Chancellor Rachel Reeves is believed to be planning another major hike in the industry’s packaging taxes as a way to fill part of her budget black hole.
With the Treasury having reportedly u-turned on plans to increase income tax, sources say they expect the UK’s plastic packaging tax to be one of those in the Chancellor’s crosshairs come next week’s announcements.
However, the move looks set to spark huge anger in the industry. It comes on top of the £1.4bn extended producer responsibility taxes, the first invoices for which landed only last month.
The UK’s plastic packaging tax (PPT) came into force in April 2022, amid public outrage following the revelations of David Attenborough’s Blue Planet and other campaigns.
It applies to UK businesses that manufacture plastic packaging or import packaged goods into the UK.
By slapping a £200 per tonne levy on all plastic packaging manufactured in or imported into the UK that contained less than 30% recycled plastic, the Tory government hoped it would be a key weapon in incentivising companies to reduce their use of virgin plastic.
However, while raking in hundreds of millions for the Treasury, the tax has been widely seen as a failure in its mission to go to war on single-use plastic. The government has faced criticism over the lack of strategy to prevent companies turning to imports of cheap virgin plastic from abroad.
The tax increased to £223.69 per tonne from 1 April this year and is normally adjusted annually in line with the Consumer Price Index.
However, there is strong speculation that the Chancellor will look to go further as part of her efforts to fill the black hole.
As well as considering a bigger increase this year, it is understood the government is looking at increasing the current 30% threshold to a higher figure.
Some key players, including Biffa, have been urging the government to go down a similar road to the landfill tax, by introducing incremental rises to the threshold.
Industry under pressure
However, the timing of a new Treasury tax raid on plastic comes within weeks of the first invoices for EPR and with warnings today that the UK food industry is still facing severe inflationary pressure.
An industry source told The Grocer: “Everyone knows the government needs to raise money, but increasing the plastic packaging tax isn’t going to raise enough money to make a difference, yet hampers manufacturers’ efforts to be profitable, growing and more sustainable.
“It seems like the government is looking at a blunt tax weapon to help fill the black hole rather than change to make the tax more effective at tackling single-use plastic.
“The PPT is meant to encourage companies to use recycled content, but supply challenges mean that high-quality, food-grade recycled plastic is very expensive and scarce so companies trying to protect their price position have little option but to buy cheap virgin plastic from overseas.
“EPR and simpler recycling are the tools to unlock this problem, but there’s no sign yet that government is attracting investment and changing the rules so chemical recycling can start at scale in the UK. We need to see progress on that, or the PPT will be an increasingly expensive blunt instrument which isn’t helping economically or environmentally.”
The BRC is calling on the government to roll the plastic packaging tax into EPR, claiming that the industry is facing a double whammy on plastic.
Naomi Brandon-Bravo, sustainability policy adviser at the body, said: “Retailers are working hard to increase the volume of recyclable material that they use in their packaging but are currently being double taxed as a result of EPR and PPT.
“To address this, the government should integrate the PPT into EPR and put in place legal ringfencing to ensure money raised is reinvested in recycling infrastructure.”
However, Philippe von Stauffenberg, CEO of UK-based Greenback Recycling Technologies, who has been a prominent critic of the government’s lack of investment in tackling single-use plastic, said he would welcome a major PPT rise, if the money was invested the right way.
“My view is that the issue of single-use plastic has become relegated quite far down the list by too many companies and unless you get a plastic tax that really bites, they won’t sit up and take notice.
“I would welcome the government putting the plastic tax up and making it clear to investors that the government is taking this seriously.
“The industry needs to be motivated to find solutions, whether this is chemical solutions or more investment in recycle facilities. The plastic packaging tax is the single most viable solution.”
However, von Stauffenberg also said any positive impact of the tax being hiked would be blunted unless the government used the money raised to invest in the war on plastic.
“Just hiking the tax is not enough. The money then needs to be used for creating a better plastic economy, used to invest in strategies that will help recyclers.
“The plastic tax is also not efficient if you don’t give HMRC the tools to go after those cheap foreign imports of plastic which are coming into the UK with virtually no checks and undermining the war on single-use plastic.”
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