The frenzied speculation about where Rachel Reeves will find new funds to try to fill the budget black hole continues apace, especially after this week’s embarrassing u-turn over income tax.

And while it might not attract the same public attention – or, as a more cynical man than I might suggest, precisely because of this – it looks nailed on that further increases in plastic packaging costs are heading the industry’s way.

The timing could not be more significant for food and drink companies, with the first invoices from the £1.4bn-a-year extended producer responsibility scheme (EPR) landing just last month.

With the shockwaves still reverberating of seeing those massive bills become a reality, the Treasury is now looking to swoop with yet more packaging taxes.

Whether it is right to do so, and which mechanisms it will use, remain up for debate.

Raising the rates

Reeves could look to raise money quickly by increasing the rate of the tax, which rose to £223.69 per tonne from 1 April this year and is normally adjusted annually in line with the Consumer Price Index (CPI).

However, there is speculation the Chancellor will instead (or as well as) look at raising the thresholds of the tax, which currently means firms are only charged for material that contains less than 30% recycled plastic.

Indeed, ministers are thought to be considering an approach similar to the landfill tax, introducing an escalator so the threshold for taxation rises regularly, creating a stronger incentive for industry to take action.

Biffa CEO Michael Topham, whose company of course has skin in the game on all this, argued powerfully for this approach in a recent interview in The Grocer.

“If you look back, one of the greatest policy successes in our sector was the landfill tax and the fact that an escalator was put on it,” he said. “The fact the tax went up gave companies an incentive to invest in different treatments, everybody knew the cost of landfill was going up and up. It really worked.”

A double whammy

However, others in the food industry believe it is a major kick in the teeth for ministers to return to the trough on plastic again so soon, and are arguing for their own shake-up of the system.

The BRC argues that instead of changing PPT thresholds, the government should merge the tax into EPR, sparing the food industry what it claims would be a double whammy on plastic.

It says this would also ensure funds raised are used to boost recycling and cut the use of single-use plastics – unlike the current system – aligning with Defra’s recent pledge to make sure local authorities spend EPR revenue as intended.

Given the Chancellor’s quandary ahead of next week’s make or break budget announcements, it might seem optimistic to expect the Treasury to resist the easy win on plastic – especially as it can present the tax as environmentally focused (even if it clearly hasn’t worked so far).

But if next week’s budget does see the industry hit with more taxes, it will make the words of ministers at today’s FDF summit seem pretty hollow, with environment secretary Emma Reynolds insisting that driving growth in the sector is the government’s number one priority.

And with packaging cost increases inevitably being passed on to consumers, changes to the tax will be no quick fix – especially if they fail to address the fundamental issues in the war on plastic that still need solving.

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