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Scrap industry facing cash trade ban

The scrap metal trade may have just months to prepare for the day when trading in cash is made illegal.

After weeks of speculation and months of discussion, debate and lobbying, the government last week confirmed it will lay down an amendment to the Legal Aid and Sentencing Bill to ban cash transactions.

Home secretary Theresa May, in a written statement, said the amendment will also seek to “significantly increase the fines for all offences under the existing Scrap Metal Dealers Act”.

The Home Office expects the measures to come into force by the summer.

In her statement May said: “Cash transactions for scrap metal are often completed without any proof of personal identification or proof that the individual legitimately owns the metal being sold. This leads to anonymous, low risk transactions for those individuals who steal metal.” Cash payments can also facilitate tax evasion, she added.

The industry is unhappy, to say the least, with the government’s decision. The British Metal Recyclers’ Association’s director general Ian Hetherington said the industry is “disappointed”. He points out, scrap merchants are one of the biggest victims of metal theft. Of the 215,000 tonnes of metal stolen last year, half was stolen from the industry. So the industry has a definite interest in tackling the problem.

In private, however, industry bosses are said to be furious at what they see as unnecessary and damaging regulation that could in fact send more business into the hands of illegitimate, unlicensed traders - the BMRA estimates the unlicensed trade nationally to equal the size of the licensed trade.

Pressure on the government to act has been building for weeks. The day before May’s announcement the Transport Select Committee called for urgent action. It took a similar approach to the BMRA, calling for licensing reform and policing powers. The committee expressed reservations about banning cash trade, calling for ministers to consider a trial.

Ministers were also under pressure from industry, and, since the media jumped on the issue, the public. With the likes of SITA, the NFU, Energy Networks Association, the Church and the police backing legislation, the opposition from within government – mostly from the deregulation evangelists at the department for Business Innovation and Skills - seems to have fallen away.

The BMRA says it does support legislation, and would like to see cash phased out. But it wants a “holistic” approach, with licensing reform and mandatory ID first. Hetherington said the cash ban is seen by government as an “easy panacea” in response to pressure to act.

The problem for government is that it is limited by the measures it can attach to a bill concerned with sentencing. And it will have to wait until the next Queen’s Speech to introduce any reform of the Scrap Metal Dealers Act. Although the Home Office says plans for further measures at this stage include only voluntary schemes such as Operation Tornado, and the work of the police-led £5m taskforce.

Labour MP, Graham Jones, whose Metal Theft (Prevention) private member’s bill failed two weeks ago – despite signals from the Home Office that it could back it - has accused ministers of “putting politics above action”, and acting out of “pure vanity” in wanting new measures in its own name.

But Jones’ bill would have gone much further, effectively rewriting the Scrap Metal Dealer Act, with increased police powers to search unlicensed yards and ID requirements. Ironically, this much tougher bill would appear closer to the “holistic” approach favoured by the BMRA.

As the dust settles on the government’s announcement, it is beginning to look like a scrappy compromise. And if the industry is correct in predicting it will have “no impact of metal theft”, it won’t be long before the pressure begins to build for complete reform of the industry and the laws that govern it.

In the meantime the industry is preparing to go back to the negotiating table. Hetherington said there are many unanswered questions. And that lack of clarity means the industry has been unable to fully prepare for measures that have been on the agenda for months.

“I don’t believe the government fully knows the extent or the scope of this legislation”, said Hetherington. “In implementation this requires a great deal more work and a great deal more definition. And I don’t believe that work has been done yet.”

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