As part of the Autumn Budget, the Treasury said it will guarantee that if councils do not receive the estimated £1.1 billion in Extended Producer Responsibility funding there will be an in-year top up in 2025-26.
Detail of the in-year top up will be set out through the Local Government Finance Settlement (LGFS) process, which is the annual determination of funding to local government from central government.
The Treasury said the funding will only be available “exceptionally” for 2025-26.
Local authorities are expected to receive around £1.1 billion of new funding in 2025-26 through the implementation of the Extended Producer Responsibility (EPR) scheme.
The Local Government Association (LGA) said that payments from EPR are unlikely to cover the extra costs that arise when households put recyclable waste in the wrong bin, placing additional financial pressure on councils.
The North London Waste Authority has also warned that revised base fees for EPR are “too low” and will impact the finances of local authorities.
Yesterday, Rachel Reeves delivered the first Budget by a female Chancellor, and Labour’s first for fourteen years.
The announcements on EPR, Plastic Packaging Tax, and Landfill Tax were not made in Parliament and released as part of the full Autumn Statement.
When setting out the Budget in Parliament, Reeves also confirmed a new, multi-year investment into carbon capture and storage (CCS).
Plastic Packaging Tax: Mass balance approach permitted
The Autumn Budget also confirmed that businesses will be permitted to use a mass balance approach to evidence recycled content in chemically recycled plastic for Plastic Packaging Tax (PPT).
The Treasury said it made the decision to support use of and investment in advanced chemical recycling technologies.
Jim Bligh, Director of Corporate Affairs and Packaging, Food and Drink Federation, said this decision was “great news”.
“Food and drink manufacturers want and need a circular economy for packaging recycling, so it’s great news that the government will enable companies to use mass balance accounting,” Bligh said.
“This important change will open up new markets for advanced recycling in the UK, creating green jobs and investment opportunities, while increasing the amount of recycled content used in food-grade packaging.”
The PPT rate for 2025-26 will also rise in line with CPI inflation to “incentivise businesses to use recycled instead of new plastic in packaging”.
Biffa CEO Michael Topham said the waste management company welcomed the decision on the PPT.
“However, we believe that to deliver a step-change in demand for recycled plastic, a progressive PPT is essential,” Topham said.
“Biffa has campaigned for this change for years and we will continue to raise it with the government.”
Jacob Hayler, Executive Director of the ESA, said it was disappointing that the Treasury “ignored advice” to escalate the PPT over the next five years to £500 per tonne.
The ESA also called for a 50% recycled content threshold in order to drive up recycling rates for plastics – instead opting only to raise it in line with CPI in 2025-26.
“This will continue to constrain markets for recycled plastic, which in turn will damage Labour’s circular economy ambitions, while leaving councils exposed to unavoidable costs when the Emissions Trading Scheme is applied to residual waste treatment from 2028,” Hayler said.
“At its current levels, the PPT is not driving plastic recycling performance or creating markets for recycled polymers.”
Landfill Tax rates
The Budget also confirmed the previously announced adjustment to Landfill Tax rates from 1 April 2025, which was announced in the preceding Budget.
The Treasury said it would announce future Landfill Tax rates immediately before future fiscal events, so those applicable from 1 April 2026 will be announced at Budget 2025.
CIWM reacts
Dan Cooke, Director of Policy, Communications and External Affairs at the Chartered Institution of Wastes Management (CIWM) said: “From a CIWM perspective, the strong focus on measures incentivising net zero, clean energy and green infrastructure was expected and welcome.
“Confirmation of significant support for CCS projects should enable important CCS projects involving Energy-from-Waste plants to progress.
“Confirmation of the Government’s commitment to the implementation of key measures from the Collections and Packaging Reforms programme, including EPR, to move towards a zero-waste economy was also to be welcomed.
From a CIWM perspective, the strong focus on measures incentivising net zero, clean energy and green infrastructure was expected and welcome.
“These will provide an essential platform for progress towards greater UK resource efficiency and will provide greater clarity for many CIWM members and the wider sector.
“Specific measures including clarifications on PPT mechanisms (enabling a mass-balance approach to incorporate chemical recycling and the exclusion of pre-consumer plastic from recycled content), and adjustments to Landfill Tax rates from 1 April 2025 as a further mechanism to incentivise more sustainable waste management are also helpful.
“The real term expenditure limits for Defra are concerning, at a time when resourcing for the Environment Agency to enable effective regulation and enforcement across our sector is more crucial than ever.”
Industry reaction
Dr Adam Read MBE, Chief External Affairs and Sustainability Officer, SUEZ Recycling and Recovery UK, said it was disappointing that the waste and resources sector had been “largely overlooked” in the Budget.
“The opportunity to inject some real momentum behind the government’s commitment to a zero-waste economy – and all the benefits that can bring for growth, communities and the environment – has been missed,” Read said.
“Today’s Budget lacked the policy clarity our sector is desperate to see on simpler recycling reforms and changes to the Apprenticeship Levy.
“The decision to reduce day-to-day funding for Defra is also concerning, as the department delivers vital programmes to keep the UK clean and reduce our impact on the environment.”
Jim Bligh, Director of Corporate Affairs and Packaging, Food and Drink Federation, said: “Driving investment and growth is critical to ensuring the continued success of the UK’s largest manufacturing sector, and protecting the nation’s food security.
“So we welcome the Chancellor’s focus on a consistent, long-term approach to tax and regulation, which should help unleash the growth potential of the food and drink manufacturing industry’s 12,500 businesses.”
Ann Carruthers, President of ADEPT, said: “This budget includes several encouraging areas of support for local authorities and the communities they serve. However, it also raises further questions and challenges.
“In particular, we welcome the announcement on simplifying the wider local funding landscape, reducing the number of grants, as well as moving towards a five-year settlement to enable effective planning.
“Local authorities have endured years of austerity and budget cuts, leaving public services at a critical breaking point: recovery will require sustained, long-term investment to rebuild the essential services that communities rely on.”
Sian Sutherland, Co-Founder, A Plastic Planet & Plastic Health Council, said the investment in carbon capture technology is a “fig leaf” to the oil giants.
“Our government needs to decide who it is elected to protect – the profits of the fossil fuel giants or the healthy future of their citizens,” Sutherland said.
“If we do not adopt stronger environmental policies, incentivising business to do better, we will see devastation that eclipses the 2008 financial crisis and the COVID-19 pandemic.”
