The soft drinks tax is increasingly coming under fire, and with a new Chancellor, now may be the time to re-visit this policy.
The arguments against the tax in the UK are compelling. The UK’s small businesses and those on lower incomes will be hit the worst by the tax – and all for a reduction of just 6 calories per person, per day.
Numbers from across the globe suggest a taxation approach to sugar reduction is ineffective. In Mexico, there was a slight drop in consumption following the introduction of a tax in 2014 but the next year sales began to rise again.
The decline in sales after a tax was introduced in France was negligible. There is no evidence that the tax had any impact on obesity. Denmark scrapped its fat tax because of its economic impact and abandoned plans for a tax on sugar.
The Office for Budget Responsibility – set up by George Osborne himself in 2010 to provide independent analysis of the government’s spending decisions – has highlighted the tax will be ‘passed entirely on to the price paid by consumers.’
By its definition as an indirect tax, it will hit those on lower incomes harder.
There is also the issue of hitting local businesses. The soft drinks sector is the fifth biggest contributor to convenience store sales. It also accounts for £1 in every £20 spent in the hospitality sector. Soft drinks are key to the sustainability of local shops and pubs in constituencies across the country. Over 5,500 jobs were lost in Mexico when they introduced a soft-drinks tax. At a time of great economic uncertainty, should the Government be taking the same risk?
From a policy perspective, there are more holes. The tax will not apply to all drinks; milk based drinks that contain added sugar will be exempt.
The tax will be applied per litre of product, not grams of sugar – meaning we could see drinks containing more sugar per 100ml attracting a lower tax per gram of sugar, a point which has been raised by the IFS.
Furthermore, the government hasn’t produced an impact assessment of the tax – something that is typically produced for measures announced at budgets and legislated through annual Finance Bills.
Osborne’s rationale for the soft drinks tax was to encourage the industry to do more to reduce sugar intake. However, since 2012 the industry has reduced its calorie content by 16%. We are also the only industry with an ambitious plan for the years ahead – in 2015 we agreed a calorie reduction goal of 20% by 2020.
Surely at a time of great economic uncertainty, plans for a regressive, ineffective tax must be halted in order to reach longer term public health goals more effectively.
