Food manufacturers have criticised the implementation of a new UK environmental tax, warning it will force them to increase prices for consumers at a risk of fuelling inflation.
Several large food companies and industry representatives told the Financial Times that businesses were finding the plastics packaging tax, which is due to come into effect on April 1, challenging to understand and comply with.
The levy, which was announced in the 2018 Budget by then-chancellor Philip Hammond, is designed to provide incentives to businesses to use recycled plastic in the production of plastic packaging.
Businesses manufacturing or importing 10 tonnes or more a year of plastic packaging that contains less than 30 per cent recycled plastic will be taxed at £200 a tonne. Plastic packaging containing at least 30 per cent recycled material will be exempt from the tax.
However, food manufacturers said the government had not provided any exemptions for materials that come into contact with food and cannot be recycled. As a result, these businesses had no choice but to pay the tax — leading to increased costs, which might be passed on.
Nicki Hunt, director of sustainability at the Food and Drink Federation, said: “Food and drink manufacturers want to do the right thing and recycle more packaging — in line with the UK government’s and our own environmental targets — but efforts are being constrained by restrictions around the materials that can have contact with food, which cannot currently be recycled, and are subject to the new plastics packaging tax.”
She added: “The result of this is that further costs are placed on businesses, which may lead to higher prices for consumers. Our industry would prefer government measures to further support and incentivise innovation in recyclable packaging materials.”
A source from a large food company said the way the tax had been implemented was “hugely contradictory as there would be no incentive to use recycled content — the very aim of the plastic tax”.
Helene Roberts, chief executive of Robinson Packaging, an Aim-traded plastics recycling company, and head of the British Plastics Federation’s plastics and flexible packaging group, said inflation would be an unintended consequence of the tax.
Food-grade items that cannot use recycled plastic — such as soup pots — should have been exempted until technology has advanced in a few years’ time, she argued. “It will just create inflationary pressures within the supply chain.”
A wide range of businesses would be affected by the new tax, said advisers at accountancy firm RSM, including retailers importing items such as bin liners, drink bottles and carrier bags, publishers importing plastic for laminating books and freight transport providers importing plastic packaging such as bubble wrap. But food manufacturers would be among the worst hit.
Andrew Thurston, customs duty consultant at MHA, an accountancy group, warned that importers would also find it “difficult and costly” to get evidence from overseas suppliers of the recycled content of packaging. This could result in businesses ignoring the call to use more sustainable materials, “defeating the purpose of the tax”, he said.
The government said it had worked closely with industry, including the food packaging sector, to “ensure businesses were getting the information they need”.
“Exemptions to the tax have been kept to a minimum to encourage greater use of recycled plastic and stimulate the recycled plastic supply chain,” it said.
It added: “Food packaging makes up around 40 per cent of packaging in the UK so excluding it from the tax would severely blunt its impact. Many types of food packaging already include recycled plastic or use alternative materials to plastic.”
Source: Financial Times