The introduction of a national deposit return scheme to encourage recycling was a Tory manifesto promise ahead of the 2019 election
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Ministers are being accused of plotting a ‘stealth tax’ under Treasury plans to charge VAT as part of a deposit return scheme for drinks bottles and cans.

The soft drinks industry has expressed fears Britons will suffer another blow during the cost-of-living crisis due to Government proposals for the long-awaited recycling scheme.

In a new poll, the British Soft Drinks Association (BDSA) found that more than two-thirds (68 per cent) of consumers were less likely to take part in a deposit return scheme if they thought it was being used to raise taxes.

The survey also revealed more than three-quarters (77 per cent) agreed the Government should not be profiting from an enviromental initiative.

The introduction of a national deposit return scheme to encourage recycling and reduce litter was pledged by Boris Johnson in the Tory manifesto ahead of the 2019 election.

Such a scheme would see shoppers charged a deposit, such as 20p, when they buy a drink in a plastic or glass bottle, or can.

This fee would then be redeemed when the drink container is recycled at a return point.

Many sports venues – such as football, rugby and cricket stadiums – already operate deposit return schemes on containers such as plastic pint glasses.

The BDSA has calculated that drinks manufacturers and importers could lose almost £185million in the first year of the scheme alone – if VAT is charged on deposits, as well as the price of drinks – even with an 80 per cent return rate of bottles and cans.

They warned that suppliers would lose 3p per unreturned container, with 28 billion containers currently on the UK market.

The introduction of a national deposit return scheme to encourage recycling was a Tory manifesto promise ahead of the 2019 election

The introduction of a national deposit return scheme to encourage recycling was a Tory manifesto promise ahead of the 2019 election

A deposit return scheme will see shoppers charged a deposit, such as 20p, when they buy a drink in a plastic or glass bottle, or can

A deposit return scheme will see shoppers charged a deposit, such as 20p, when they buy a drink in a plastic or glass bottle, or can

Ministers initially promised to introduce such a deposit return scheme across England, Wales and Northern Ireland from 2023.

But the Government has delayed that until late 2024 at the earliest as they blamed economic disruption caused by the Covid pandemic.

A second consultation on the deposit return scheme proposals ended in June last year, with ministers yet to publish their response.

However, the Treasury recently indicated that VAT would be charged on both the price of the drink and the bottle deposit, under any scheme.

Lucy Frazer, the Financial Secretary to the Treasury, told MPs that charging VAT on the whole price of a drink would be consistent with schemes in other countries.

This has angered the soft drinks industry, who have called on ministers to back down on the ‘ludicrous decision’.

It has also caused a row with Nicola Sturgeon’s Scottish Government who want to introduce their own deposit return scheme, which is due to begin in August next year, without VAT being charged on the deposit.

Gavin Partington, director general of the BDSA, said: ‘A situation where the Government ends up profiting from the failure of its own deposit return scheme is utterly outrageous.

‘What’s more, VAT being added to the deposit fee effectively imposes a stealth tax on drinks producers, backing industry into a corner and creating the very real scenario of price rises.

‘Is that what this Government wants, to punish hard-up consumers yet more?

‘Along with the British public, we are pleading with the Government to reverse its ludicrous decision to apply VAT to the deposit fee before it’s too late.’

The intent to charge VAT on deposits has also caused a row with Nicola Sturgeon's Scottish Government, who plan to introduce their own deposit return scheme next August

The intent to charge VAT on deposits has also caused a row with Nicola Sturgeon’s Scottish Government, who plan to introduce their own deposit return scheme next August

The poll of more than 2,000 adults for the BDSA, conducted by Portland Communications, demonstrated public opposition to taxes forming part of green initiatives.

The survey also found 71 per cent of respondents did not want more taxes, especially on environmental programmes.

A Government spokesperson told MailOnline: ‘We are committed to introducing a deposit return scheme for single-use drinks containers to increase recycling rates and reduce litter.

‘Details will be set out later this year.’

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