The industry’s bill for the extended producer responsibility (EPR) packaging tax is set to rise by tens of millions next year, after Defra revealed the rates for most materials will shoot up by double the rate of inflation.
PackUK made the announcement at a meeting with industry bodies and packaging schemes yesterday. While sources in attendance welcomed the advance notice of next October’s regulatory hikes, they expressed anger at the scale of the planned increases and warned the move would inevitably result in further food inflation next year.
Defra also came under fire for failing to provide any guarantees that money raised will be spent on improving local recycling facilities.
Yesterday’s estimates indicate EPR taxes will rise sharply next year. Fees for rigid and flexible plastics are increasing from £423 to £455 per tonne (up 7.5%) with glass rising from £192 to £205 (a rise of nearly 7%).
Other materials are expected to see similar hikes; paper and card 7%, steel 11%, aluminium 1%, and fibre-based composites 14%. Wood faces the steepest rise, with estimates suggesting a 61% increase.
A ‘slap in the face’
The Grocer understands Defra also told industry leaders that EPR is already beginning to impact the amount of packaging on the market. However, sources said the decision to ramp up the taxes without any guarantees on how the money would be spent by local councils was a “slap in the face” for the industry.
Defra has pledged to give the industry greater control over EPR, with an industry-led body set to be appointed to run the scheme next year. However, its arm’s-length body, PackUK, will remain in charge of collecting and setting fees.
The first year of EPR, which saw invoices land in October, cost the industry an estimated £1.5bn annually, with fees varying by material.
“The increase in packaging taxes will only serve to put further unwelcome pressure on prices,” said BRC director of food and sustainability Andrew Opie.
“Retailers are playing their part, working to reduce the volume of their packaging and use more recyclable materials.
“However, with customers paying the tax through increased prices and no legal certainty that all the money collected will be used for recycling improvements, EPR simply remains a multibillion-pound tax on an already overburdened industry with no tangible benefits for consumers or the environment.”
Pressure on prices
Another source told The Grocer: “The point of EPR is to drive reduction in packaging and increase the amount of recycled content so it’s good news the level of packaging is falling.
“But the big question is what are PackUK and Defra doing to assess local authority costs and bear down on them?
“We’ve got no guarantee at all that they will spend the money on improving recycling in local communities.
“The industry will understandably greet these increases with anger if it thinks it’s just being treated as a cash cow to pour money into a local authority money pit.”
A third source said they were sure the hikes had been announced early due to “Defra responding to industry calls to have maximum notice so they can plan for future costs”.
“Most streams have gone up by between 6.5% and 7.5%, and of course nobody likes it when they are confronted by increases of twice the rate of inflation. That will make it that much more difficult to absorb.
“Of course we could see that change again as we did with the first set of fees.”
EPR fees in the second year of the scheme will also be impacted by the introduction of so-called modulation. This will further penalise types of packaging that are hard to recycle, while rewarding those that are the most recyclable.
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