The government is going to be on a sticky wicket next time it tries to deny the £1.6bn hit of extended producer responsibility is not simply a whopping fresh tax on industry.

Unofficially, of course, many business and trade bodies calling for the brakes to be slammed on the controversial new fees have referred to it as a “packaging tax” for some time.

But now it’s official, thanks to the Treasury’s own spending watchdog, which has not only reclassified EPR as a tax on business but upped the estimates of how much it will cost to the tune of a cool £200m.

Documents published by the Office for Budget Responsibility (OBR) to accompany Chancellor Rachel Reeves’ spring statement last week reveal that whilst the EPR scheme was previously treated as a fee to be received and spent within government department expenditure limits, it was now being treated as a tax and would boost the Treasury’s tax forecasts.

EPR’s perfect storm

The revelation, coming ahead of today’s deadline for obligated companies to register for EPR or face being dragged through the courts by the Environment Agency, is not exactly great messaging for ministers already facing an industry rebellion.

Already a large majority of businesses are up in arms about the impact of EPR, with organisations, including the BRC representing the major supermarkets, among those calling for it to be delayed because of the potential effects on inflation.

In February retailers including Tesco and M&S said ministers were creating a “perfect storm”, with Stuart Machin, the chief executive of the latter, accusing them of “raiding retail like a piggy bank”.

Even the FDF, which has been a loyal supporter of the scheme, has threatened to withdraw its support unless there are, among other things, guarantees that the money raised will not simply be used to plug local authority shortfalls. 

Last week it cited EPR as the key regulatory concern of manufacturers, whose confidence was tanking.  

The suspicion that the cash raised from EPR is going to end up going towards general local authority coffers, rather than being targeted carefully at rebooting local authority recycling resources, is heightened to no end by the OBR’s language.

“We previously captured EPR revenues as a fee received and spent within DEL (departmental expenditure limit),” it says.

“So the new treatment of EPR revenues as a tax boosts receipts and decreases DEL fees by an equal and offsetting amount.

“While the policy was announced in 2021, there was previously not enough detail on the fees for this to be reflected as a tax in our receipts forecast.”

Not only that, but the OBR also forecasts the cost of EPR to average out at £1.6bn a year over the next five years, compared to Defra’s estimate last year of £1.4bn. And to add even more insult to injury, it quotes Defra as saying the scheme is “unlikely to have a material impact on rates of recycling or packaging waste volumes” during that period.

Green tax is no joke

Is it any wonder outrage is growing over the costs facing producers, with such little reassurance that the money will be well spent?

Today WSTA CEO Miles Beale said what he referred to as the new “green tax” would make the cost of recycling a glass bottle seven times more expensive, suggesting that EPR and today’s deadline could have been a cruel April Fools’ joke.

“The whole point of EPR is to build a circular economy, so packaging can be turned back into packaging,” adds one angry industry source.

“If EPR is just a tax, with no reform of the system overall and no clear plans for investment, is government just paying lip service to the circular economy?

“Before fees are paid and the price of packaged products goes up, the government needs to show producers that it’s serious about improving council performance, controlling cost increases, and creating an up-to-date recycling infrastructure. The risk is that we spend these billions and end up with the same old ineffective recycling system.”

With that view being widely held (and in fact the above opinion is nowhere near as explicit as it might be from others impacted by the new tax regime), it does risk today’s deadline being seen as nothing more than a joke. If only, of course, it were in any way whatsoever funny.

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