‘Poorly thought through’: UK food firms say packaging tax is pushing up prices | Packaging

A packaging tax designed to end our throwaway society is being criticized for inadvertently contributing to food price inflation by driving up the price of everything from sausages to soft drinks.

“It’s about 3p on a packet of sausages,” says Andrew Keeble, co-founder of Heck, of the new Extended Producer Responsibility (EPR) tax.

This year’s packaging tax bill for the family-owned food manufacturer, based near Bedale, North Yorkshire, which landed this month, stands at £153,000.

Heck has already absorbed increases in employer National Insurance contributions and the “national living wage” announced by the Chancellor a year ago, but Keeble suggests this new tax will have to be “passed on to a fairly cash-strapped nation”.

The packaging tax – designed to end excessive packaging and create a circular economy – shifts the cost of recycling ready meal containers and wine bottles in your public bin from councils to the businesses that sold them.

“We all hate plastic,” Keeble says. “We wish we could live without it. But the reality is that this particular tax was really poorly thought through.”

Heck has “looked all over the world” for an alternative to the plastic tray and cardboard sleeve he uses for his sausages, but has yet to find a better option, Keeble says. “People don’t shop in a butcher’s where they wrap sausages in paper and hand them over. People shop in supermarkets.”

The EPR has been in the works for a long time. The idea was introduced by Michael Gove when he was environment minister in late 2018, with the policy a key part of a new recycling regime for England.

In December of the same year, food inflation stood at 0.7%. But today, the environmental measures come into force at the end of a cost-of-living crisis in which food price inflation has peaked at more than 19 percent.

Although the latest cost of living data shows that the annual rate of food inflation slowed for the first time since March – to 4.5% in September, from 5.1% in August – this does not mean that the cost is falling, just that prices are rising at a slower pace.

Over the summer, the Bank of England suggested that the EPR could increase food price levels by 0.5% if the cost was passed on in full to consumers.

The tax works by charging businesses the cost of collecting and recycling their product packaging, with fees per tonne of material set by the Department for Environment, Food and Rural Affairs (Defra).

This year, taxes are set at £423 per tonne for plastic and £266 and £192 for aluminum and glass respectively. For paper and card the price is £196. The UK-wide scheme is expected to raise £1.4 billion this year. (Steel, aluminum and PET plastic beverage containers are not included as they will be covered by deposit schemes.)

The British Retail Consortium says last year’s Budget generated an extra £5 billion in employment costs for retailers, leaving them with little room to absorb additional spending. He expects more than 80% of the cost of the EPR to be passed on to consumers and describes it as “further inflationary pressure, at a time when food prices are already rising rapidly”.

However, a letter of support for the tax, signed by environmental groups including WWF-UK, Surfers Against Sewage and Wrap, and published last week, presents it as a policy “essential foundation” for a circular economy.

The letter says the tax will “reduce greenhouse gas emissions, reduce the impacts of resource extraction on the natural environment, and stimulate domestic recycling and reuse markets, creating jobs and promoting green growth.”

Defra says the EPR takes the “cost of waste treatment away from the taxpayer”, adding: “We will continue to listen and work with industry as these changes are implemented.” »

In the food sector, the cries of pain were loudest in the beverage trade and in small and medium-sized food companies. Glass is hit hard because it is heavy and Defra uses weight as a key measurement.

Although glass taxes were reduced before the program launched, the Wine and Spirits Trade Association says the revised taxes remain “excessively high” and were likely to encourage producers to abandon highly recyclable glass in favor of more environmentally damaging forms of packaging.

The impact of the tax on dessert brand Gü – famous for its often recycled glass ramekins – is “massive”, says its managing director, Emma Vass.

“We have chocolate, dairy, national insurance costs, and on top of that… we are affected in every way,” she says.

Although the production line at its factory in Bishop’s Stortford, Hertfordshire, is designed to fill glass jars with chocolate mousse and cheesecake, it has to consider other options, including switching to a plastic container. Vass refuses to share Gü’s bill, saying only that it is “huge.”

She says: “If you’re spending £10 on a bottle of wine, the percentage of glass as a cost of that product isn’t as high. When it’s a cheesecake in a glass ramekin, the packaging is obviously more of a percentage of the cost.

“We’re going to have to make cuts in other areas and then pass on the rest, which we don’t want to do, especially when food inflation has been so high for so long. To bring in another tax that affects food inflation again just seems very unfair to consumers.”

However, she adds: “We are studying alternatives. To guarantee food security, we will probably have to turn to plastic. It seems that this tax has not been completely thought through.”

Its ramekins are “iconic,” Vass says, with its consumer survey suggesting 70 percent are reused. “Every home in the UK has them in their drawers, whether for potted plants, candles or storing nuts.” The company is sticking with glass for now because a customer survey found they preferred it for its quality and durability.

Pev Manners, managing director of cordial maker Belvoir Farm, says his bill comes to just over £860,000, a figure equivalent to around 60% of the £1.4m profit made last year. The invoice is calculated on the basis of packaging placed on the market during the previous calendar year.

“It’s so important that we had to pass the cost on to the consumer,” says Manners. At retail, EPR put around 25p on a 750ml bottle of its syrup because supermarkets consider that as part of the cost and then add their profit margin and VAT, he explains. To reduce its EPR bill, the company has now reduced its glass bottles.

The tax has “absolutely, definitely” caused food inflation “because it affects the entire link in the food chain,” Manners adds.

Even if the timing is bad, the government believes that EPR “is the right solution for companies that produce packaging to pay their fair share of recycling costs”. It is also a policy used successfully by other governments, notably in continental Europe.

Household recycling rates have been stagnant for years and huge amounts of waste are still sent to landfills or incinerators, with packaging being a significant component.

In its second year of operation, Defra will introduce ‘modulation’, meaning charges will be higher for materials that are difficult to recycle. Businesses who opt for packaging rated ‘green’ according to Pack UK’s ‘recyclability assessment methodology’ will receive a discount.

Companies using reusable and refillable containers will only pay disposal fees when the packaging is first placed on the market.

Complaints from food companies and trade associations ignore the fact that “workers are already paying for the cost of packaging through their council tax bills,” says Catherine Conway, director and policy lead at sustainability consultancy GoUnpackaged.

She suggests that businesses should “stop complaining” and “recognize the very obvious solution they have at hand and start taking the steps to reuse much of their single-use packaging.”

EPR is the cornerstone of broader changes in packaging. Although this specific tax applies across the whole of the UK, as waste is a devolved area, countries of origin have their own approaches.

In England, a new household recycling regime requiring councils to collect the same set of materials, including food waste, comes into force in March. Then, from 2027, a bottle and can return scheme, which also covers Northern Ireland and Scotland, will offer consumers a financial incentive to return empty drinks containers to collection points. The Wales project will also start in 2027, but it includes glass.