Food Prices Set To Rise As Government Refuses To Scrap £2bn Packaging Tax

Food prices could rise further after ministers confirmed they will press ahead with the controversial Extended Producer Responsibility (EPR) packaging tax regime, despite growing pressure from businesses already battling mounting inflation and global supply chain disruption.

Industry leaders had hoped the Government would reconsider the policy amid increasing concern over rising supermarket prices and the wider cost-of-living pressures facing consumers. However, officials at the Department for Environment, Food and Rural Affairs (Defra) have now reportedly told businesses that the scheme will remain in place.

The EPR scheme requires food producers and retailers to pay charges based on the packaging used on products sold to consumers. According to the report, around 80 per cent of those costs are ultimately passed on to shoppers, leading critics to brand the policy a “shopping stealth tax”.

The Bank of England is said to estimate that the scheme is already adding around 0.5 percentage points to food inflation. Meanwhile, inflation could reportedly rise to 6.2 per cent by the beginning of 2027, with food inflation potentially reaching as high as 7 per cent.

The situation is being compounded by ongoing geopolitical tensions in the Middle East, which are expected to disrupt fertiliser exports and increase pressure on global food supplies. Products including tomatoes, cucumbers and lettuce are expected to be particularly vulnerable to rising costs.

Under the current plans, taxes on items such as coffee cups, soup containers and juice cartons are set to rise later this year, while plastic packaging charges are also expected to increase. The funds generated are intended to support local authority recycling services, although concerns have been raised that councils are free to use the money elsewhere, including social care and education budgets.

The policy is also causing significant concern across the glass packaging sector.

According to the report, the UK glass industry — which supports around 120,000 jobs and contributes £2 billion to the economy — is facing growing uncertainty over future investment.

Spanish-owned glass manufacturer Encirc, which produces around a third of the UK’s glass bottles for brands including Budweiser, Fever-Tree and Smirnoff, is reportedly considering withdrawing £500 million of planned UK investment linked to furnace upgrades required for net zero targets.

Industry leaders argue that the current system disproportionately impacts glass manufacturers because the charges are calculated by weight.

Nick Kirk, federation director at British Glass, warned that the policy was contributing to declining domestic production, rising imports and growing uncertainty around long-term investment decisions. He also highlighted concerns that future investment into low-carbon glass production could instead be directed towards other countries if conditions in the UK become less competitive.

Despite the criticism, the Government has defended the scheme, stating that EPR shifts the cost of waste management away from taxpayers and is expected to generate more than £1 billion annually while supporting investment and job creation.