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The industry has come out firing following yesterday’s implementation of the Extended Producer Responsibility for Packaging (EPR) scheme.
The EPR scheme from the UK’ s department for environment, food and rural affairs (DEFRA) came into effect yesterday (April 1). Its intention is to hold producers accountable for packaging waste, and they will now have to report how much packaging they release into the market and pay the associated fees.
The fees, however, will not be known until this summer.
In February, the Wine & Spirit Trade Association (WSTA) joined forces with various trade associations to air their grievances with the scheme and the uncertainty around it, stressing that it introduces ‘extortionately high fees for glass’, therefore encouraging producers to move from highly-recyclable glass to more environmentally damaging forms of packaging.
With the scheme now live, Miles Beale, WSTA’s chief executive, has made his contention loud and clear, labelling it a “misjudged attempt at an April Fool’s joke”.
He argued: “The government’s Extended Producer Responsibility fees make the cost of recycling a glass bottle almost seven times more expensive than for recycling the same sized plastic bottle. With businesses being charged this new ‘green tax’ from 1 April, the introduction of EPR could be mistaken as a misjudged attempt by Defra at an April Fool’s joke.
“Sadly it is deadly serious. As well as being another government-inspired cost on businesses in the UK drinks sector, it’s wholly at odds with improving recycling – the aim of the EPR scheme. We are supportive of the ‘polluter pays principle’, but if you are asking businesses to pick up the tab, they need to be confident in the efficiency and effectiveness of the system they are being asked to fund and be given sufficient time to plan for the introduction of new costs.
“Defra ministers need to engage on the design of these schemes. In practice they should delay EPR and bring it in at the same time as any Deposit Return Scheme.”
Unwelcome shock
Beale and other members of the drinks trade have continuously called for the UK government to delay the scheme since it was announced, so businesses can plan for the ‘eye-wateringly high’ fees that are expected.
The latest forecast from Defra for the EPR fees for glass is £240 (US$310) per tonne, which is an ‘unwelcome shock’, WSTA has said, as earlier estimates were considerably lower at £110 (US$142) to £215 (US$728) a tonne.
After last week’s spring budget and the Office for Budget Responsibility’s (OBR) forecast, it was admitted the scheme won’t improve recycling, with Defra revealing that “the policy is unlikely to have a material impact on rates of recycling or packaging waste volumes in the next five years.”
WSTA notes, however, that secretary of state Steve Reed failed to acknowledge this with his comment: “Packaging Extended Producer Responsibility will begin later this year, incentivising businesses to remove unnecessary packaging and make their products more recyclable and refillable.”
WSTA believes the fees could cost the drinks trade around £500 million (US$647m), additionally accounting for the 2.5 million tonnes of glass packaging that is placed on the UK market each year (85% of which are drinks bottles) and existing packaging fees.
The trade association also pointed out that consumers will bear the brunt of the EPR too, with the price rise from the scheme joining the alcohol duty hikes that came into play on 1 February, as well as increased employment costs and business rates bills.
David Gates, CEO of wine retailer Laithwaites, called the EPR an “inflationary new tax” that’s being implemented “before it’s properly finished”.
He added that it “shares a similar fiendish complexity with the big recent hikes in wine duty. Combine them both with the chancellor’s increase in National Insurance and our family wine business is left facing an extra £10m in taxes year on year – a body blow that leaves us with little choice but to put up prices, look hard at the size of our workforce, postpone or cancel capital expenditure projects and consider prioritising our other markets for investment.”
A concern on many fronts
Sharing his frustration, Alex Hunt MW, purchasing director of Berkmann Wine Cellar, explained that the waste packaging tax “and specifically the fees for household collection – is a concern to our business on many fronts. From our perspective this is an additional tax on a product – namely wine – that has already seen a huge average increase in duty.
“By far the largest concern for a business like ours, where the vast majority of sales go to the hospitality sector, is the danger of double-counting packaging waste. Hospitality outlets already pay for their empty bottles to be collected, and yet those bottles are not explicitly exempted from the household fees.
“This error on Defra’s part could result in importers like ourselves effectively paying councils to collect tens of millions of phantom bottles that never go anywhere near a household recycling bin. The fees incurred by these phantom bottles are not small; we estimate the cost of this legislative error to our company alone would be over £1m per year – around a third of our net profit.
“We are pleased that Defra has finally acknowledged the issue, but dismayed at the suggestion that it will take two years to amend. Especially in a faltering economy, what business can afford to be bled of cash by unjustified fees resulting from unjust regulations?
“It is essential that an immediate solution is found, to protect honest, diligent businesses from a badly drafted piece of legislation that is not only unfit for purpose, but completely at odds with the minimum standards of fairness and accuracy we would expect from the UK government.”
In the October 2024 issue of The Spirits Business magazine, brands gave us a detailed rundown on how and why the EPR scheme is unfair.
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