New figures from the British Retail Consortium (BRC) suggest that over 80% of the costs of the new packaging tax – the Extended Producer Responsibility (EPR) scheme – are likely to be passed onto consumers.
Following last year’s Budget, retailers were hit with £5bn in extra employment costs due to higher employer National Insurance and rising National Living Wages. The BRC noted that the industry has been left with little room to absorb additional costs, with EPR expected to cost billions, adding another inflationary pressure, at a time when food prices are already rising fast. The Bank of England estimates that the EPR policy will add 0.5% to food inflation.
A survey of leading retailers by the trade body highlights the significant financial burden that EPR fees will place on UK retailers and households. 85% of retailers said the administrative and compliance burden they face has increased significantly as a result of EPR. Firms are now required to report extensive information on the composition and amounts of packaging they are putting on the market.
The new packaging tax is levied on any company which produces packaging bought and disposed of by households, including retailers and brands. The fees are based on the materials and amounts used. As a result, retailers are trying to use more recyclable materials and less packaging, with the BRC survey showing that 85% of retailers intend to increase the proportion of sustainable packaging placed on the market, while almost four in five retailers (78%) intend to reduce the total volume of packaging they place on the market.
However, with prices set to increase as a result of the new tax, the BRC is calling for the government to provide greater clarity on how consumers and the environment will benefit.
The trade body wants the government to put in place legal restrictions (ringfencing) to ensure the money raised from EPR can only be used by local councils to collect and operate local recycling, as well as fund improvements to local recycling systems.
Andrew Opie, Director of Food & Sustainability at the BRC, commented: “Retailers support the polluter pays principle and are making significant changes to reduce and improve their packaging. But the packaging tax is also a multi-billion-pound levy being paid by consumers during a cost-of-living crisis. They will ask: What are we getting for higher prices?
“Unless funds are spent transparently and effectively, EPR threatens to just be another burden on an already overtaxed industry with no tangible benefits for customers or the environment.”
