UK businesses will be forced to pass the vast majority of costs incurred by a new packaging tax onto consumers, in a move that will stoke already rampant food inflation and compound financial pressures on hard-pressed households.
According to fresh figures from the British Retail Consortium (BRC), retailers plan to pass over 80 per cent of the fees associated with the new levy – known as the extended producer responsibility (EPR) – onto consumers as it comes into force this month.
The industry body has previously claimed the tax – which makes the producers of packaging pay for it to be recycled – will take a £2bn chunk out of members’ bottom lines, just months after the twin hikes to payroll tax and living wage left many retailers floundering.
The BRC’s latest survey – published the day the new levy comes into force – also found the packaging tax to have significantly added to firms’ administrative workload at a time when many are already drowning in red tape compliance. Some 85 per cent of bosses said the paperwork, which many have been filing since last April, had pushed up their compliance burden “significantly”, in a force that will fuel more upward pressure on prices.
New tax adding to inflation fears
Waste producers have been forced to log swathes of information on the composition and volume of packaging they are putting onto the market to ensure they are not overcharged by customs officials.
Fears of further resource being spent on adhering to the complex packaging tax, combined with the fees themselves, will compound already existing food inflation, which has seen the pace of price rises climb to a three-month average of 4.1 per cent.
Prices in the category are now rising at their fastest rate since the double-digit inflation seen at the height of the cost-of-living crisis, a move Bank of England officials have blamed on ingredient scarcity and the government’s £25bn raid on employer national insurance contributions.
“Retailers support the polluter pays principle and are making significant changes to reduce and improve their packaging. But the packaging tax is also a multi-billion pound levy being paid by consumers during a cost-of-living crisis,” said Andrew Opie, director of food and sustainability at the BRC.
Alongside the research, the industry body also demanded that ministers guarantee the packaging tax be ringfenced for local authorities to use on improving recycling. Industry chiefs currently fear that cash-strapped councils may look to use the new revenue stream – which government has said should go towards waste processing – to fulfil their other ballooning obligations, from social care to housing.
Opie said BRC members were asking the body, “What are we getting for higher prices?”, adding: “Unless funds are spent transparently and effectively, EPR threatens to just be another burden on an already overtaxed industry with no tangible benefits for customers or the environment.”