Labour to reduce Tory green tax on packaging

After a backlash by the food and beverage industry, ministers will water down the “packaging tax” of £1 billion proposed by the previous Conservative government. From April of next year, businesses that supply packaging or handle it for consumers, as well as other companies, will be responsible for the cost of collection, recycling, and disposal.

The government is expected to announce this week that it will be reducing the fees suggested previously, due to the rising cost of living and the heavy lobbying by industry executives. According to sources in the Department for Environment, Food & Rural Affairs, (Defra), the department made the changes as a result of listening to the voices of business.

Labour has reportedly backed down on other promises that could be seen as anti-business, such as the tax for non-doms or the treatment of private equity executives. When the prices are announced next week, they will be lower in “almost every category” from plastics to glass.

In the early 1990s, taxing manufacturers was introduced as a way to hold them accountable financially for what happens with their products after they have reached their end-of-life. According to the British Beer and Pub Association, the scheme may add 7p per bottle of beer.

In the past, governments have announced plans to tax packaging as part what is called extended producer responsibility (EPR).

The reforms are designed to reduce the amount waste that is sent to landfills and to stimulate investment of more than £10 Billion in the recycling sector within the next decade. Last month, Labour released a list of indicative prices. Aluminium producers could face bills up to £655 a tonne. Fibre composites would be charged between £410 to £655 a tonne. Plastic packaging was to cost up to £610. The government estimates that this levy would raise more than £1billion a year.

However, food and beverage producers have warned that this cost will be passed on to the consumer via higher prices. According to the British Beer and Pub Association, the price increase in August could amount to 7p per bottle of beer sold. Some parts of the food supply chain will welcome new or lower prices, but pubs & restaurants do not like being included.

Kate Nicholls, a hospitality business owner, said that the complexity of the scheme would cost the industry. Kate Nicholls is the chief executive officer of UKHospitality. She said that at a time where hospitality businesses are faced with rising costs, a double punishment of being incorrectly charged an EPR fee, and paying for the commercial waste disposal, is the last thing this sector needs.

“We know that tracking packaging can be complex. However, there should be an easy and clear way for wholesalers as well as hospitality businesses to show when the packaging is not household. She said: “It is unfair to expect that hospitality businesses will pick up the tab twice just because an issue has complicated nature.”

The announcement will likely anger environmentalists, because it could be a lessening of the incentive to reduce waste. The government said that it is “committed” to crackingdown on waste. A spokesperson from Defra stated: “Extended Producer Responsibility for Packaging is a crucial first step for our package reforms. The reforms will generate 21,000 jobs, and more than £10 Billion in investment for the recycling sector within the next decade. This means that packaging producers will be responsible for managing waste, not the taxpayer.

We continue to work closely together with businesses in this program. Now we are publishing updated base fees based on the data that they submitted. This will give them the clarity and information they need. Tax cuts are expected to coincide with some of the most controversial fiscal plans being altered.

Reeves’ plans for non-doms, or non-doms as they are also known, had expected their beneficiaries to now pay inheritance tax. Last week, there were reports that this idea might be abandoned due to warnings from those who said it would force wealthy individuals to leave Britain and reduce the tax take.

A compromise with the private equity sector has also been reached over the tax arrangement that allows 3,000 people to pay capital gain tax (CGT), at a rate of 28 percent, instead of income tax at 45 percent. Reeves pledged to crack down on this, but now is said to be looking at allowing those who invested their own money into deals to pay CGT. Individuals who didn’t invest their own cash would be subject to income tax.