Digital Waste Tracking: business regulatory impact assessment

7. Option 2: Digital Waste Tracking system for waste receiving sites.

102. Under this option, those operating a permitted waste receiving site are required to record individual movements and transfers of waste into their waste site using the digital service provided. Costs and benefits of this option are in addition to the baseline.

7.1 Costs to Government: IT development and set up costs

103. The costs to government under Option 2 are the capital and ongoing costs of building and running the waste tracking service. These costs are first incurred in 2026, and capital build costs stop being incurred after 2027 meaning there are only running and maintenance costs from 2028 onwards. Costs are summarised in Table 10.

104. All costs will be covered by the users’ service charge, so this cost to government is offset by future service charge income. The service charge has been included in the analysis as a cost to business.

105. A 15% optimism bias has been applied to reflect the risk that costs may be underestimated. A lower optimism bias reflects the increased level of cost certainty at this stage of policy development, as the digital service design has been explored in detailed breakdown of required resources whilst undergoing private beta and continued conversations with IT providers.

7.2 Cost to Business: Service Charge (Transfer to Government)

106. The costs of building and running the service are initially uncured by government and recorded as a public sector cost (CDEL and RDEL). These costs are recovered from businesses through a service charge, which is recorded as a cost to business and an equal benefit to government (see Table 11). The service charge is treated as a transfer, while the underlying cost of delivering the service is counted once. The service charge has been calculated by dividing the total recoverable cost by the estimated number of users and spreading the cost over 15 years.

107. The build costs of the service are amortised over a 10 year period, meaning the upfront development costs are recovered gradually though the service charge. It is expected that there will continue to be a service charge to cover the maintenance costs of the service beyond the amortisation period, but that it will be reduced as it will only be covering the cost of running the service rather than building the service. This avoids the need for the programme to secure funding repeatedly through future spending rounds and ensures that the service remains financially sustainable over the full appraisal period.

7.3 Cost to Business: Transition costs

108. There will be transition costs for all receiving waste sites to record their waste data on the new digital waste tracking platform. This is due to the requirement proposed under Option 2 for receiving waste businesses to record their waste movements and transfers digitally. Waste sites will still need to comply with their current duty of care requirements^[41] albeit using digital rather than paper systems. The transition costs may include familiarisation, training and new on-site technology costs (e.g. IT). In total we expect these transition costs to amount to £2.09m over 4 years across the UK (2026-2029).

109. This transition cost to waste sites was estimated through analysing responses to surveys shared with a sample of waste companies. Based on survey results, we applied the proportions of paper, spreadsheet and software users to the total number of receiving sites and carriers, brokers or dealers (CBDs) provided by regulators. This allowed us to allocate business across the different upload methods and estimate the time required for set-up and familiarisation (Tables 12 - 14). We estimate that there are 117,853 CBDs and 11,765 receiving sites in scope across the UK.

110. The number of hours businesses are likely to spend on set up and familiarisation of the software API are based on HMRC’s Making Tax Digital transition, which we consider a comparable digital onboarding process. Businesses that initially opt to use the temporary secondary submission method will incur an additional transition cost when they later move onto full software integration after the first year.

111. To estimate costs, we multiplied the relevant number of firms by the expected familiarisation hours and applied the mean waste management administrative hourly wage of £21.48 (including a 22% uplift to account for non-wage costs)^[42]. We expect total discounted transition cost to receiving sites to be £2.03m across the UK.

7.4 Cost to Business: Software

112. Under Option 2, only permitted receiving sites are required to use digital systems to submit waste movement data. Businesses already using commercial waste management software will be able to integrate directly via the API at no additional software cost. However, operators without existing compatible systems will need to purchase new software or upgrade their current tools to meet digital requirements. These software costs are expected to be recurring annual or monthly license fees charged by software vendors.

113. To estimate these ongoing costs, we applied the total number of receiving sites in scope (as provided by regulators) and assumed that only those without existing software would face additional expenditure.

114. Because market pricing for DWT software is not yet available, we used HMRC’s Making Tax Digital cost assumptions as a proxy. They estimated an average annual software cost of £158 per year for a similar digital transition. Given the uncertainty around future DWT software pricing and recognising that the market is smaller compared to those that would be using tax software, we applied a 400% optimism bias, resulting in an estimated annual cost to business of £632 per year.

115. The higher optimism bias reflects the limited evidence available, the likelihood that software developers will have fewer users over which to spread development costs, and the possibility that bespoke waste tracking functionality will be priced higher than standard accounting software.

116. By making DWT a mandatory requirement, we are creating a clear commercial opportunity that will attract a wider range of software vendors into the market. As more software vendors participate and compete for this expanded customer base, prices will be driven down, for example as seen in the Making Tax Digital market. We expect the cost of DWT software to be below market value of existing waste management software.

117. The software expenditure represents a commercial transaction between waste companies and software providers, covering access to and maintenance of the digital tool. We predict software costs for receivers to be £74m (undiscounted), over the appraisal period across the UK (see Table 15).

7.5 Benefits to Government: Service Charge (Transfer from Business to Government)

118. The full cost of building and maintaining the Digital Waste Tracking service will be recovered from users through a service charge. This creates a saving for government, as the costs that would otherwise fall to the public sector are instead funded by businesses. This is estimated to be £17.26m (undiscounted) across the UK, with the same cost profile as in Table 9.