Apr 8th, 2021
11 mins
When the BFFF formed the Special Interest Group (SIG) on Packaging we did this because we were aware, that over time, the cost to our members on the recycling and recovery of packaging was only going to increase. So the need to change the types of material currently used combined with a reduction in the absolute quantity of packaging would be business critical.
Whilst many members have seen significant increases in PRN costs for plastic over the last couple of years, this is only a foretaste of what will they inevitably face.
In the last few weeks, the Government has published two pieces of information that will drive significant cost for industry on Packaging.
The first is the Finance Bill 2021 which has confirmed that the Plastic Tax will be introduced in April 2022. This will mean that a tax of £200 will be levied on any plastic that does not contain 30% of recycled material.
In the BFFF response to the consultation of this tax we suggested that the timing of the tax needed to be pushed back so that industry has enough time to drive change. This has been ignored by Government.
In our response we, along with a number of other trade bodies, highlighted two key issues:
- Insufficient supply of recycled material.
- Currently material that is mechanically recycled is prohibited for use in a ‘food contact’ application.
The first issue can only be resolved when the overall quantity of flexible plastic collected at kerbside is increased. With Local Authorities reluctant to collect flexibles it is important Government creates a framework to encourage them to increase the 17% collected today.
Whilst Government drags its feet over finding a solution to the lack of kerbside collection or flexible plastic, industry is also trying to find solutions. A group of brand owners have created the Flexible Plastic Fund aimed at encouraging increased collection. Initially the £1m fund allocated will be used to support recyclers and thereby in turn support the PRN price. Another industry initiative we have seen is Tesco creating a ‘closed loop’ process for soft flexible packaging for cheese.
We then need to find a way for recycled material to be safely used in ‘food contact’ applications. This is potentially only possible when we see a greater use of Chemical Recycling. This is where material is processed through a chemical application to extract the base oil out of the material. This oil is then re-used to make plastic, which could be used in a ‘food contact’ application. However, this requires significant investment to build this at scale. One company already doing this is – Plastic Energy, a Spanish-based company.
There is also a major issue with the way the Plastic Tax legislation has been drafted. The tax for UK companies is levied at the point of extrusion. This means that tax is paid on material that is then wasted through the various stages before a final pack arrives with the consumer or end user. Together with the British Plastic Federation (BPF) we estimate that the £200 per tonne tax becomes approximatly £640 per tonne on a final product. However, in contrast products that enters the UK in a packed format will only pay the £200 per tonne tax on the weight of plastic that enters the UK from a third country (this includes the EU). This puts our members’ UK produced product at a commercial disadvantage. Also, according to the BFP there is currently no test available where you can determine if a material has a recycled content.
The Finance Bill 2021 now has to go through the committee stages when we hope some changes may be possible. We would urge all members who will be impacted by this tax to lobby their local MP to see if we can apply pressure for some vital and realistic changes to the Plastic Tax.
The second critical document published by Government has been the consultation on the Extended Producer Responsibility. This will be the new system introduced to replace the current PRN system. The Federation will, through our SIG Packaging, respond to the consultation which is due to close on 4th June 2021.
The draft, as it stands, will transfer £2.7bn of costs from Government (Westminster and Local Authorities) to industry. To put this in perspective, industry currently pays about £330m per annum for the PRN system – so this will be a 8 fold increase in costs.
It will also bring with it a massive burden on data collection and reporting – this is because the proposed system will use modulated fees. This means the harder a material is to recover and recycle the higher the fees will be charged.
The BFFF SIG on Packaging is currently involved in a series of workshops organised by INCPEN and WRAP to work through the types of material definitions that will be required and it is already clear that it will be far more complex than the current PRN system.
The scope of the proposed EPR will also try to address the national issues of litter with the concept being that those brands we see discarded on the roadside hedges and many open areas – will pay more. There is, however, a fundamental flaw in this. Those brands did not discard the rubbish – consumers did. So, we do hope that any monies raised through the EPR system is used to educate consumers to dispose of rubbish in an environmental way.
It would also be important to ensure that Local Authorities that already have enforcement powers do use them. However, it is not always consumers who create these issues – I have often followed flat bed lorries with empty pallets on them and I am amazed that companies do not remove the bits of plastic still on the pallet. These then are blown off onto the roadside as the vehicle travels, which then remain on the kerb side and surrounding land.
Whilst the draft EPR will transfer a massive cost to industry it is clear we all need to play our part if the UK is to reach the net zero target by 2050, as this will only be achieved by collaboration. Even Tesco CEO, Ken Murphy, has recently stated that the only way, even mighty, Tesco will achieve its net zero target by 2035 is by working with its suppliers.
The key on packaging will be to reduce, recycle and re-use if members are going to be faced with such a major increase in costs.
