Autumn Statement: Plastics tax to be introduced from April 2022

A tax will be placed on the manufacture and import of plastic packaging containing less than 30 per cent recycled plastic, the Treasury’s Autumn Statement has revealed, though a coffee cup levy will not be introduced.

In a much earlier budget than usual, brought forward to allow the government to focus on crucial Brexit negotiations over the next few weeks, Chancellor Philip Hammond yesterday (29 October) provided an update on the nation’s finances, announcing that ‘austerity is coming to an end’ and providing extra funding to certain public services.

There were offerings for the resources and waste industry, with Hammond announcing a tax would be placed on the manufacture or import of plastics containing less than 30 per cent recycled content, while £10 million will be put aside to deal with abandoned waste sites. It was also confirmed that reform of the packaging producer responsibility system would take place from the end of the year.

The government’s consultation into a plastics tax, launched during the Spring Budget in March, drew the biggest response ever to a public Treasury consultation, receiving more than 162,000 responses between 13 March and 18 May 2018. The new tax will be introduced from April 2022, subject to a further consultation. Revenues from the tax will be used to enable investment to address the issue of single-use plastics.

However, a proposed tax on disposable coffee cups – dubbed the ‘latte levy’ – will not be implemented, with the Chancellor saying he was not convinced that it would achieve the desired shift from disposable to reusable.

The decision not to introduce a ‘latte levy’ will come as a disappointment to some, with Parliament’s Environmental Audit Committee (EAC) recommending a 25 pence charge on disposable coffee cups to curb the levels of waste generated by their disposal. However, there has been some push back on the idea from industry, with the Paper Cup Alliance stating that a levy could cost the economy £819 million and result in 11,000 job losses in the coffee retail sector. Still, there has been voluntary action from within the industry, with Starbucks announcing it would be trialling a five pence charge for disposable coffee cups earlier in the year, while independent coffee shop chain Boston Tea Party banned the use of single-use coffee cups in its 22 stores in June.

While the total capital budgets for government departments will increase from £63.7 billion in 2018/19 to £80.1 billion in 2020/21, the Department for Environment, Food and Rural Affairs (Defra) will see no additional funding in that time, with its capital budget frozen at £600 million for each financial year. In fact, Defra’s departmental resource budget will be reduced from £1.6 billion to £1.5 billion between 2018/19 and 2019/20.

This is concerning, given Defra has already accommodated for £147 million of budget cuts across 2017/18 and 2018/19. It is also the department with the most Brexit work streams – around 70 – and is still looking to take on 1,400 new staff by the Brexit deadline of 29 March 2019.

Though the government has not introduced an incineration tax, the budget document states that ‘in the long term the government wants to maximise the amount of waste sent to recycling instead of incineration and landfill. Should wider policies not deliver the government’s waste ambitions for the future, it will consider the introduction of a tax on the incineration of waste, in conjunction with landfill tax, taking account of the possible impacts of local authorities’.

Responses to the budget

The response to the budget from the resources and waste industry has largely been positive, with most welcoming the Chancellor’s announcement of a plastics tax and reform of the packaging producer responsibility system, though the main indicator of the government’s commitment to getting the UK’s waste issues under control will come in the Resources and Waste Strategy, expected before the end of the year.

Pat Jennings, Head of Policy and Communications at the Chartered Institute of Wastes Management (CIWM), stated: “CIWM, alongside many other organisations across the sector, has repeatedly pressed for measures to stimulate secondary material markets, particularly to support and increase plastics recycling, where there is a degree of market failure. The new tax proposal is, therefore, welcome and we look forward to engaging fully with the consultation.

“This announcement, coupled with the recently launched consultation on banning some single-use plastic items, is a good start but there is still more to be done. Recyclability needs to be built in at the design stage and this will require a stronger and expanded Extended Producer Responsibility framework. We look forward to further proposals in the forthcoming Resources and Waste Strategy to deliver the government’s ambition of zero avoidable plastic waste by 2042.”

Jacob Hayler, Executive Director of the Environmental Services Association (ESA) said:

“The industry has long been calling for measures to support end markets for recycling. Today the Chancellor has listened, and we welcome proposals to introduce a new tax on plastic packaging that contains less than 30 per cent recycled content. Without stimulating the demand for recycled material, higher recycling rates will be unachievable.

“We are pleased that the Treasury has recognised that this is the most effective way to ensure the right incentives are in place for recycling, rather than to penalise energy from waste. An incineration tax would only burden local authorities and industry without doing anything to support greater recycling, and we are glad that the Treasury recognises the importance of energy from waste in sustainable waste management.

“This Budget has provided positive signs that the government is taking seriously the need to manage our resources and waste carefully. We look forward to working with the Treasury on implementing a new plastics packaging tax to deliver a more circular economy.”

Chief Executive of the Resource Association, Ray Georgeson, welcomed the plastics tax, but stated more needs to be done to address public concerns over the transparency of recycling and industry concerns relating to quality of recyclate. He said: “Creating demand for recycled material is not just about the fiscal incentive… Action across the supply chain is needed to address issues of poor quality recyclate from many collection and sorting programmes, the lack of transparency on end destination of recycling which damages public confidence in the recycling process, and an integrated approach to recycling market development that addresses other barriers to the take-up of recycled material in manufacturing.”

Waste management companies Veolia and SUEZ also welcomed the Budget, with Richard Kirkman, Chief Technology and Innovation Officer at Veolia UK and Ireland praising the Chancellor for focusing on “delivering a level playing field for manufacturers and the recycling sector, helping to bolster the circular economy and protect our common environment”.

Kirkman also called for the removal of “confusion for consumers” as the next step in making the UK a “waste-to-resources heavyweight”. Meanwhile, David Palmer-Jones, CEO of SUEZ, was pleased to see that the Chancellor “is not taking a piecemeal, straw-by-straw approach, but will consult on a more holistic tax, which seeks to drive a circular economy in recycled materials”. He added that he hoped the Budget announcements were “just the first steps of the journey – heralding a systemic shift from a throwaway to a thrifty society.”

Missed opportunity

However, not all were satisfied with the Budget’s offerings on the environment, with Michelle Carvell, COO of Lorax Compliance, calling it a “missed opportunity” to address wider environmental problems and “to address sustainability across all disposed materials, including electronics, food and textiles.”

She continued: “The backlash against plastics is indeed welcome, but a ban on single-use plastics, such as straws, will do little to phase out landfill waste or reform the UK’s creaking recycling infrastructure because they form such a small part of our plastic waste problem.

“Fashion in particular stands out as an industry in which more environmental regulation is required. As consumers, we throw away around £140 million worth of clothing each year, while clothing manufacturers create the equivalent emissions of international flights and shipping combined by burning unwanted or unsold stock.

“We can only reverse this cycle by reducing our consumption of non-reusable materials. Industry has already stepped forward, with many companies now signed up to the UK’s Plastics Pact, but more could certainly have been done by government to support a circular society by implementing the changes required to the UK’s PRN (packaging recovery note) system.

“In the meantime, we can only hope that more progress will be announced in Defra’s forthcoming Waste and Resources strategy.”