Labour set to water down Tory ‘green’ tax on packaging

Ministers are set to water down a £1 billion “packaging tax” proposed by the former Conservative government following a backlash from the food and drink industry.
Businesses that handle and supply packaging to consumers, or to other companies, are to be charged for the costs of collecting, recycling and disposing of the waste from April next year.
However, amid the cost of living crisis and heavy lobbying from industry executives, the government will this week announce they are cutting the previously suggested fees.
Sources in the Department for Environment, Food & Rural Affairs (Defra) said it was making the changes after listening to business voices.
Labour is reportedly scaling back other potentially anti-business pledges made in its manifesto on issues such as the non-dom tax and the treatment of private equity executives.
The charges will be lower across “almost all categories” from plastic to glass, when the prices are announced this week.
The concept of taxing manufacturers first emerged in the early 1990s as a “polluter pays” way of holding them financially accountable for what happens to their products at their end of life.
Previous governments have unveiled plans for a tax on packaging as part of what is known as extended producer responsibility for packaging (EPR).
The reforms were designed to reduce the amount of waste going to landfill and stimulate more than £10 billion investment in the recycling sector over the next decade.
Labour unveiled a set of indicative prices last month. Aluminium producers were in line to face bills of up to £655 per tonne, fibre composites between £410 and £655 per tonne, and plastic packaging up to £610. The government has estimated that the levy will raise more than £1 billion a year for the Exchequer.
Food and drink producers, however, have warned that the cost would be passed onto the end consumer through higher pricing. The British Beer and Pub Association estimated that the August pricing could add up to 7p on each of the 3.2 billion bottles of beer sold in the UK.
New or lower prices will be welcomed by some parts of the food and drink supply chain, but pubs and restaurants are not happy at also being included in the regime.
Kate Nicholls, chief executive of UKHospitality, said: “At a time when hospitality businesses are facing rising costs in almost every area of their business, a double penalty of being incorrectly levied a EPR fee and paying for commercial waste disposal is the last thing the sector needs.
“We understand that tracking packaging is complex, but there needs to be a clear and simple route for both wholesalers and hospitality businesses to demonstrate when packaging is non-household.
She added: “It’s unfair to expect hospitality businesses to pick up the bill twice, just because an issue is complicated.”
Meanwhile, the announcement is likely to anger environmental campaigners, as it risks being less of an incentive to reduce waste.
But the government insisted that it was “committed to cracking down on waste”.
A spokesperson for Defra said: “Extended producer responsibility for packaging is a vital first step for our packaging reforms. These reforms will create 21,000 jobs and stimulate more than £10 billion investment in the recycling sector over the next decade. It means packaging producers, rather than the taxpayer, covering the costs of managing waste.
“We continue to work closely with businesses on this programme. We are now publishing the updated illustrative base fees, based on data they have submitted, and providing the clarity they need to prepare.”
The tax cuts come amid speculation that some of the most controversial plans for fiscal changes are also being tweaked.
Under changes applying to non-domiciled people — so-called non-doms — it had been expected that their beneficiaries would now have to pay inheritance tax under Reeves’s plans.
But last week there were reports this idea could be abandoned in the face of warnings that it will force wealthy individuals out of Britain and cut the tax take.
There are also signs that a compromise has been reached with the private equity industry over the tax arrangement which allows 3,000 individuals to pay capital gains tax (CGT) at 28 per cent rather than income tax at a 45 per cent rate.
Reeves had pledged to clamp down on this but is now said to be considering allowing individuals who have invested their own cash into deals to continue to pay CGT. Those individuals who did not put in their own money would pay income tax.