Controversial £2bn packaging tax could be scrapped as food inflation looms
The government is reviewing a controversial £2bn sustainable packaging tax as it faces increasing pressure from retailers to prevent food prices from soaring.
The Treasury is reportedly looking at potential changes to the Extended Producer Responsibility (EPR) tax, which requires large businesses to pay towards the cost of disposing of their packaging.
Retailers have been ramping up their calls on the government to cut the cost of red tape to allow them to focus their efforts on keeping prices down for shoppers.
The EPR levy was expanded last year to require retailers to cover the full cost of disposing of their packaging, and the tax weighs heavily on materials like glass bottles.
The tax is equivalent to 12p for every glass bottle or jar sold in a supermarket and retailers have warned they may be forced to pass on as much as £56 in costs to the average household each year.
Premium mixer brand Fevertree took the Environment Agency to court over the tax in March, and retail giant John Lewis and sausage maker Heck have been vocal in their opposition to the tax.
Food inflation could reach double figures
The effective blockade to the Strait of Hormuz during the Iran war has sent the costs of energy, shipping and fertiliser soaring, and some industry figures have said this could have a catastrophic effect on the price of a food shop.
The Food and Drink Federation (FDF), which represents the UK’s 12,000 food and drink manufacturers, expect food inflation to soar to nine or 10 per cent this year – though it currently stands at 3.7 per cent.
The Bank of England said last week that they think food inflation could reach seven per cent this year, above a headline inflation forecast of 6.2 per cent.
The FDF warns that food inflation could vastly outpace overall inflation but that the impact of the Middle East conflict will be delayed by a few months, as it was during the 2022 energy crisis caused by Russia’s invasion of Ukraine.
Supermarkets have recently ramped up calls on the government to cut their tax and regulation costs, with the bosses of Tesco, Sainsbury’s and others focussing on so-called policy costs on energy bills.
But ministers have landed on reviewing the packaging tax as a way to ease the pressure on supermarkets to hike food prices, according to the Times.
‘Triple-tax pushes up food costs’
The British Retail Consortium (BRC), a leading trade body, has long supported a review of the EPR levy and welcomed reports that the government is considering action on the tax.
Andrew Opie, head of food and sustainability at the BRC, told the Times: “[The] government cannot fix the Middle East situation, but it can take action to help retailers hold down prices for their customers.
“[The] government should review the triple packaging taxes, reducing the burden of its new EPR packaging tax, temporarily pausing the plastic packaging tax and scrapping the broken packaging recovery note scheme, which together push up the cost of shopping for households.”
A government spokesperson ruled out the EPR tax being scrapped entirely: “There are no plans to scrap extended producer responsibility, which moves the cost of dealing with waste away from taxpayers and generates over £1 billion annually.
“It’s part of a major investment in the UK economy, helping create 25,000 jobs and we will continue to work with industry as the changes are implemented.”