The government is preparing to revise a £1 billion “packaging tax” initially introduced by the Conservative party due to significant opposition from the food and beverage sector.

Starting April of next year, businesses involved in the supply chain of packaging will be subjected to charges that cover the costs related to waste collection, recycling, and disposal.

In response to the ongoing cost of living crisis and pressure from industry leaders, an announcement this week is expected to reveal decreased fees from those originally proposed.

Sources from the Department for Environment, Food & Rural Affairs (Defra) indicate that these changes were implemented following feedback from business stakeholders.

Additionally, Labour is reportedly scaling back other business-critical commitments from its manifesto, focusing on policies like non-dom taxation and the categorization of private equity executives.

The upcoming fees are likely to be lowered across nearly all packaging categories, including both plastic and glass, when revealed this week.

The notion of taxing manufacturers based on their packaging has roots dating back to the early 1990s, linked to the principle of “polluter pays,” a model designed to hold companies financially accountable for the end-of-life management of their products.

Prior administrations have sought to develop a tax on packaging under the framework of extended producer responsibility (EPR), which aims to minimize landfill waste and encourage over £10 billion in investment within the recycling industry over the next ten years.

Labour previously announced indicative pricing, with aluminium producers facing fees up to £655 per tonne, fibre composites ranging from £410 to £655 per tonne, and plastic packaging charges potentially reaching £610. The government predicted that this levy could generate over £1 billion annually for public finances.

However, producers in the food and beverage industry have cautioned that such costs would likely be transmitted to consumers through increased prices. The British Beer and Pub Association projected that the pricing adjustments could add approximately 7p to each of the 3.2 billion beer bottles sold in the UK.

While some sectors of the food and beverage supply chain may welcome the reduction of fees, many pubs and restaurants are concerned about their inclusion under the new tax regime.

Kate Nicholls, CEO of UKHospitality, expressed her concerns, stating, “The hospitality sector is already battling rising operational costs; adding an EPR fee and the burden of waste disposal simultaneously is detrimental to the industry. We recognize that tracking packaging is intricate, but a straightforward pathway must be established for wholesalers and hospitality operators to showcase when their packaging is not classified as household waste.”

“It’s unreasonable to demand that hospitality businesses shoulder the financial responsibility twice due to the complexity of the issue,” she added.

This announcement may provoke discontent among environmental advocates, as it could diminish the motivation to reduce waste levels.

Nonetheless, the government maintains its commitment to tackling waste issues. A Defra spokesperson stated, “The implementation of extended producer responsibility for packaging is a crucial initial step for our overall packaging reforms. This initiative is expected to create 21,000 jobs and encourage over £10 billion in recycling sector investments in the coming decade. It will ensure that the costs of waste management fall on packaging producers instead of taxpayers.”

Meanwhile, the adjustment of tax measures coincides with speculation that other significant fiscal proposals are being reconsidered.

Regarding taxation changes for non-domiciled individuals, it was anticipated that their beneficiaries would be required to pay inheritance tax under current proposals. However, reports last week suggested that such measures may be shelved amid concerns that they could lead to wealthy individuals leaving the UK, ultimately reducing the tax revenue.

Additionally, indications have emerged that an agreement might be reached with the private equity sector regarding its tax framework, which allows about 3,000 individuals to pay capital gains tax (CGT) at a rate of 28% instead of income tax at 45%.

Although Labour pledged to enforce stricter measures, it is reportedly now considering allowing those who invested personal capital in their deals to retain CGT payments, while those who did not would then be subject to income tax.