Plastic packaging tax will further fuel inflation, warn food makers

Food manufacturers are calling on the government over implementation of a new UK environmental tax, warning it will force them to increase prices for consumers at a risk of fuelling inflation. It is set to come into effect from April 1.

Several large food companies and industry representatives told the Financial Times that businesses were finding the plastics packaging tax “challenging to understand and comply with”.

The levy, which was announced in the 2018 Budget, is designed to provide incentives to businesses so as to encourage them to use recycled plastic in the production of plastic packaging.

As per the rules, 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.

“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,” FT quoted Nicki Hunt, director of sustainability at the Food and Drink Federation, as saying.

“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.”

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, adding that it will just create “inflationary pressures within the supply chain”.