Transparency data

Plastic Packaging Tax: policy evaluation plan

Published 14 December 2023

Summary

The Plastic Packaging Tax (PPT) was introduced on 1 April 2022 to provide a clear economic incentive to use recycled plastic in the manufacture of plastic packaging, which will create greater demand for this material. In turn this will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.  

PPT is part of the government’s Resources and Waste Strategy, which brings together a package of measures to contribute to the government’s ambitious target to eliminate all avoidable plastic waste by 2042. PPT is the first of these measures to be delivered.

In April 2023, the government announced that it will evaluate PPT to assess the impacts, customer experience and interaction with wider government policy. The evaluation is part of the government’s commitment to:

• provide transparency and accountability of public funds
• ensure decision-making is evidence-driven
• release research and analysis in a way that promotes public trust, objectivity and credibility
• provide robust evidence in areas of interest to the public

The evaluation of PPT will aim to measure:

• performance against stated policy objectives
• performance against relevant wider government policy objectives
• any unintended consequences (positive and negative)
• impact on businesses

The evaluation will draw on a range of data sources, such as trends from tax administration data held by HM Revenue and Customs (HMRC), existing surveys with mid-size and large businesses, and where appropriate, externally commissioned research with other businesses and industry experts to address evidence gaps and provide a better understanding of both the effect on businesses who are liable for or impacted by the tax. To ensure the evaluation is robust, HMRC and HM Treasury (HMT) intend to continue to work closely with and leverage expertise from partners across government and will also engage with external academics, evaluation experts, industry experts and others.

The findings from this evaluation will inform the development of PPT in the future and tax policy more generally.

1.Policy background

1.1 Overview of the Plastic Packaging Tax

Plastic packaging manufactured or imported into the UK which does not contain at least 30% recycled plastic is currently taxed at £210.82 per tonne. To ensure the costs of complying with the tax are not disproportionate to the environmental harm the tax seeks to address, only businesses that manufacture or import 10 or more tonnes of plastic packaging within a 12-month period are liable to register for the tax.

Businesses exceeding the 10-tonne threshold need to register for PPT even if all their packaging contains 30% or more recycled plastic, however they will not pay any tax.

There are broadly 2 types of plastic packaging components subject to the tax – plastic packaging components designed to be suitable for:

• use in the supply chain from the manufacturer of the good to the user or consumer to contain, protect, handle, deliver or present the goods, although it does not matter if it is used in the supply chain or by the end user
• single use by the end-consumer to contain, protect, handle, deliver, or present a commodity or waste

There are 3 categories of products which are excluded from this broad definition, which inadvertently meet the definition of a packaging component but are not typically conceived as packaging. They are products:

• where the packaging function is secondary to the storage function
• where the component is an integral part of the good
• where the component is primarily designed for re-use for the presentation of goods

There are also certain types of packaging which are exempt from PPT. They are packaging components which are:

• used for the immediate packaging of human medicines
• permanently recorded as set aside for non-packaging use
• used as transport packaging to import multiple goods safely into the UK, including:
  • road, rail, ship or air containers
  • plastic crates, containers, pallets or other heavy duty plastic packaging which are reusable and designed to carry a range of products
  • single-use packaging components such as pallet wrap and retaining straps
  • reusable mail sacks
• used in international stores on aircraft, ship and rail

In order to conduct a thorough evaluation of PPT, HMRC will need to collect sufficient data over a period of time to identify the emerging impacts made by the tax since it was introduced in April 2022. This means that new policy developments or those actively under consideration, such as any changes arising from the consultation on chemical recycling and adoption of a mass balance approach will be out of scope for this evaluation.   

1.2. Policy objective

The policy objective of PPT is to provide a clear economic incentive to use recycled plastic in the manufacture of plastic packaging, which will create greater demand for this material. In turn this will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.

PPT is part of a package of measures announced in the Resources and Waste strategy, to help realise the government’s ambitious target to eliminate avoidable plastic waste by 2042. While PPT principally aims to increase demand for recycled plastic, other government policies aim to improve the quantity and quality of recycled plastic including Extended Producer Responsibility for packaging and Simpler Recycling. PPT is the first of these measures to have been delivered.

Policy development timeline

At Budget 2017, the government announced a call for evidence into using the tax system or charges to tackle single-use plastic waste, which received 162,000 responses. At Budget 2018, a new tax on plastic packaging with less than 30% recycled plastic was announced. The government launched a consultation in February 2019 seeking input on the early proposals for the design of the tax. Initial research was commissioned to support this and was published in May 2022.

At Budget 2020, the government announced key decisions on the design of the tax, and HMRC launched a second consultation on the more detailed design and implementation of the measure. This ran from March to August 2020, focused on refining the details of the tax through stakeholder engagement. The government published a summary of responses in November 2020.

Primary legislation to enact the tax was introduced in Parliament in 2021. The Finance Act 2021 received Royal Assent on the 10 June 2021 and secondary legislation was subsequently approved by Parliament ahead of the tax commencing on 1 April 2022.

2. Evaluation plan

2.1 Key areas to evaluate

The primary objective of PPT is to provide a clear economic incentive to use recycled plastic in the manufacture of plastic packaging, to create greater demand for this material. In turn this will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.

Therefore, the evaluation will aim to measure:

• performance against stated policy objectives
• performance against wider policy objectives (for example, investment)
• any unintended consequences (positive and negative)
• impact on businesses

2.2 Overview of the evaluation approach

The evaluation of PPT will be led by HMRC in partnership with HM Treasury. Insight will also be drawn from other government departments given the cross-cutting nature of the policy.

The evaluation will consider and use best practice guidance for evaluation. This includes approaches and models outlined in the Magenta Book on designing an evaluation and economic principles in the Green Book on appraisal and evaluation in central government. As such, the evaluation will comprise of quantitative and qualitative analysis.

2.3 Measurement of the counterfactual

The counterfactual refers to what would have happened if PPT had not been introduced. There are challenges with separating the impact of PPT from other influencing factors, so the counterfactual will be an estimate. Given the complex context within which PPT was introduced (including wider government policy, societal change in attitude towards plastic use and net zero ambitions) we intend to use a variety of techniques to assess its impact. For example, as outlined in the Magenta Book, contribution analysis will need to be undertaken to understand to what extent observed changes (whether positive or negative) are the consequence of the policy and what are the consequence of other factors.

2.4 Sources of information

The evaluation will draw on a range of data sources, such as tax administrative data, existing surveys (including HMRC’s large and mid-size business customer surveys) and where appropriate additional externally commissioned research to reduce or minimise evidence gaps and provide a better understanding of the impact on businesses.

HMRC’s annual customer surveys for large (largest and most complex businesses in the UK, typically with a turnover of more than £200 million) and mid-size (UK turnover above £10 million or at least 20 employees) businesses seek views on the impact of specific policies, customer experiences of tax administration and perceptions of HMRC. In 2023, the surveys included questions on HMRC’s guidance and customer support for PPT.

The above is not an exhaustive list of information sources; further research may be needed to improve the reliability of the evaluation. Exploration of further data sources is ongoing, including wider data held by government, to ensure that the evaluation of the impact of the policy is as complete as possible.

2.5 Analytical assurance and standards

The results of the evaluation will be used to assess the impacts of the tax, specifically how the tax is delivering against its objectives and the impact it has had on businesses.

HMRC will report evaluation findings for PPT according to best practice guidelines (as outlined in the Magenta Book, Green Book and analytical codes of practice). Where possible and meaningful, findings will be broken down by various factors, including business size and sector.

HMRC will also ensure that the evaluation is in line with the UK Statistics Authority’s 5-year strategy, which supports the need for having “high quality data and analysis to inform the UK, improve lives and build the future”. By publishing the findings from this evaluation, HMRC will be able to support the strategy’s key aim of ensuring there is relevant and coherent information to aid businesses, individuals and thus society.

The Government Social Research Code sets the standard that those who are producing research should adhere to. The evaluation and report will align with these standards to ensure public value and high-quality analysis.

Analytical and policy experts across government and outside of it will be consulted during the design and delivery of this evaluation to ensure that it is conducted with integrity, honesty, objectivity and impartiality.

2.6 External engagement and reporting

HMRC and HMT will engage with industry representatives and associations as well as other government departments to ensure any analysis and research conducted is properly targeted.

To complete the analysis effectively, HMRC will also engage with businesses affected by PPT, waste management companies and reprocessors as part of any external research commissioned.

To conduct a thorough evaluation which captures a complete picture of the impacts of PPT, HMRC needs to consider several years of data. Subject to obtaining sufficient data, interim reports will be published before the evaluation concludes in 2026.