April 2025
PACKAGING EPR IS OFFICIALLY A TAX
In the supporting documentation for the Chancellor’s recent Spring Statement the Office of Budget Responsibility published the following with regard to Extended Producer Responsibility now officially being treated as a tax and that there is unlikely to be any significant improvement in recycling rates in the next five years . This raises a huge question as to where all the money that is being raised from the Packaging industry will actually be spent. The original intention of EPR was that the funds raised would be used to increase recycling facilities within the UK and this would lead to an increase in the quality and quantity of recycling.
The text that follows are extracts from that document:
Classification treatment of new policies
3.50 Since our October forecast the Government has introduced a number of new measures, and policy has become sufficiently firm to incorporate some previously announced measures. On the advice of Treasury classification experts and pending a decision by the ONS we are recording the following transactions in the following ways: Receipts from the extended producer responsibility, building safety levy, a gambling levy, and various visa and passport fees as taxes on production.
Other changes to previously announced measures
3.54 The extended producer responsibility (EPR) is a scheme which requires packaging producers to pay a fee for the packaging they supply to or import into the UK market, effectively compensating local authorities for the cost of packaging waste management. We previously captured EPR revenues as a fee received and spent within DEL( Department Expenditure Limits), so the new treatment of EPR revenues as a tax boosts receipts and decreases DEL fees by an equal and offsetting amount. While the policy was announced in 2021, there was previously not enough detail on the fees for this to be reflected as a tax in our receipts forecast. It will come into effect from April 2025 and is estimated to raise on average £1.6 billion a year between 2025-26 and 2029-30. The costing includes only a very small behavioural response to the policy from packaging producers and local authorities. This is based on assessments by the Department for Environment, Food and Rural Affairs, the responsible department, that the policy is unlikely to have a material impact on rates of recycling or packaging waste volumes in the next five years.
We assume that future budget reports and tax analyses will refer to the total tax take of packaging EPR. In other markets, such as insurance, the tax element is itemised. Will defining it as a tax make passing it on to customers more acceptable?
We also wonder if the tax status will mean more Treasury involvement in future EPR fee setting and how that works with Pack UK, especially if future governments view packaging EPR as more of a fund-raising mechanism designed to boost the total tax take, rather than the original intention of increasing recycling.
