Ministers press ahead with £2bn packaging levy despite inflation warnings

The news

Ministers have confirmed they will not scrap the Extended Producer Responsibility regime. The £2 billion packaging levy applies to every item of packaging placed on the UK market. Defra has told business leaders the scheme will stay despite warnings from the Bank of England that it is adding to food price inflation. Spanish-owned Encirc, which produces a third of Britain’s glass bottles, is understood to be poised to withdraw a £500m furnace upgrade.

What's at stake

The levy shifts waste costs from taxpayers to producers and is projected to generate more than £1 billion annually. It supports 25,000 jobs according to government figures. Glass already accounts for £400 million of the scheme’s revenue despite representing only 5 per cent of packaging by volume. Because fees are calculated by weight, glass pays 27 per cent of total charges. Roughly four-fifths of the bill is passed through to consumers, adding an estimated £50 a year to the average household.

Fees on coffee cups, soup pots and juice cartons are set to rise by an average of 19 per cent later this year, with plastic packaging charges increasing 15 per cent. The Bank of England has calculated that the levy contributes approximately 0.5 percentage points to food price inflation.

The case for

The scheme moves the cost of dealing with waste away from taxpayers and onto the companies that place packaging on the market. It generates more than £1 billion each year and forms part of a major investment in recycling infrastructure. By making producers financially responsible for end-of-life packaging, the policy creates incentives to design lighter and more recyclable materials while funding collection and reprocessing capacity that supports 25,000 jobs.

The case against

The levy raises production costs that are largely passed on to shoppers. The Bank of England estimates it adds 0.5 percentage points to food price inflation at a time when households already face higher costs. Industry leaders warn that continued investment in UK manufacturing, including a planned £500m glass furnace upgrade, is becoming commercially unviable under the current fee structure, with decisions on billions of pounds of Net Zero-linked spending increasingly being taken outside Britain.

Why it matters now

If the levy remains unchanged, households will face further price rises when fees increase later this year and manufacturers may accelerate investment decisions abroad. If ministers later adjust the regime, the cost burden on glass and other weight-based sectors could fall, though current projections show only a 1 per cent average reduction for glass when fees reset in June.

Further reading

bmmagazine.co.uk · GBNews

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