Industry chiefs sound alarm over ‘horrific’ packaging tax
A new packaging tax that makes the producers of waste pay for their packaging to be recycled poses a multibillion-pound threat to UK businesses and will encourage firms to relocate their production abroad, senior industry figures have warned.
The Department for the Environment, Food and Rural Affairs (Defra) released on Friday the final fees for an impending tax on business known as the Extended Producer Responsibility (EPR) scheme, confirming the amount firms will have to pay for producing packaging from October.
Most of the final fees, which are split by packaging type, are less punitive than indicative charges released by the government last year, but retailers, producers and hospitality firms have sounded the alarm on the damaging effect a further levy will impose on struggling British firms.
In a rare joint statement, lobby groups for the glass, pubs, whisky, wine, spirit and hospitality industries warned the levy “goes against the UK government’s plans for growth” and accused ministers of ignoring frenzied representations from affected sectors.
“The current EPR design does not meaningfully support the delivery of a circular economy, and adds a significant additional cost to businesses who use glass,” they said.
And the British Retail Consortium, which had been calling for the government to delay implementing the new tax, said the fees would take a £2bn chunk out of retailers’ bottom lines, just months after the £5bn hit from the hikes to employer national insurance contributions.
“It’s inevitable [the EPR] will add pressure on prices, adding to inflation,” said Andrew Opie, the body’s director of food and sustainability.
The proceeds from the new tax, which was first announced by the former Conservative government, will be funnelled directly to cash-strapped councils to help fund their recycling obligations.
Industry bodies had warned that local authorities would spend their new income stream on other essential services. But in a move welcomed by the BRC and Food and Drink Federation, Defra sought to rectify those concerns in last week’s final draft of the policy, ring-fencing EPR proceeds for recycling services.
Packaging tax a ‘rotten piece of policy’
The final fees follow months of warnings from business owners that the new levy, imposed in conjunction with minimum wage hikes and the payroll tax hike, will force them to change their packaging materials or relocate.
William Fugard, the co-founder and chief executive of soft drink brand Gusto Organic, had previously branded the tax “horrifically inflationary”.
Speaking in the wake of the final fees, he told City PM that the confirmed additional burden would force him to move from glass bottle production in the UK to aluminium can production in the EU.
“This tax is symptomatic of a total disconnect in government policy around health, food security and inflation,” he said. “Put simply the government is steering drinks companies away from glass packaging [in favour of] plastic.
“It’s a rotten piece of policy, ill thought out and serves only to raise money for the treasury whilst virtue signalling that the government is addressing issues around health and climate change.”
Glass packaging will be taxed less per tonne than any other material under the updated fees. But Fugard and a host of industry bodies argue that because the average piece of glass packaging is heavier than the plastic or tin equivalent, it is still the most heavily taxed.
The joint statement from various food and drinks sectors said the EPR will add a “significant additional cost to businessses who use glass”.
Fugard also warned the lack of exemption for smaller firms would only benefit multinationals, telling City PM: “DEFRA, in all their wisdom, have not supported SMEs with this tax as they said they would.
“There are no exemptions for small and medium-sized enterprises that are the lifeblood of innovation and export success in the UK. It’s a loss for the consumer as prices will rise and choices diminish, and it’s another layer of worry for brands and their daily battle with spiralling costs.”
A Defra spokesman said: “We are committed to cracking down on waste as we move towards a circular economy.
“Extended Producer Responsibility for packaging will generate more than £1 billion annually to improve recycling collections, benefitting every household across the country. The confirmed fees producers will pay have fallen significantly, including for glass which are down by 20%, since our last estimates.
“This is a vital first step for our packaging reforms, ensuring more materials are recycled and reused. Together, these reforms will create 25,000 jobs and help stimulate more than £10 billion investment in recycling over the next decade.”