15 July 2015

Why the government shouldn’t intervene in the sugar market

By Christopher Snowdon

Sugar is much in the news at the moment, with the British Medical Association calling for a tax on sugary drinks and the Scientific Advisory Committee on Nutrition expected to announce new advice on how much sugar to eat very soon. It has also been claimed that the government has shelved a report from Public England Health which will look at how to make the British public live within whatever guidelines the scientific advisory sets. Options include reducing portion sizes, restricting advertising and banning shops from displaying sweets near checkouts.

It is a sign of the times that the prospect of new health advice is assumed to necessitate new legislation. The idea that guidelines are simply guidelines which sovereign citizens are free to follow or ignore has gradually been eroded. It is therefore a happy accident that the Institute of Economic Affairs picked this week to release a new report that looks at the sugar market. Instead of asking what the government should do, it starts from the economist’s position that the government should do nothing unless there is evidence of a market failure.

With regards to sugar and health, there are three potential market failures. First, there may be negative externalities, including the NHS costs of treating obesity-related conditions. Second, there could be a lack of competition and a lack of choice leading consumers to eating chocolate when they would prefer to be eating cauliflower. Third, consumers could be systematically ignorant and irrational in a way that the sugar industry exploits. If none of these market failures exist, it is reasonable to assume that people who eat too much sugar (however that may be defined) are doing so of their free will and are prepared to bear the consequences.

In fact, there is little evidence for any of them. First, the claim that obesity is a drain on the NHS is refuted by evidence showing that the lifetime healthcare costs of obese people are lower than average (because they are less likely to reach the most expensive years of extreme old age). There are clearly costs associated with treating obesity-related conditions, but there is not a net cost. Besides, even if there were clear negative externalities from obesity, it would be illogical to blame a single ingredient like sugar, particularly when per capita sugar consumption has been falling in recent decades at the very time when obesity has been rising.

Second, if consumers face a problem with choice, it is with too much, not too little. Supermarkets are crammed with tens of thousands of products and there are low-sugar and sugar-free options available for most sweet products. This is particularly true of the public health lobby’s current bête noire, fizzy drinks, for which a huge range of low-sugar and zero-calorie options are available on the same shelves for the same price. If, like me, you prefer to buy the traditional high-sugar varieties, it is because you have made a free choice to do so.

Moreover, you have the information with which to decide. Most food and drink products are clearly labelled with the amount of sugar and calories they contain. It is sometimes claimed that sugar is addictive, but there is vanishingly little evidence for this unless one stretches the definition of addiction to include any general feeling of enjoyment. The claim that sugar is like cocaine because it releases dopamine in the brain (as cocaine does) is fallacious. Sugar, being food, is supposed to release dopamine in the brain. Cocaine mimics the effect of eating food to provide an ‘artificial’ sense of wellbeing, but this does not make sugar a drug, let alone an addictive drug.

This synopsis has been brief by necessity, but I urge you read the IEA report (‘Sweet Truth’) for a more detailed discussion of the evidence. The other version is that there is no market failure for the government to correct. The mere fact that many of us live our lives in a way that single-issue pressure groups disapprove does not mean that the market is dysfunctional, and remedial policies proposed by campaign groups will create real costs for consumers to bear.

Christopher Snowdon is the Director of Lifestyle Economics at the IEA