Duo - Zoe Brimelow

Duo - Zoe Brimelow

Following the UK Government launching a new consultation on the Plastic Packaging Tax, Zoe Brimelow, director at packaging manufacturer and consultancy Duo, asks: are we looking in the right places and debating the correct priorities when it comes to plastic packaging and sustainability?

On 18th July 2023, HM Revenue & Customs opened a consultation seeking views on the potential adoption of a mass balance approach for chemically recycled plastic in the Plastic Packaging Tax (PPT).

These types of consultation are important and provide a welcome opportunity for sharing industry-wide expertise and experiences around complex matters, and the potential to develop practical measures that can effect change. However, in this instance, when it comes to the PPT, it raises the question: is the Government looking at the right areas, at the right time?

The mass balance approach is progressive and has the potential to encourage growth in the chemical recycling of plastic. It could play an important role in helping the UK improve overall circularity and should be discussed, but equally, conversations need to be as informed and as considered as possible.

The PPT is still very much in its infancy and, based on experience throughout the plastic value chain, I believe there’s still much more work to be done to increase the availability of recycled plastic as a priority. It seems logical for consultation to consider the impacts of the PPT and to look at the status of UK recycling – factors that appear to be falling by the wayside.

PPT performance

The beginning of April 2023 marked the end of the PPT’s first year, during which time Duo submitted Freedom of Information (FOI) requests to HMRC to determine the tax’s performance.

FOI data showed that around £260 million in tax revenue was generated by the PPT during its first 12 months. In total, the tax was applied to about 1.3 million tonnes of plastic packaging, with an average of 2,800 organisations submitting a plastic packaging tax return each quarter.

A higher volume of 1.9 million tonnes of declared plastic packaging was tax exempt in the first year, showing the usage of packaging containing at least 30% recycled plastic was in the majority. Although there were quarterly variations in the volumes of packaging that qualified for PPT deductions, there was a consistent trend of over half of the total declared packaging each quarter not being subjected to the tax.

It is difficult to apply meaningful context to these figures and to determine the true impact of the PPT. The tax is completely new and different in the UK, making it complex to draw useful comparisons with other policies. Additionally, there haven’t been many official forecasts for its expected performance, which is understandable given the variable factors in play. The tax was introduced against a backdrop of rising operating costs, volatility in plastic recycling prices and consumers prioritising value as they felt the squeeze of living costs. All these elements affect margins and business decisions about the most feasible and viable usage of packaging materials. It would have been near-impossible to accurately guess how the PPT would have been received by businesses in year one.

An estimate that was provided by HMRC prior to the introduction of the PPT was the exchequer impact. Forecasts expected the tax to generate £235 million in its first year, with the FOI data showing this was exceeded by around £25 million. Does this mean the tax was a success or failure? Would it have been more positive to see sub £235m revenues – an indicator the tax didn’t deliver against its financial forecasts, because there was a greater use of plastic packaging containing at least 30% recycled plastic? Or was the revenue forecast for the first year too conservative?

There’s a multitude of questions to think about how the PPT has performed so far. Proper consideration of its performance to-date could help to better shape the next steps, whether that’s mass balance or other approaches and models. Drawing on data and research that clarify how the PPT is actually affecting businesses will help arrive at changes that keep pace with advances in packaging materials and technologies, and recycling processes. It’ll also ensure that polices are agile enough to encourage change, rather than detracting from the sustainable packaging progress many businesses are already making.

PPT in context

It also seems practical to consider the wider impacts of the PPT. The tax’s policy objective is to provide a clear economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging. Looking at tax revenues and volumes of declared PPT packaging alone will not necessarily show whether this objective is being met. The tax should be viewed in the context of UK-wide recycling rates.

The most recent Government data from the Department for Environment, Food & Rural Affairs (Defra) shows that plastic packaging waste recycling rates in the UK stand at 44.2%. The percentage shows the rate of tonnes of waste that is being recycled across 12 months and compares to other packaging waste recycling rates including metal 76%, paper and cardboard 70.6% and glass 73.6%.

Defra data also tracks the volume of packaging waste. Viewing any changes in these rates before and after the introduction of the PPT would go some way to providing a clearer indication about how the tax is impacting packaging material usage and recycling across the board.

Such analysis wouldn’t be wholly conclusive about the impact of the tax, as there will be other factors impacting material usage, volumes of waste and recycling rates. It would, however, provide more of a meaningful barometer for trends in plastic recycling following the introduction of a policy designed to stimulate greater demand for this.

The real issue with this proposed analysis is that the most recent Defra packaging waste recycling data is for 2021. Similar data for 2022 is required and should be taken into account before any potential PPT reformation.

Looking beyond plastic waste recycling and the usage of recycled plastic, PPT reformation must also consider bio-based plastics. The tax does not make any positive allowance for such materials, yet they can prove a highly effective method of reducing the usage of virgin plastics. It’s possible to develop bio-based plastics from entirely renewable sources and for these packaging materials to be fully recyclable. They can help to reduce the carbon footprint of packaging. Currently, the PPT provides no financial incentive for the use of these materials and can actually penalise their usage if the materials don’t contain at least 30% recycled plastic.

Enhancing plastic packaging recycling

The Defra data brings me to my final point about why I think PPT consultation must better consider the status of plastic recycling in the UK. Aside from packaging waste recycling rates for wood, which is 44.1%, plastic has the lowest recycling rate amongst the other materials of paper and cardboard, glass, and metal. Plastic’s recycling rate seriously lags behind these other materials – a factor that needs to be addressed if the Government wants to encourage greater use of recycled plastic in packaging.

Last year, we invested in creating a new dedicated plastic waste recycling business, Duclo Recycling, after years and years of frustration about the low availability of high quality, recycled plastic pellets in the UK. Before the introduction of the PPT, we were seeing clear and growing demand for plastic packaging containing recycled plastic. It was becoming more complex to satisfy this demand, because closed-loop recycling infrastructure is significantly lacking in the UK. It is years behind recycling streams for metal, glass and paper and cardboard, and current strategies and models need to address this to enhance plastic packaging recycling rates.

Focusing consultation on this end of the plastic value chain would help to increase the availability of recycled plastic content, which could have a positive impact on the costs of these materials. Higher and more stable availability should make recycled plastic more affordable for businesses to use in their packaging strategies – an effective way of stimulating change. Better quality recycled plastic will also mean more virgin plastics can be displaced, reducing overall usage of new materials.

Undoubtedly, we should discuss mass balance as part of the PPT. It seems though that for this consultation to be truly beneficial, then it should come once we have a more informed understanding of how the Plastic Packaging Tax is performing against policy objectives. Effective consultation must also consider enhancing plastic packaging recycling rates, and how to successfully expand the use of bio-based plastics – a move the European Union is embraci