Taxation: Silage Film

Debate between Nigel Mills and Robbie Moore

Tuesday 18th January 2022 Westminster Hall

[Nigel Mills (Amber Valley) (Con)]

I beg to move,

That this House has considered taxation of silage film.

I am grateful for the chance to raise these issues in debate. Before we begin, I am not seeking to question or doubt the merits of the plastic packaging tax, which I fully support, along with all efforts to make sure that as much plastic as possible that we use is recycled. My concern is shared by many colleagues, plastic manufacturers and farming industries: guidance was—I could say sneaked out—released by Her Majesty’s Revenue and Customs just before Christmas, and unexpectedly added silage film to the list of items caught by that tax. That was not a position that anyone expected. Industries had not prepared for that, and the costs will fall directly on farmers at a very difficult time for them.

My interest in this stems both from the fact that there is a collection of farmers in Amber Valley who use silage film and from the fact that I have a large employer who uses recycled plastic pellet to make, among other things, refuse sacks for the NHS and damp-proof membrane for construction products. The irony of the situation is that, in the years in which I have been an MP, the main problem that that business has had is securing enough plastic to wash at a different plant and recycle so that it can use it in its production process. The best source of plastic that it can get is silage film, which is being exported illegally as clean waste around the world, rather than being washed and recycled at home. Our enforcement bodies were not enforcing the law that was in place, so we are in a rather strange situation. The industry has been investing, and has been keen to recycle the film for years, and if we ended up by accident with a new tax that the Government introduced to try to encourage more plastic recycling it would stop the recycling of that film so we would end up in a worse position. I am sure that that is not what the Government intended.

I have four arguments for the Minister as to why the HMRC guidance should be corrected or withdrawn before 1 April. First, the primary purpose of silage film is not packaging—it is to ensure that harvested grass can be fermented into silage. Secondly, the purpose of the plastic packaging tax is to encourage the use of recycled material and increase the recycling of plastic material. Extending the charge to silage film will not generate more use of recycled material in the film, and will lead to less recycling of the film that is used. Thirdly, I am not sure that silage film falls within the definition of the measures that were introduced in the Finance Act 2021, so the guidance is incorrect and inconsistent with the law. Fourthly, I contend that this is seriously damaging for our farming industry at a difficult time, and would reduce its competitiveness against international rivals. All of those cases are strong reasons why the guidance, which appears to be out of sync with what had been planned, should be withdrawn.

The first case I should like to make is about the primary purpose of the silage film. I would not claim to be an expert on silage or its creation, but the information that I have had from the National Farmers Union, for which I am grateful, and from other farming bodies, is that the film is very specialised. It is very thin. Generally, contractors go on to farms and, in simple terms, mow the grass and wrap it in film so that is airtight and watertight, so that fermentation can take place and produce silage to feed animals through the winter. If that film is not airtight and watertight, the grass will rot and cannot be fed to animals. That is quite a technical process and the film is an expensive and highly specialised product. It cannot be any old plastic: it has to be a very thin film that is air and watertight, and that can survive being used to wrap on a farm in those conditions, rather than in a nice, safe factory setting.

The main aim of using that film is not simple wrapping or packaging to store the grass; there is a much greater purpose of converting the grass into something that can be used to feed animals through the winter. If that plastic does not fulfil that purpose, there will be no food for animals and we will have to import soya or other foods from around the world to get them through the winter.

[Robbie Moore (Keighley) (Con)]

I should declare that while I am not one, my family are farmers and have a plastic recycling business. I want to pick up on the point that my hon. Friend is eloquently making about the nub of the issue: silage wrap should not be classed as packaging but is integral to the grass fermentation process to make silage. Does he agree that our colleagues at the Treasury need to realise this very fine point so that legislation and taxation can be addressed accordingly?

[Nigel Mills]

I am grateful to my hon. Friend for making that point, with which I entirely agree. It is not a point that the Government have ever challenged in the past. Only last year, the Environment Agency published a paper on the positions and technical interpretations in respect of responsibility for packaging. On page 31, the document accepts that the primary function of silage wrap is producing the product. I accept that it is a different Government Department, but it has accepted that the primary function of silage wrap is to produce silage, not to package, store or protect it. The Minister may argue that that is a different Department and that it is not Treasury policy, but we are trying, on a cross-Government basis, to reduce the amount of plastic that is used and encourage the use of recycled plastic and of recycling. We have measures coming in to make the producer pay for the collection and recycling of their packaging material through the whole system. It seems bizarre that the Treasury, HMRC and the Department for Environment, Food and Rural Affairs have different definitions of what counts as packaging in that situation. People come under one set of rules but not the other, even though they are charging for similar sorts of things. I hope that we can achieve consistency across Government.

If the Minister is not convinced by that compelling argument for consistency across Government, I refer her to a 2018 HM Treasury consultation on tackling the plastic problem that concluded that silage film came into the category of non-packaging plastics. Even the Treasury has, in the past, accepted that silage film is not a packaging plastic. I therefore hope that there is no doubt that the primary purpose here is not simple packaging. Looking through the list of items that fall inside and outside this tax, one of the general themes is the primary purpose of the plastic. It is hard to see from that list why silage film has been treated inconsistently with other plastics that are excluded.

My second contention is that what has been done here is contrary to the policy intent. The guidance notes set out that the plastic packaging tax was designed to encourage to the use of recycled plastic instead of new plastic material in plastic packaging. In turn, the tax would create demand for recycled plastic and stimulate increased recycling and collection of plastic waste, diverting it from landfill or incineration. That is the Government’s own stated intent. Because of the very specialised nature of the film––which has to be incredibly thin, light-proof and waterproof, and capable of achieving those things when being used for wrapping in a farm setting––the industry and farming lobbying bodies are absolutely clear that there is no way any level of recycled plastic can be used in that film with current technology and achieve the effect needed for the fermentation of grass. No matter what this tax is from 1 April, there will not be any quantity of recycled plastic incorporated in the film, as that is not technologically possible at the moment. Therefore, including silage film in this tax will not generate increased use of recycled plastic; it will simply be a tax on farmers that they can barely afford to pay, given their current situation.