The sour sugar tax

Yesterday George Osborne announced his latest Budget for the country and one of the key announcements was the introduction of a tax on sugary soft drinks that would come in to force in 2018.

The tax, or “soft drinks industry levy” as it is officially known, will be paid by companies who produces soft drinks at a rate of 18 pence per litre above 5g of sugar per 100ml and 24 pence per litre above 8g of sugar per 100ml.  This could have major impacts on the prices of soft drinks, though, as companies will be forced to either reduce their profit margins considerably or pass on the extra cost to consumers.

The Government has long since toyed with the idea of introducing the tax, and believes that it would help curb rising obesity levels across the country by providing a financial disincentive to buying sugary drinks.

The sugar tax, though, is a regressive measure that will disproportionately affect the poorest in our country who are already suffering from Osborne’s swinging cuts to welfare and public services.  His heart may be in the right place on this issue, for once, but the sugar tax is not a silver bullet to obesity.

The consensus is that taxing sugar is not a way of curing the nation’s love affair with unhealthy food and drink.  The Institute of Economic Affairs set out its’ position clearly in a briefing released in January this year that stated that: “taxes on energy-dense food and soft drinks take a greater share of income from the poor than the rich” and “no impact on obesity or health outcomes has ever been found.”  This completely deflates both the economic and health arguments behind the sugar tax and shows that Osborne’s sugar tax move is simply ideologically driven.  Sugar taxes sound to the public as though the Government is getting serious on tackling obesity, but what they are really doing is bringing in another stream of income to HMRC that allows Osborne to make tax cuts in other areas and save face with his richer support-base.  It may be good politics, but it’s bad public service.

In fact, both scientific and economic evidence across the board suggests that the impact of a sugar tax is minimal at best.  A 2009 study in the Journal of Adolescent Health said that there were. “no statistically significant associations between state-level soda taxes and adolescent BMI”.  Last year’s article in the British Medical Journal that re-ignited the debate over the sugar tax even said that “a 20% tax on sugar sweetened drinks would lead to a reduction in the prevalence of obesity in the UK of 1.3%” – which is hardly a fantastic health outcome considering the economic consequences it will have for many people.

The real kicker in George Osborne’s plans, though, is that the rate of tax he is proposing to introduce on sugary drinks is beyond what most academic studies have focussed upon.  The Chancellor estimates his new plan will bring in £520 million to the Treasury’s coffers each year, which is almost double what the BMJ article last year predicted would be raised by a 20% tax.  The Office for Budget Responsibility suggests that the effect on prices could be a whopping 80% for some own-brand colas.  This is an incredible price hike on existing levels and one that will not only affect people’s pockets but that of companies too.  Share prices for companies such as Barr (makers of Irn Bru) fell yesterday after Osborne’s announcement and will likely dip further as their business is targeted by tax.

On a personal note, the sugar tax will have a big impact on me as a massive fan of Coca-Cola.  In general, soft drinks are all I drink – however I am neither obese nor unhealthy because I balance out my love of soft drinks with other diet and lifestyle choices.  I understand that I’m fortunate to have the means with which to do this, but it still feels as though this tax is a particularly unfair one on me.  I’ll still buy Coke as often as I please, taking the financial hit as I go – but for thousands if not millions of people who are struggling to make ends meet the extra cost of buying a soft drink will be too much.

I fully accept that the country has health problems and that they urgently need fixed to ensure the stability of our NHS.  However, I believe that the best way of doing this is to incentivise buying fruits and vegetables and by increasing opportunities to take part in physical activities rather than taxing people for their lifestyle choices.  We have deeply ingrained attitudes towards food that aren’t right and these are not something that we can fix through taxation – in the same way that we can’t tax alcohol and tobacco out of people’s lives.

Research suggests that almost half of all children at age 7 are not getting enough exercise, and that is where I believe the real preventative measures to obesity should be targeted.  The Chancellor has earmarked the income from the sugar tax to go towards funding sports projects in schools, which is a laudable objective, but the extent to which it will actually get children active will be limited.  The tax will not be enough to solve the issue of obesity alone and will hurt many people’s finances in doing so.

It has to be commended that the Government are taking steps to address our national problems of obesity, but the sugar tax simply won’t do the job.  It will not have enough of an impact on people’s habits and choices to severely curb rising obesity and it will hamper the finances of the poorest in our society, who already have things tough as it is.

We’re still two years away from the introduction of the sugar tax and hopefully it’ll be enough time for the Chancellor to change his mind and propose a real alternative that will benefit people’s lives.  It’s clear already that although the proposal has its merits, the idea of a sugar tax will eventually turn sour.

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