Clause 30 - Rate of plastic packaging tax

Finance Bill – in a Public Bill Committee at 2:00 pm on 16 January 2024.

Alert me about debates like this

Question proposed, That the clause stand part of the Bill.

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

The clause makes changes to increase the rate of the plastic packaging tax from 1 April 2024 in line with the consumer price index. The plastic packaging tax is charged on plastic packaging that does not contain at least 30% recycled plastic. It was introduced on 1 April 2022, as part of the Government’s resources and waste strategy. The tax provides an economic incentive to use recycled plastic rather than virgin plastic in packaging. It is designed to create greater demand for recycled plastic, which, in turn, will stimulate more investment in the collection and recycling of plastic waste, diverting it away from landfill and incineration. Increasing the rate of the plastic packaging tax in line with CPI will maintain the real-terms value of the price incentive to use recycled plastic in packaging. Clause 30 increases the rate of the plastic packaging tax from £210.82 to £217.85 per tonne from 1 April 2024.

Photo of James Murray James Murray Shadow Financial Secretary (Treasury)

As we heard from the Minister, clause 30 raises the plastic packaging tax in line with CPI, and the change will take effect from 1 April. The Opposition have made clear throughout the introduction and the implementation of the plastic packaging tax that we are supportive of it as an important tool in tackling plastic pollution. The tax was introduced in April 2022 to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic repackaging. By applying such a tax on products that contain less than 30% recycled plastic, the tax was expected to create greater demand for recycled plastic, which would in turn stimulate increased recycling and the collection of plastic waste, diverting it from landfill or incineration.

As I set out in a Westminster Hall debate in October last year, we in the Opposition agree it is important to tackle less sustainable packaging products, including those from overseas. We also believe that it is important to build resilience here in the UK and that we have a clear, stable policy environment to encourage investment in our country. I was therefore concerned to note that, in response to the Government’s recent announcement that they would consult on a new mass balance approach to chemical recycling, the British Plastics Federation said:

“The lack of clarity to date has prevented companies from investing in the UK and some have looked elsewhere to build facilities.”

With the tax now having been in place for almost two years, what evaluation has the Treasury made of its success, including in building the domestic sector?

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

I am grateful to the hon. Gentleman and I am glad that he supports the taxation, which we were pleased to introduce in 2022. He is right to challenge us on the impact of the tax, and we have been clear that we intend to evaluate this when enough years have passed to be able to fully assess the impact. In December 2023, the Government came forward with a plan to evaluate the plastic packaging tax, and that is now published on I am happy to write to him with the provisions of that plan, which will be carried out to 2026.

The hon. Gentleman talked about the chemical recycling and mass balance approach. He should know that we engage very closely and extensively with industry ahead of fiscal events. On that specific point, we recognise that chemical recycling is a legitimate form of reprocessing plastic waste. However, following the constructive engagement with stakeholders that I described, and across the whole plastic value chain, the Government understand that is not currently possible for businesses to use chemically recycled plastic in packaging and claim a relief from the tax due to the way in which the recycled content is calculated. I assure him that we will continue to engage with the industry, and we know that it is a matter of great importance to it. My hope is that that can form part of the plan to evaluate PPT in due course as well.

Question put and agreed to.

Clause 30 accordingly ordered to stand part of the Bill.