In George Osborne’s last budget, on 11th March 2016, he announced the introduction of a sugar tax on the soft drinks industry. Why was it implemented, will it be a success and has it gone far enough?
TV chef Jamie Oliver has perhaps been the most famous personality to push the tax forward, having created an e-petition with over 150,000 people backing a tax, and introducing a sugar levy in his restaurants. He and other campaigners have highlighted the negative impacts of consuming sugary drinks: it can lead to unnecessary illnesses, such as obesity, tooth decay and type two diabetes. This puts excessive pressure on a struggling NHS. Indeed, NHS England chief executive Simon Stevens supports the tax whilst announcing that the health service will introduce its own ‘tax’ in hospitals.
The sugar tax will be imposed on companies according to the volume of the sugar-sweetened drinks they produce or import. There will be two bands: the higher band for the most sugary drinks with a total sugar content above 8g per 100 millilitres (drinks such as Coca-Cola, Pepsi and Lucozade) levied at 24p per litre, and another for sugar content above 5g per 100 millilitres (Dr Pepper, Fanta and Sprite) levied at 18p per litre.
The tax will earn a lot of money for the government, which can help in dealing with the issue of obesity in children. Ex-treasurer Osborne estimates that the sugar tax will generate £520m a year, which will hopefully be spent on funding sport in primary schools. This in itself is a hugely positive thing, given that research has shown that half of seven-year-olds do not do enough exercise. Childhood obesity has been described as one of the most serious public health challenges for the 21st Century by the World Health Organisation, while NHS England’s Simon Stevens has dubbed it “the new smoking”. It is worth noting that diseases caused by poor diets and sedentary lifestyles cost the NHS over £6 billion a year, more than the costs of treating illnesses caused by smoking or alcohol.
In the long-run, the tax should incentivise firms to decrease the amount of sugar in their fizzy drinks in order to avoid the heavier taxation. For example, low sugar alternatives to Coca-Cola will hopefully be invested in. Real-world evidence shows that the sugar tax should be effective in the UK. After just one year in Mexico, the one-peso-per-litre tax on sugary drinks has resulted in a 12% decrease in their consumption. Moreover, sales of bottled water and beverages with no added sugar increased by 4%, showing how the Mexican government is successfully persuading people through the tax to adopt healthier alternatives.
However, the tax may not have gone far enough. Public Health England suggests that a sugar tax of 20% is needed, and not just for sugary drinks, but for all fattening snacks. This implies that sugary drinks are actually relatively price inelastic, and so a proportionately larger tax than the one suggested should be implemented in order to reduce sugar intake significantly, whilst a further tax on unhealthy products would help combat the issue of obesity more effectively.
Moreover, alternative solutions, such as reducing sugary drink advertising to children, banning special offers in supermarkets (considering that 40% of money spent on food and drink is on products on offer) and ensuring that healthy cheap alternatives are available may work better. However, this would all cost money, whilst the sugar tax will gain the government revenue.
Overall, the sugar tax should be effective. It will raise money for the government, helping school children to have a healthier lifestyle, reduce the burden on the NHS and incentivise firms to cut down the amount of sugar in their drinks. Although the tax may not go far enough, it is a positive step for the UK in combating the problems associated with sugary drink consumption, and will hopefully kick-start the government to make greater changes to encourage healthier eating and lifestyles in the future.
Original Image by Oliver Hansen