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The Soft Drinks Levy: a tax on sugar in soft drinks
‘Just a spoonful of sugar helps the medicine go down’ – Mary Poppins.
Health officials and the media like to remind the public that they’re enjoying too much of something, whether it be too much salt, too much fat, or too much alcohol. Many of these warnings grab attention only until the next health scare comes about, but some do stick – and this time we are being told we are consuming too much sugar, especially children in the UK.
Our sugar intake from soft drinks is specifically the problem, according to the UK government. Industry found this a hard pill to swallow, with 78% of soft drink companies originally against the proposals, although retailers were more supportive, with 73% backing the plan.
The Soft Drinks Industry Levy, better known as the ‘sugar tax’, is a completely new measure that will come into force in from 6 April 2018. The levy applies to the production and importation of soft drinks containing added sugar.
Drinks with a total sugar content of over five but below eight grams per 100 millilitres will be subject to the lower rate, while those producing drinks with over eight grams of sugar will face a higher rate. Importantly, the measure only affects drinks with added sugar, not those that have naturally-occurring sugars.
The Office for Budget Responsibility expects the levy to be 'passed entirely onto the price paid by consumers'. The lower tax band will see 18p added onto the drink’s price per litre unit, while the higher tax band would push the price up by 24p.
Why is the UK introducing a sugar tax on soft drinks?
‘The sugar tax on drinks is not a tax on customers, it is a tax on manufacturers. The whole point of it was to get manufacturers to change the ingredients of the product.’ – Camilla Cavendish, author of the Soft Drinks Industry Levy, as former head of policy under David Cameron.
There is a debate about what the impact of the levy was supposed to be, but the reason for its introduction (according to the government) is clear – the UK has one of the highest obesity rates in the developed world, and it’s getting worse. The Department for Health and Social Care claims over 35% of boys and 20% of girls aged between six and ten will be obese by 2050, and that the general issue of obesity in the UK costs the NHS around £6 billion each year.
As Cavendish has pointed out, 'making things more expensive does change people’s behaviour in a way that I’m afraid all the leaflets we have all read over the years and all the newspaper articles fundamentally don’t.'
What is the impact of the sugar tax on the public coffer?
The sugar tax is sweet for some and sour for others. When the levy was drawn up, the government forecast the measure would bring in £1.5 billion over the first three years, with £520 million in the first year of implementation alone.
However, as most companies have tried to avoid the tax by taking measures like reformulating their drinks, the first year forecast was lowered to £385 million in the Spring 2017 Budget and then down to £275 million last autumn.
George Osborne, the chancellor who introduced the tax, and who has since become the editor of the London Evening Standard, earmarked the money for school sports programmes and breakfast clubs, as the primary aim is to reduce sugar consumption for children rather than adults.
What does the soft drink industry think of the sugar tax?
‘Given current increases in cost of goods, we're surprised the Treasury wishes to put more pressure on businesses and raise prices for hard-pressed consumers.’ – Gavin Partington, director general of the British Soft Drink Association (BSDA), March 2017.
Quite simply, the industry feels hard done by. Organisations like the BSDA and the Food and Drink Federation, which not only represent the likes of drink producers but also the wider supply chain (covering pubs, restaurants, distributors and retailers) firmly believe the levy is unnecessary, as industry was already addressing the problem.
One criticism made by the BSDA is that the decision to introduce the tax was based on data taken in 2012, before the industry implemented plans to reduce the sugar content in drinks voluntarily.
The BSDA claims producers have lowered the sugar content of soft drinks by 19% since 2013, that 11-to-18 year olds reduced consumption of sugar-sweetened beverages by 23% between 2010 and 2014, and that overall sugar intake in teenagers dropped by over 8% over the two years to 2014.