Food bills about to get a lot more expensive with new ‘plastic tax’

A new ‘grocery tax’ on packaging used by retailers and manufacturers could increase shopping bills by up to £1.4 billion.

It’s hoped the green levy, designed to meet the government’s net zero targets, will help cut the enormous amount of packaging used in the UK.

The government projects the scheme – called the Extended Producer Responsibility for Packaging (EPR) – will end up costing firms £1.4 billion a year.

An impact assessment report published by the Department for Environment, Food and Rural Affairs (Defra) predicts that between 85% to 100% of this bill will be passed onto the consumer, pushing a household’s costs up by £28-£56 in 2025.

Firms will be charged more for using plastic packaging than more sustainable materials such as paper or cardboard.

Both the British Retail Consortium and the Food and Drink Federation welcomed the move, but urged the government to use funds raised by the scheme to improve the country’s recycling infrastructure.

Lord McKinlay, a Tory peer and chair of the Net Zero Scrutiny Committee, criticised the initiative, telling the Telegraph, the ‘grocery tax’ legislation will add ‘unnecessary costs on consumers’.

The scheme was initially suggested by Conservative Michael Gove when he was environment secretary, but put on hold following backlash from Tory MPs.

But Keir Starmer’s government passed the secondary legislation earlier this month, and the new levy will come into force on January 1.

How will it work?

According to base fees published last week by Defra, in 2025 firms will be charged £215 per tonne if using paper or board packaging – the cheapest packaging, while plastic – the highest costing material – will cost £485 per tonne.

All other materials fall between these two in terms of costs, depending on how sustainable they are.

Companies will only be charged the first time packaging is placed on the market. Glass, for example, can be reused so it’s hoped more firms will use the material when suitable.

Defra says revenue from EPR will be used to ‘support local collection and disposal services, including recycling services’.

What does the manufacturing and retail industry think?

Jim Bligh Director of Corporate Affairs and Packaging, The Food and Drink Federation, said: ‘Food and drink manufacturers support the government’s zero waste goal and are committed to a cleaner environment.

‘We welcome the long awaited release of base fees for Extended Producer Responsibility (EPR), which helps manufacturers take more responsibility for packaging and helps them plan for 2025 costs.

‘With EPR expected to cost at least £1.4 billion in 2025, it’s crucial that funds are used to improve recycling infrastructure. 

Andrew Opie, of the British Retail Consortium said the scheme could play a ‘vital role’ in cutting unnecessary packaging, adding: ‘Ultimately, customers and businesses will pay for these improvements through increased costs which is why it is essential EPR delivers a step change in recycling that justifies its £2 billion a year cost.’

Lord McKinlay accused Labour of being ‘obsessed with green politics’ and ‘quite happy to impose these new burdens on business which will boost inflation and push up food costs for every family’.

A Defra spokesman said: ‘This government will end our throwaway society and stop the avalanche of rubbish that is filling up our streets by increasing recycling rates, reducing waste and cracking down on waste crime.

‘Extended producer responsibility for packaging is a vital first step for our packaging reforms which will create 21,000 jobs and stimulate more than £10 billion investment in the recycling sector over the next decade.

‘We continue to work closely with businesses, including the glass industry, on these reforms. We set out illustrative fees which are lower for almost all categories than originally proposed, including for glass.’

What does net zero mean?

Net zero means achieving a balance between greenhouse gasses emitted into the atmosphere and the amount removed from it. Greenhouse gases include carbon dioxide (CO2) and methane.

CO2 is released when oil, gas and coal are burned in homes, factories and to power transport. Methane is produced through farming and landfill, as well as other sources.

What are the UK government’s net zero targets?

The UN says the world needs to cut carbon dioxide emissions to net zero by 2050.

The UK government has made a series of pledges to achieve this target, which include:

Ending the sale of new fully petrol and diesel cars by 2030

Investing in technology to capture and store CO2

Increasing wind and solar power to achieve so-called ‘clean’ electricity by 2030.

Installing 600,000 electric heat pumps by 2028.

The UK’s greenhouse gas emissions last year were around 50% less than in 1990. Under the Paris climate agreement, the UK needs to cut emissions by 68% by 2030.

The Climate Change Committee (CCC), warned in July that the UK was in danger of missing this target.

Speaking at COP29 climate summit in Azerbaijan, Prime Minister Sir Keir Starmer announced a new target to cut the UK’s emissions by 80% compared to 1990, by 2035.

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