Plastic waste

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Leading policy experts have pleaded with the government for urgent reform of its controversial plastic tax, amid anger it has generated a massive windfall for the Treasury while failing to quell demand for single-use plastic.

Earlier this month, figures from HMRC revealed the tax generated £276m in its first year of operation, £40m more than estimated by the Treasury before its introduction.

That is despite the number of companies registering tax returns under the scheme being far less than anticipated, at just over 4,000. The government had said 20,000 would be affected.

The HMRC figures show companies declared 3.5 million tonnes of plastic material across the 2022 financial year, of which around 1.4 million tonnes was liable for the £200/tonne tax because it failed to reach the threshold of containing 30% recycled plastic.

This week, experts told The Grocer the figures suggested there was “far less” recycled plastic in circulation than Treasury bean counters had predicted. They warned its continued eye-watering prices, compared with virgin plastic, meant many companies were continuing to eschew recycled plastic.

“The figures show that HMRC has made far more than it estimated in the first year,” said George Atkinson, head of policy at Valpak, which represents more than 2,000 companies in the food and drink sector and boasts the UK’s biggest packaging database.

“That shows that either there is far less recycled content out there than the Treasury was hoping, or they have grossly overestimated the number of businesses that would be liable for the tax.

“I think it’s clear to see that there is a lot less recycled content being used than the Treasury was expecting.”

The HMRC figure shows that income from the tax was £72m in each of the first two quarters of 2022, but fell to around £65m by the end of the 12 months.

Atkinson said: “It does not appear that declining tax revenues are a result of the greater availability of recycled material. Instead it seems to point to in general less plastic packaging going on the market across the end of 2022 and beginning of 2023.

Vacuum Packed Mince 3

“This could be because of the worsening economic picture or because producers are switching material away from plastic or lightweighting their packaging instead.” He gave the examples of the likes of Sainsbury’s and Tesco introducing vacuum-packed meat, Morrisons moving to Tetra Pak and greater uptake of paper packaging.

Recycled plastic material prices increased dramatically from spring 2022, with most peaking in autumn last year. Atkinson said: “The tax has not produced enough of an incentive to persuade companies to move away from virgin material. The market dynamics are preventing the tax from being successful.”

There is also growing frustration that the plastic tax has become a new cash cow for the government despite the disarray of its wider waste and packaging reforms, which have already seen extended producer responsibility pushed back until at least 2025, and growing doubt over the launch date for a deposit return scheme.

“We have said for a long time that it is real shame the plastic tax isn’t being hypothecated into the UK recycling industry and instead is just going into the coffers of HMRC and seems like it will do for the foreseeable future,” said Atkinson.

Steve Morgan, head of policy at leading plastic recycling charity Recoup, also called for more joined-up thinking. “As an environmental tax, the plastic tax was supposed to be part of the EPR response to the environment but obviously the government has gone down a different route,” he said.

“This is a great chance to provide a big injection of money into boosting recycling infrastructure or helping the industry towards the costs of introducing technology to create a more circular economy. The £40m extra alone compared to the Treasury’s estimate would go a huge way towards that.”