The 5p carrier bag charge: where does your money actually go?

The 5p carrier bag charge: where does your money actually go?

Shoppers spend millions of pounds a month on carrier bags, but how much do we know about where the money actually goes?

Anna Jordan

Household money

Anna Jordan
Updated on 14 February 2017

As we all know by now, October 2015 saw the introduction of the 5p carrier bag charge in England.

The charge was introduced following its success in Wales, Scotland and Northern Ireland where carrier bag use has plummeted.

Though it was met with a mixed reception, shoppers down south used six billion fewer carrier bags up to the year ending July 2016.

When we reported on it back in October last year, 64% of you thought the charge was a good idea

While many assume all the proceeds go straight to charity, the reality is that supermarkets do keep some for themselves.

What's going on? We’ve crunched the numbers to give you some insight.

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How the charge works

UK retailers with more than 250 members of staff can no longer hand out free single-use plastic bags. Instead, they have to charge 5p.

A few exceptions are in place for unwrapped food, unwrapped blades, loose flowers and seeds and prescriptions.

While smaller firms with under 250 workers don’t have to charge, they can do so voluntarily.

Those who charge for plastic bags will have to report how many bags they’ve issued, how much money they’ve generated, how much of it has gone to charity and which charities they’ve gone to.

Though shops are under no legal obligation to give away the money raised by the charge, the Government is urging them to pass it on to charities.

The Department for Environment, Food and Rural Affairs (Defra) says the charge will raise an estimated £730 million for good causes in its first decade.

Government figures released for the first six months of the charge show that, post VAT and other charges, £41.3 million was raised.

Breaking down the costs

It’s not as simple as ‘buy a bag and the money goes to charity’. Funds from the 5p carrier bag charge end up in a number of places.

Firstly, bags are still subject to VAT at 20%.

Retailers can also deduct ‘reasonable costs’, which can include things like:

Cost of staff communications: Changes to company’s intranet, connections, meetings;

Cost of customer communications: Posters, signage, social media;

Cost of obtaining advice on the charge: Companies seeking expert advice on how to apply the charge; 

Cost of administering donations: Costs of processing large donations from corporations;

Other costs of implementing the charge: Other necessary costs like admin and payroll.

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How much each supermarket donates 

According to a 2016 report, the amount each supermarket donates per bag varies greatly.

While Asda, Morrisons and Waitrose donated all funds (minus VAT, or 4.16p a bag) to charity, Tesco donated just 3p as it subtracted the costs of administering the bag scheme.

As for Sainsbury's, it found the figure was far lower at 1p. This is largely because it produces a different type of carrier bag, which we'll explain in more detail later.

Tesco Bags of Help

Tesco, the nation's biggest supermarket, has given the largest total donation of over £25 million.

The supermarket has teamed up with environmental charity Groundwork and is putting proceeds from the carrier bag charge into a massive pot to be shared between environmental and community projects across England, Scotland and Wales.

The Bags of Help scheme used to hand out funds every nine months, awarding successful community groups sums of between £8,000 and £12,000 to put towards their worthy causes.

However, it now now runs every month with more groups being able to benefit from smaller pots of £5,000, £2,000 and £1,000.

A practical example

Cycling development charity Freewheel North received £10,000 from Bags of Help. The money is being used to develop a 'peddling pool' in Glasgow – a sort of paddling pool for bikes.

Freewheel North uses a 1km track with a range of adapted bikes, trikes, go-karts and other pedal-powered machines. It helps vulnerable and isolated people as well as those with additional needs to get outside and get active.

Managing Director Norman Armstrong said: “The pool will be a separate area set off for small children to get involved in bike riding.

“The Bags of Help funding will go a great way towards paying for this project; it will be a fantastic start and allow us to develop the area even further."

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Who has the moral high ground?

When the charge was introduced, Sainsbury’s found itself in hot water for replacing its normal plastic bags with more robust, thicker bags that don’t meet the criteria for the carrier bag charge.

Though it does give some money to charity from bag sales, Sainsbury’s has not revealed how much or where it was being donated.

The supermarket giant said it couldn't reveal such information as it was “commercially sensitive”, although it's believed to be a third less than its rivals.

That said, Sainsbury’s is giving out fewer plastic bags overall – 25,078,408 to Tesco’s 319,711,512.

The supermarket said:

“Although our new, reusable bag is not subject to the levy, we are still donating all profits from these bags to good causes, alongside the levy charged for the single-use carrier bags distributed through online orders. 

"This will be in addition to what we already raise for charity, which last year was £52 million.

“We think this is the best way to do the right thing for the environment, whilst still supporting good causes.”

Back in February 2016, the Daily Express reported on a woman who went into an Asda near where she works in Preston every day to buy her lunch.

But rather than get into the habit of taking her own bags in, she purposely bought the 5p carrier bags to contribute to the dementia centre.

The bigger controversy with this story is that Asda has attracted complaints for withholding 5p carrier bags and giving out 6p ones instead.

Not a big deal? Well, proceeds from the 5p bag go the UCL dementia centre in London while all of the proceeds of the 6p bag goes straight into Asda’s pocket.

Could there be charges for any other disposable items in future?

The success of the plastic bag charge could see charges, or ‘deposits’, on other single-use items like plastic bottles and paper coffee cups.

A study from Cardiff University showed that, since the introduction, attitudes towards single-use plastic bags had changed and participants were forced to think more about their habits, instead of simply grabbing a carrier bag at the checkout.

Approval increased from 51% to 62%, as well as more support for other potential waste reduction charges. 

Though there may not be any need for a change yet. A proposal to charge for disposable coffee cups was shot down by the Government shortly after the carrier bag charge was introduced.

One deposit scheme pitched in Scotland back in 2015 suggested charging a deposit on cans and bottles, which would be returned once it was taken by to a designated recycling point, similar to Irn Bru’s scheme that wrapped up at the end of 2015.

Similar schemes have been popular in countries like Germany, Sweden and Norway.

What do you think about more charges for disposable items? Let us know what you think in the comments below.

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