If you have not yet written to government on EPR packaging tax, now is the time. Following the August estimates backlash, Defra published revisions this week.
Whilst bringing down the levels a tad, this review changes nothing. The government needs to rethink the process, especially the timing, urgently –or accept this will immediately drive inflation. It is vital to add your voice by writing to the secretary of state for Defra and the Chancellor of the Exchequer now.
Whilst the packaging ‘tax’ demands will be issued in April 2025, payable in October 2025, they will be based on usage for the 2024 calendar year. Businesses have therefore been blind to an additional applicable tax rate for nine months. What’s more, these figures are still subject to significant uncertainty and will change, as local authority chargeable costs are not yet accurately modelled.
This retrospective billing of a mystery charge is surely illegal by any description. But of course, when it comes to raising money, the government will do as they like. A genuine fear should be a subsequent move from retro payments to advance ‘payments on account’.
Efficiencies by changing substrate remain unclear, so the best option suppliers have now is to estimate the charges and pass on in cost price increases. My advice is to apply packaging tax like a duty, and now. All manufacturers should be galvanised on doing so.
Retailers should move own-label rsps immediately and branded suppliers should not need notice periods, because they are all already incurring these additional costs. Normal supplier CPIs should go ahead in addition, and in the first cycle of EPR there will be a need to go extra on those to fill the profit hole from the past nine months, as well as reflecting normal input cost moves.
Much of today’s disarray is because the weight-based approach disadvantaged suppliers in glass packaging. Glass has always been the responsible environmental format with advanced reuse and recycling initiatives.
Well, no good deed goes unpunished! The weight-based system in EPR is expected to put circa 4p on a small glass bottle of beer. This is down from 7p with the revision, but equates to an increased duty range of between 7% and 14%.
For many SMEs who can’t afford to change packaging material or don’t have formulations that allow, the only option is to raise prices on what is a premium range, which could choke off demand and cause bankruptcy – putting jobs at risk.
Don’t leave it to trade associations. Write now to Steve Reed MP (secretary.state@defra.gov.uk) and Rachel Reeves MP (action.XST@hmtreasury.gov.uk), making clear the impact on your business, the implication for inflation, the risk to employment, and the recycling initiatives you already support.
The industry will inevitably be blamed for driving inflation once again. No doubt the CMA will investigate and pretend it’s found someone within the industry to blame. We want and need a better environment, but surely Defra is doing the right thing wrong.
Image Editorial credit: DimaSid / Shutterstock.com
