The UK government is reviewing a controversial £2 billion sustainable packaging tax as it faces mounting pressure from retailers to prevent food prices from soaring. The Treasury is reportedly examining potential changes to the Extended Producer Responsibility (EPR) tax, which requires large businesses to pay for the disposal of their packaging.
Retailers Call for Red Tape Reduction
Retailers have intensified calls on the government to cut red tape costs, allowing them to focus on keeping prices low for shoppers. The EPR levy, expanded last year, requires retailers to cover the full cost of disposing of their packaging, with heavy taxes on materials like glass bottles. The tax equates to 12p per glass bottle or jar sold in supermarkets, and retailers warn they may pass on up to £56 in costs to the average household annually. Premium mixer brand Fevertree took the Environment Agency to court over the tax in March, while John Lewis and sausage maker Heck have voiced strong opposition.
Food Inflation Could Reach Double Digits
The blockade of the Strait of Hormuz during the Iran war has driven up energy, shipping, and fertiliser costs. Industry figures warn this could have a catastrophic effect on food prices. The Food and Drink Federation (FDF), representing the UK's 12,000 food and drink manufacturers, expects food inflation to hit nine or ten percent this year, up from the current 3.7 percent. The Bank of England forecasts food inflation could reach seven percent, above a headline inflation forecast of 6.2 percent. The FDF warns that the impact of the Middle East conflict may be delayed by several months, similar to the 2022 energy crisis following Russia's invasion of Ukraine.
Supermarkets Urge Government Action
Supermarkets have recently ramped up demands for the government to reduce tax and regulation costs. Executives from Tesco, Sainsbury's, and other chains have highlighted policy costs on energy bills. Ministers have identified the packaging tax review as a way to ease pressure on supermarkets to hike food prices, according to The Times.
Triple Tax Pushes Up Food Costs
The British Retail Consortium (BRC), a leading trade body, has long supported a review of the EPR levy and welcomed reports of government action. Andrew Opie, head of food and sustainability at the BRC, told The Times: “The government cannot fix the Middle East situation, but it can take action to help retailers hold down prices for their customers. The government should review the triple packaging taxes, reducing the burden of its new EPR packaging tax, temporarily pausing the plastic packaging tax, and scrapping the broken packaging recovery note scheme, which together push up the cost of shopping for households.”
A government spokesperson ruled out scrapping the EPR tax entirely, stating: “There are no plans to scrap extended producer responsibility, which moves the cost of dealing with waste away from taxpayers and generates over £1 billion annually. It’s part of a major investment in the UK economy, helping create 25,000 jobs and we will continue to work with industry as the changes are implemented.”
