One Year On: Reflections on the UK's Plastic Packaging Tax and the Industry Working Group

6 April 2023

Richard Hudson MCIWM, Technical Manager 

April 1 2023 marked the first anniversary of the implementation of the UK’s Plastic Packaging Tax (PPT). Around the same time, the final meeting of the Industry Working Group (IWG) for PPT was held.

The IWG was a body established by government in 2020 to facilitate collaborative working between HMRC and industry stakeholders to help develop and implement the tax. Alongside organisations such as the British Retail Consortium (BRC), Food & Drink Federation (FDF), British Plastics Federation (BPF), Food Packaging Association (FPA), Incpen, and WRAP, CIWM sat on the IWG right from the start, working hard to ensure the best interests of our members in relation to the tax were heard.

The coinciding of these events got me thinking about the impact the tax has had so far, and reflecting upon the workings of the IWG. The following are my personal views, and don’t necessarily reflect the position of CIWM.

Turning first to the IWG. Whilst the over-riding responsibility of HMRC was to implement the tax as set out the UK Government, the representatives from HMRC proved themselves willing and open to listen to the concerns raised by the various sector representatives, and to present these for consideration by Government.

So, what did the IWG achieve? Influencing product inclusions and exclusions within the scope of the tax was a big part of the early discussions, with successes such as the exclusion of silage wrap. The practically unworkable requirement for recycling statements on invoices was also dropped following pressure from IWG members.

However, arguably the greatest success was getting the importance of chemical recycling (CR) on the Government’s radar. Without CR it is unlikely the bulk of flexible food-contact packaging will ever be able to achieve the 30% minimum recycle content required to avoid paying the PPT. By 2027, huge quantities of flexible plastic packaging will start to be collected from households. Where will the end markets for this material be? Mechanical recycling can’t be the only solution, and our sector will need other stable and secure mass outlets, such as CR, for the materials we’ll be collecting.

On the subject of PPT, I have to confess to being a fan of taxes as a means of influencing and encouraging ‘desired’ consumer and business behaviours. Can the uncontrolled proliferation of the use of plastic packaging continue? No. Would the tax have been better scoped as a single-use plastic packaging tax? Probably.

Is the wasteful use of inappropriate resources for packaging solely a plastics issue? No. Do we run the risk of demonising plastics to the detriment of it often being the most suitable material when balancing properties against sustainability? Yes. Should society stop worshipping at the altar of convenience? Yes. Has the PPT been a success? OK that’s a hard one but let’s try!

According to UK Government, the aim of PPT was “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. In turn this will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.” On the plus side, the confirmation of the tax’s introduction certainly resulted in a flurry of capacity investments and a steady increase in the demand for, and the value of, recycled plastics. If anything, there is now not enough recycled plastic to meet demand – great for treasury coffers, not great for industry or the planet.

So could the tax achieve more, and is it structured to do so? Does the government need to do more to support the UK plastics collection and recycling sector? Around 2.4 MT of plastic packaging is placed on the UK market per annum, of which 1.3 MT is captured for recycling. However some 0.5 MT is exported for overseas recycling and it is estimated that 60% of the UK’s recycled plastic usage requirement in packaging applications is imported due to the UK’s lack of reprocessing capacity. According to BPF’s 2021 Recycling Roadmap between 1.8 – 1.9 MT of plastic packaging will be collected by 2035.

If we are to handle this in the UK an additional 1 MT of UK plastic sort capacity and between 0.5 – 0.65 MT of mechanical recycling capacity will be required, some £1 billion of capital investment. However, the prizes of doing so are great - reduced CO2E emissions of 30 – 35 MT, £2.8 to £3.1 billion of gross-value added contribution, 1,100 new jobs in direct employment, and 1,000 new jobs in the supply chain. So could PPT receipts be put to better use by being ring-fenced and re-invested in the sector in order to achieve this?

The PPT rate was set at £200/tonne for any packaging with less than 30% recycled content. This increased to £210.82/tonne from 1 April 2023 in line with the Consumer Prices Index (CPI). As it stands all PPT receipts go straight to the treasury. HMRC estimated they would receive a net benefit of £235 million in Year 1 from the PPT. A recent freedom of information request by packaging manufacturer and consultancy - Duo - revealed that in the tax generated over £200m in revenue in the first full three quarters.

Assuming this trend continued in Q4, the UK would be on track to exceed HMRC’s first-year target by more than £30 million. In these respects you could argue the tax has failed. If the stated UK Government aim had been fulfilled, PPT tax receipts would be zero. £230million revenue equates to 1.15 MT of plastic packaging being placed on the market that did not contain at least 30% recycled content.

In these times of austerity and in the midst of a cost of living crisis I can understand why Government might be reluctant to give up a revenue stream but is there not an argument that at the very least the additional windfall could be set-aside to support ‘UK plastics collection & recycling PLC’?    

As it stands I can’t escape my gut feeling that UK Government does not see the value and potential of the UK reprocessing sector, and that the PPT is a lost opportunity to increase the amount of post-consumer plastic recycled in the UK. The tax has certainly resulted in an increased demand for recycled content but most of this demand is being fulfilled by overseas suppliers as the UK lacks sufficient reprocessing capacity.

Large-scale investment is urgently required, and PPT revenues could be reinvested to help fund this, not only creating high value jobs and wealth but also supporting the Government’s levelling up agenda. I wait with hope in my heart but won’t be holding my breath!