If Humza Yousaf can't sack Lorna Slater he's in office but not in power

The deposit return scheme inadvertently reveals the pitfalls of erecting a hard border with the rest of the UK

The Scottish government's beleaguered bottle return scheme may seem an exercise in common and garden mismanagement, and it certainly is that. But it also tells us something important about the internal dynamics of the Humza administration and, inadvertently, exposes the kind of problems that would arise were there to be a hard border with England after Scottish independence. These are problems that the SNP has scrupulously avoided addressing since Brexit.

The circular economy minister, Lorna Slater, has landed the First Minister Humza Yousaf with a multimillion pound headache. Instead of accepting the inevitable and converting the Scottish deposit return scheme (DRS) into a pilot for the UK scheme, due in 2025, she appears now to be throwing her toys, or her bottles, out of the pram. She keeps insisting that she doesn't know whether the scheme is viable, given the limited exemption from the UK Internal Market Act, but what she won't do allow the DRS to die quietly.

This is an intolerable situation for the Scottish government, which risks compensation claims from companies who have already lost money because of the delays and changes to the scheme. What should have been a relatively simple exercise in recycling bottles and cans has turned into a nightmare for all concerned. A “bonfire of chaos” as the boss of Scottish brewers Innes and Gunn, Dougal Sharp, put it. And this was the case long before the UK government said that it should only go ahead as a pilot for the UK scheme.

Consumers are generally favourable to the scheme until they learn that they will have to take the bottles, which are currently recycled by local authorities, by car or bus to collection points. And that only certain kinds of bottles will be accepted by reverse vending machines – not sauce bottles or pickle jars for example. Small businesses say they do not have the space for reverse vending machines and risk losing trade and in many cases going out of business. That is why four thousand small businesses took the extraordinary step of refusing to pay the cost of registration for a scheme by the March deadline.

That was the moment Lorna Slater should have been moved and the DRS scrapped in its current form. Slater disingenuously said that 95% of business, “by volume of sales”, had signed up in – meaning that large retailers who dominate the market had registered. But that didn't alter the fact of this extraordinary boycott by small businesses – the backbone of the Scottish economy. Large UK drinks producers were also opposed to a Scotland-only DRS. Leaks from the Scottish government suggested that C&C, owners of the Tennent's brand, were supporters of the DRS, when in fact they had all along called for an all-UK scheme.

Even after the deadline debacle the circular economy minister insisted that the scheme just had to go ahead in August and that anyone who said differently was “not credible”. Within weeks, Humza Yousaf had announced a delay until next March and introduced various exemptions for small businesses, which are still being worked through. Companies with sales of fewer than 5000 “units” appear to be exempt as are business[es] where drink is consumed on the premises, though it's not clear to whom these exemptions really apply. The delay has not calmed the anxieties of small retailers. Larger supermarkets who have never been enthusiastic for the scheme have continued to raise key issues that were never addressed by Slater.

Britain's largest supermarket, Tesco, told the UK government internal market body that it might have to stop online sales altogether in Scotland. This is because, under the Scottish scheme, the supermarket would have to collect the empty bottles from the elderly and infirm who are unable to take their used bottles to the collection points. It would not be economically viable for Tesco to continue to sell in Scotland under those circumstances. Astonishingly, Lorna Slater did not appear to be aware of this until it was raised by Alister Jack, the Scottish Secretary, last month.

Clearly, this is a record of ministerial incompetence. Slater is unfit to continue in charge of this policy whatever happens to it. She has lost the confidence of the business community without whom this policy is impossible to implement. But it appears that Humza Yousaf cannot sack Lorna Slater, or move her to another less high profile position. This is because of the infamous Bute House agreement that cemented the 2021 coalition between the SNP and the Scottish Green Party.

But consider the implications of this. If Slater and the other Green minister, Patrick Harvie, are unsackable then the First Minister is not in charge of his government. He is in office but not in power. The FM should be in absolute control of his cabinet and decide all key posts in the administration. That is what he is there for. If Yousaf is a hostage of the Greens it means that a party with only 8% of the vote in Holyrood is exercising a veto on the actions of the Scottish government. The 1.3 million who voted for the SNP in the 2021 Scottish Parliament elections had a right to expect that the government they elected would be its own boss. The SNP, for reasons that remain obscure, has turned parliamentary democracy on its head. The Green tail is wagging the SNP dog.

This is unsustainable. Yousaf needs to assert his authority by placing someone else in charge of the circular economy brief. It is not too late to show that Scotland can make this scheme work. But bottles will have to be excluded as was always going to be the case after the March debacle. It made no sense to include glass because local authorities already collect nearly 70% of bottles on the doorstep – something that gives them a useful revenue stream. Local authorities also have the means to separate bottles so that they can be recycled more effectively. There should be no separate Scottish labelling, barcodes or refunding arrangements. A can of coke bought in Scotland should be returnable to England and vice versa.

Outside the environmental groups, it is hard to find anyone who has a positive word to say about the Scottish Deposit Return Scheme as it stands. But this is about more than just bottles and cans. The scheme as devised by Slater has been more than just an object lesson in mismanagement, it is a study in microcosm of what a hard border might look like after independence – if Scotland were ever to vote to leave the UK.

The 2014 independence prospectus assumed that Scotland and England would remain in the European Union. There would therefore have been no need for a border at Carlisle. Both Scotland and England would be in the European Single Market and subject to common regulations, trading standards, tariffs and customs. There would be no need for the problems so evident in Ireland when one part of the Island, the Republic, in the EU single market, while another, Northern Ireland, is in the UK single market.

Now, because the UK is out of the EU, Scotland will have to face up to the necessity of erecting a hard border with England in order to rejoin the European Union, which has long been SNP policy. This means a regulatory border more onerous than the one that has caused so much trouble in the island of Ireland. There will be no special deals from Brussels. The EU will not permit Scotland to join the EU single market and remain part of a unitary UK state. Scotland will have to accept a hard border and that means customs, tariffs, sanitary and phytosanitary checks and all the bureaucratic issues that have led to lorries stacking up at ports like Dover because they have to complete voluminous customs forms.

The SNP has refused to address this reality – but they will eventually have to. The Deposit Return Scheme reveals, in microcosm, the kind of border issue that could arise if and when Scotland leaves the UK single market. It demonstrates the problems UK companies would have to face adapt to a different regulatory regime in one part of the UK. A separate scheme involves duplication and additional costs both for consumer and producer. The UK is a single market and just like the European single market, the whole point is to avoid the kind of friction that borders create.

Throughout, Lorna Slater tried to pretend that there was no border issue; that Scotland could have a totally separate scheme even though the businesses that would have to run it are UK businesses operating in UK market. But ignoring the existence of borders, when you are voluntarily creating one, only leads to confusion and expense. The Scottish government has inadvertently provided an object lesson in the pitfalls of separatism.