UK Plastic Packaging Tax Escalator

The UK Plastic Packaging Tax came into force on 1 April 2022. This put in place a £200-per-tonne charge for any packaging that did not contain at least 30% recycled content. This price has since increased in line with the Consumer Price Index to £210.82 and will increase further in April 2024 to £217.85.

The stated aim of the tax is “to provide a clear economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging, which will create greater demand for this material”.[1] It has been said that the ultimate success of the tax will be when it makes no money.

In the financial year 2022-23 the Plastic Packaging Tax generated £276 million. Data from 2022-23 shows that 39% of plastic packaging was taxable and 61% was relieved or exempt.

The government announced in November 2023 that they will ‘consider introducing an escalator to the rate of the Plastic Packaging Tax and minimum recycled plastic threshold in the future’.

Has the UK Plastics Packaging Tax been successful?

It is difficult to fully evaluate the success of the Plastic Packaging Tax in its current format. The UK Plastics Pact has reported that since 2018 the recycled content contained in pact members’ packaging has increased from 8.5% to 24%. However, the source of this recycled content is not known and it is understood that a lot of this demand is being met by importing recycled material.  This has prevented the tax from leading to large-scale investment in UK recycling infrastructure. There was a series of announcements regarding investment in recycling facilities prior to the tax coming into effect. However, these also coincided with stricter export controls and large-scale investment has not taken place.

The British Plastics Federation (BPF) is aware that some key concerns remain with the Plastic Packaging Tax. The Plastic Packaging Tax is applicable across all types of plastic packaging (except where a small number of exemptions apply) and this creates a blunt instrument that does not consider the technical or practical feasibility of using recycled content in each application. This encourages fraud in some areas, with some products claiming to contain 30% recycled content when this is not technically possible. It could discourage the higher use of recycled content in others where much higher recycled content levels are achievable.

Other concerns are:

• Mass balance – the current lack of acceptance of mass balance methodology is preventing companies from being able to use chemically recycled material to meet their tax obligations[2]
• Food contact – food contact regulations prevent the use of recycled content in a certain amount plastic packaging
• No hypothecation of the tax – the plastic packaging tax is not currently being invested back into improving and expanding the UK’s plastic recycling infrastructure

In conclusion

The BPF would not support an increase in the minimum recycled threshold as increasing this further would not overcome any of the barriers to increasing the use of recycled content —and could encourage further fraud. Increasing the minimum threshold is also likely to increase imports further, rather than leading to investment in UK infrastructure. The BPF could potentially support a modest increase in the cost of the tax — but only if this was brought in with the following conditions:

• Using proceeds from the tax to invest in relevant UK infrastructure.
• Accepting mass balance as a calculation method so that chemical recycling technologies and facilities can grow.
• Updating food contact regulations to enable the use of recycled plastic in a wider range of food contact applications.
• Implementing industry-agreed certification or verification methods to identify the amount of recycled content in applicable products to minimise fraud and increase the effectiveness of the tax.

However, if the case is being made to increase the cost of the tax, it should be noted that the initial  revenue targets have been exceeded, so the tax must not become a thinly veiled stealth tax on the plastics industry. Any rise in cost needs to be carefully justified and the benefit to the UK’s environmental ambitions need to be clearly established. The Plastic Packaging Tax needs to be a sensible and rational mechanism, aligned with Extended Producer Responsibility proposals. It also needs to be mindful of current inflationary pressure. Plastic Packaging is used in essential, staple items for consumers and any cost increases in these could put households under even more financial pressure.

Published on 28 March 2024

[1] Plastic Packaging Tax: policy evaluation plan - https://www.gov.uk/government/publications/plastic-packaging-tax-evaluation-plan/plastic-packaging-tax-policy-evaluation-plan
[2]  https://www.bpf.co.uk/hub/mass-balance.aspx