Our food manufacturers are in unified despair over the introduction of a new Extended Producer Responsibility (EPR) tax. They worry that increasing regulatory costs will eventually be passed on to consumers. The EPR tax currently is expected to raise a net £1.4 billion this year. It uses lower rates for recycled content depending on the type of packaging. They recently increased their plastic tax to £423 per tonne. For aluminium, the fee is £266, for glass it’s £192, and for paper and card, it’s £196.
Past Environment Secretary Michael Gove bravely enshrined the EPR tax into law at the end of 2018. The purpose of this new initiative is to improve recycling practices throughout England. Under the policy, businesses would be able to accumulate tax credits by employing packaging classified as “green.” This rating is derived from Pack UK’s recyclability assessment methodology. The EPR tax builds on success seen in a handful of European nations. It highlights the importance of sustainability and calls for increased responsible production.
While the tax may have come from good intentions, it’s creating a state of panic among food manufacturers. Most importantly, they fear it will increase costs for consumers. For instance, Andrew Keeble, co-founder of Heck, a family-run food manufacturer, noted that the tax adds approximately “3p on a pack of sausages.” As an example, representatives from Gü pointed to their large EPR tax bill. They cited the tax’s economic impact on their operations, without revealing just how much the tax costs them.
Further, regulators like the Bank of England have weighed in on the expected economic burden of the EPR tax. They’ve proposed it would raise total food prices by up to 0.5% at the most if manufacturers fully pass these costs onto consumers. This troubling projection has sent shudders through industry leaders who are already fighting against unprecedented food inflation rates.
Catherine Conway, an advocate for sustainable packaging solutions, remarked on the pressing need for companies to transition from single-use packaging to reusable alternatives. She stated that businesses must “recognise the very obvious solution they have at their fingertips and start taking the necessary steps to move much of their single-use packaging into reuse.”
At least some manufacturers are skeptical about the feasibility of making those shifts. Vass, a representative from another food company, commented on the challenges posed by the EPR tax: “We’re going to have to make cuts in other areas, and then pass the rest on, which we don’t want to do, especially when food inflation has been so high for so long. To put another tax in that affects food inflation again just seems very unfair to consumers.”
Additionally, the EPR tax is based on the type of packaging that companies put onto the market. As a reminder, it’s determined using data from the prior calendar year. With the program well into its second year, the Department for Environment, Food & Rural Affairs (Defra) is preparing to roll out “modulation.” Through this groundbreaking new initiative, recyclers will pay heavier fees for the more difficult-to-recycle materials.
Vass pointed out the differing impacts of packaging costs on various products: “If you’re spending £10 on a bottle of wine then the percentage of glass as a cost of that product isn’t as much. When it’s a cheesecake in a glass ramekin then obviously the packaging is more as a percentage of the cost.”
As producers adapt to this new paradigm, they have repeatedly raised alarms about the manner in which the EPR tax has been rolled out. Keeble criticized the approach taken by policymakers, stating: “We wish we could live without it. The reality is this particular tax has been really poorly thought through.”