Red-faced government packaging tax bosses have warned food and drink companies they may have to reissue all invoices with higher bills for the controversial extended producer responsibility.
It comes after estimates showed the sums raised by the tax have fallen tens of millions of pounds short of what is needed.
Companies claimed they had been left “shell shocked” by the news, delivered in an emergency industry call by PackUK late last week.
The Grocer understands Defra’s arm’s-length body told producers it had been inundated with a larger-than-anticipated volume of appeals against the EPR invoices that landed for the first time in October.
The subsequent shortfall in funding local authority recycling has left the body facing the humiliating prospect of either asking producers for more money or going “cap in hand”, as one source put it, to the Treasury to ask the government to bail out the scheme.
One major supplier told The Grocer: “PackUK held a business readiness call last week and basically announced they don’t have enough money to cover the total cost of funding local authorities’ recycling.
“They revealed that when the invoices were first issued, they didn’t expect quite so many business to appeal and to resubmit their data with updated figures, which meant the total is a lot less than what they had prepared for.”
Sources said PackUK had not revealed the shortfall amount, but the fact it is warning producers that it may have to reissue EPR invoices is being seen as a disaster for the government’s landmark environmental reform.
“My chin hit the floor when they announced this, I thought what the hell?” said one supplier source.
Another source told The Grocer: “Without knowing the exact figures it seems as though when PackUK did the calculations for the base fees they underestimated the amount of data adjustment that would go on.
“As we understand it the decision will go up to ministerial level to decide what to do next.”
The situation is the latest and the biggest blow to hit EPR since the scheme launched, with PackUK having already faced a series of scandals, including mistakenly charging producers multiple times for bills which had to be refunded.
In December, The Grocer revealed the industry’s EPR bill for year two was set to rise by millions next year, after Defra said the rates for most materials would shoot up by double the rate of inflation.
However, questions are also being asked about the government funding formula that underpins EPR, which does not allow PackUK to build up a surplus or a deficit from bills but expects it to balance the books.
“In retrospect this was always something of an impossible task,” said one source. “For PackUK to bring in such a huge new taxation system to be expected to balance the books in year one meant that they were always likely to face this point.
“They would have known having a shortfall was a possibility but the difference is now it looks like it’s turned into a terrible reality.”
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