Local authorities are missing opportunities to share in the results of huge profits generated by the soaring value of recyclable materials.
The price of recyclable plastic, newspaper, cardboard and glass has soared over the past two years, giving councils a potential source of revenue that could be spent on improving local services. Many local authorities are locked into 20 or 30-year contracts with recycling companies and are unable to cash in on the higher cost of plastic and copper.
Westminster City Council has a seven year contract to share profits as prices rise and believes that councils are sitting on huge profits and could negotiate better contracts.
Waste strategy manager Mark Banks told MRW: Many councils locked into fixed price contracts may be missing out on tens of thousands of pounds of revenue from rising prices of recyclable materials. Westminster takes a commercial approach to contracts so that we benefit in rising market situations but with a safety net in place when markets inevitably turn.
He said that mixed plastic bottle prices have increased from an average sale price of £30-40 per tonne in 2004 up to £180-230 per tonne now. He said: We anticipate this price continuing to rise in relation to oil prices and also increasing demand from manufacturers to expand the range of plastics collected.
Banks added: All contracts were based on risk and reward. Councils have tended to be conservative with a small c by wanting to budget with certainty.
They allocate a financial plan and want to stick to that plan. But by sticking to that plan they are missing out on opportunities.
Local authorities such as Kent County Council admitted to the Times that they could make up to £1 million a year by selling recyclable materials if their 25-year contract deal could be renegotiated.
Kent County Council cabinet member for environmental and waste services Keith Ferrin told the Times: If I could get out of the long-term contract I have inherited I would do that. Ferrin said: Over the course of a year we could make just under £1m profit.
Banks added that the short term contract suited Westminster Council because it was based in central London and the waste collection could vary year on year.
He explained that five years ago the council was collecting 250,000 tonnes and today it is colleting 193,000 tonnes of waste but cannot predict what tonnages it would collect in the future. Banks said that short term contracts were the way to go in the future as you are not tied down to a contract from day one.
But Local Government Association chairman Paul Bettison said councils had to strike a balance: Do you lock the contractor into what appears to be a reasonable price and lock them in as a long as possible or do you secure a shorter contract and risk seeing the price dive? Recyclates go down as well as up a bit like investments.