Will the UK government Plastic Packaging Tax work?

Zara Babakordi, 12th November 2020

At Budget 2018, the UK Government announced its intention to introduce a Plastic Packaging Tax (anticipated to take effect from April 2022). The development of this measure is framed by a call for evidence into using the tax system (or charges) to reduce single use plastic waste; however, the tax will be applied more broadly, to include all plastic packaging (not specifically single use plastic packaging).

The primary goals of the tax are to reduce producer demand for virgin feedstocks while creating greater demand for recycled plastics, increase levels of plastic recycling and divert plastic waste from landfill and incineration. The tax is designed to complement reformed Packaging Producer Responsibility Regulations and calls for increased consistency in household recycling collections across local authorities and businesses (increasing the supply of plastics that are easier to recycle). While the design and refinement of the tax are ongoing, key elements based on the 2020 consultation can be seen in box below.

Adapted from HMRC (2020). Plastic packaging tax. Consultation document

To understand how effective this tax is likely to be in achieving these goals we reviewed some of the technical considerations presented in the August 2020 Consultation.

Definition of taxable plastics

The government’s definition of taxable plastics includes alternative plastics (with the exception of cellulose-based polymers). This means that bio-based, biodegradable and compostable plastic packaging may be eligible for taxation—this is based on the need for further evidence of the impact of these materials should they be used more widely, in addition to avoiding situations in which the development of novel plastics or blends is implemented in order to avoid taxation. The refined definition also takes into account the consensus that there are packaging types where plastic is not the main structural component, but is the predominant material by weight (e.g., in situations where plastic is the single largest component of weight in a mixed-material item). The current definition does not capture items which are designed for longer term, likely repeated, storage by consumers (e.g., plastic storage boxes). This raises questions about the definition and interpretation of plastic storage as opposed to plastic packaging and the assumption of longer-term use at the consumer level.

Alignment with other targets such as the UK Plastics Pact

Wrap is largely in favour of the proposed tax, noting its alignment with the UK Plastics Pact target of achieving an average of 30% recycled content across all plastic packaging by 2025 and, as a result, disincentivising production of plastic from 100% virgin feedstocks. However, this does raise the question as to the usefulness of the Plastic Packaging Tax (which will be implemented in April 2022 at the earliest) given many UK Plastic Pact members are committed to these goals, to be achieved by 2025. There is room to consider whether the tax’s recycled plastic threshold of 30% is sufficient. The Green Alliance, for example, suggests the target is not ambitious enough, suggesting an escalation-type, long-term approach may be more suitable, on the rate or tax, the percentage of recycled plastic content, or both.In a more ‘radical’ measure, they also propose increasing taxation on virgin materials.

Does the UK have the infrastructure to produce this much recycled plastic?

The supply of high-quality recycled plastic is a concern amongst some stakeholders; it is suggested that, at present, the UK market does not have the infrastructure to process and produce the volume of recycled plastic needed to meet the 30% threshold, potentially resulting in great reliance on imports.  There is also concern about the quality of pellets, with contamination frequent.  RECOUP suggests that sorting capacities at material recycling facilities and plastic recovery facilities do not represent a barrier to meeting the 30% recycled content target (by volume). However, their research suggests there are shortfalls in reprocessing capacity, with an estimated current operation output of 230,000 tonnes. Their analyses suggest that the UK’s reprocessing capacity may need to increase by 100% to meet the 30% recycled content in all household plastic packaging placed on the market, and over 200% to meet that target for food grade rigid household plastic packaging.

Is it fair?

Photos from our diary study research

The Food and Drinks Federation argues the tax unfairly penalises producers who must adhere to strict food safety rules affecting the packing they use.  This concern is also put forward by the British Plastics Federation, arguing barriers to use of recycled plastic are not financial, but technical, in nature and food safety restrictions limit the use of recycled plastics in certain contexts. This is recognised by Wrap, who, while favouring an increased demand for plastic recycled content, notes there are various types of plastic and plastic packaging where it will not be possible to achieve a 30% recycled content.  Feedback during the Consultation processes reflected this concern, with arguments that the 30% threshold is too high for plastic packaging that comes into contact with food (currently, only PET and HDPE are currently available in recycled grades that are suitable for direct food contact).

Consultation feedback highlights concerns that, as food and drink producers might be unable to avoid paying the tax, it risks impacting the price of goods for consumers. Just Eat, for example, suggests that the knock on effect of packaging pricing is likely to be passed directly to the consumer.

For more information, please see our 2020 research report: Institutions, Interventions and Single Use Plastics

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