The bitter reality of the sugar tax

The Independent’s chief business commentator suggests ‘raising a glass to the sugar tax’. A variety of ‘experts’ have declared in the Lancet that taxing unhealthy lifestyle choices works. An anti-sugar campaigner tweets that 6 April 2018 is ‘a historic day in a first major step to reverse Britain’s #obesity & type 2 diabetes epidemics’, while the leading anti-sugar zealot in America praises Britain’s ‘public-health warriors’. The rest of us can simply feel a bit more depressed at the state interfering in our lifestyles and choices.

The Soft Drinks Industry Levy, to give the sugar tax its proper title, applies to drinks that have sugar added in production, apart from sweetened milk drinks and alcoholic drinks. It doesn’t apply, for example, to naturally sugar-packed fruit juices or those uber-sweet milky coffees in Starbucks. When it was announced in the Budget in March 2016, it was aimed at sugary soft drinks like Coca-Cola, Pepsi, 7UP, Lucozade and others.

For drinks with more than five grams of sugar per 100ml, but less than eight grams, the levy is 18 pence per litre. For drinks with more than eight grams of sugar per 100ml, the levy is 24 pence per litre. That means a 330ml can of high-sugar drink costs eight pence more than before; a two-litre bottle costs 48 pence more. That’s an increase of about 20 per cent on large bottles of the leading brands.

According to a Treasury press release: ‘Soft-drinks manufacturers who don’t reformulate will pay the levy, which is expected to raise £240million each year. This money will go towards doubling the Primary Sports Premium, the creation of a Healthy Pupils Capital Fund to help schools upgrade their sports facilities, and give children access to top-quality PE equipment. The levy will also give a funding boost for healthy school-breakfast clubs.’

What could be wrong with encouraging people to consume less sugar, particularly if the remaining sugar-guzzlers are helping to fund sports facilities and healthy eating in schools? Well, if the case is so strong for expanding school sports and providing breakfasts, this could be funded by general taxation. In truth, the sugar tax is really designed to limit our choices – and on that front, it has worked. Almost every leading brand of sugary soft drink – with the exceptions of the regular versions of Coca-Cola and Pepsi Cola, plus energy drink Red Bull – has been reformulated, including Coca-Cola brands Fanta, Sprite and Dr Pepper. Pepsi has reduced the sugar in 7UP to bring it into the lower tax band.

Most important are the biggest sellers of all: supermarkets’ own-brand drinks, which had sales of £1.3 billion in 2017 and when combined even out-sell the various versions of Coca-Cola (£796million in 2017). Take into account the lower prices of own-brand drinks and they massively out-sell everything else in terms of volume. All the major supermarkets have swapped sugar in their drinks for artificial sweeteners to bring them below the threshold for the new levy. (Not surprising when big bottles would leap in price by nearly 100 per cent, from around 60 pence to £1.10, if left as they were.) While there has been a significant backlash against the reformulation of Lucozade, Irn-Bru and Ribena, the same process has been going on across the board. As a result, the expected income from the new levy has fallen from £415million per year (as estimated in early 2017) to £240million.

While there is much talk about childhood obesity, in fact it will be adults who pay this tax. It is certainly a regressive tax, applied according to what you consume rather than what you earn, and it will disproportionately impact poorer people who are more likely to consume the drinks affected. While this is not a ban, it is an attempt to influence our choices and price some people out of buying the ‘wrong’ drinks.

The sugar tax brings to mind John Stuart Mill’s point about sin taxes in On Liberty: ‘To tax stimulants for the sole purpose of making them more difficult to be obtained is a measure differing only in degree from their entire prohibition; and would be justifiable only if that were justifiable. Every increase of cost is a prohibition, to those whose means do not come up to the augmented price; and to those who do, it is a penalty laid on them for gratifying a particular taste.’

While the regressive nature of this tax is a problem, the decision by most brands to cut their sugar content means the biggest loss is that of choice. Until now, there have been plenty of options for those who want a soft drink but don’t want to consume a lot of sugar. Now we are largely left with just reduced-sugar drinks and zero-sugar drinks. Those who enjoy that full-sugar taste have few options left. This is not solely because of the new tax, but also because of constant pressure from government to reduce sugar availability. Where foods are not being reformulated, portion and bottle sizes are being cut instead, so that the food and drinks industry can still claim a reduction in the amount of sugar being consumed. In January this year, for example, Coca-Cola announced it would reduce the size of some of its bottles (for example, from 1.75 litres to 1.5 litres) and put up the price of 500ml bottles from £1.09 to £1.25.

One thing we can be fairly confident about is that the sugar tax will have a trivial impact on obesity – if any. According to the National Diet and Nutrition Survey 2014, sugary drinks make up about five per cent of the calorie intake of 11- to 18-year-olds and about 2.5 per cent for adults. Reducing that intake of sugar will make little difference to waistlines, particularly if those with a sweet tooth simply add other sources of sugar to their diets, like cakes and confectionery.

Another thing that is clear is that, if those ‘public-health warriors’ have their way, the sugar tax will be extended. Once it becomes obvious that the levy isn’t raising much money and is having zero impact on obesity and health, it will be claimed that this is due to the tax either not being high enough or not covering enough products. Already, the politician responsible for the sugar tax – the former chancellor of the exchequer, George Osborne – has claimed it has been a great success in forcing firms to change their products. He told Newsnight: ‘I suspect the sugar tax will start to be extended to things like milk products, which I was nervous of going into in the first instance because I wanted to establish the case for a sugar tax… It’ll be for others to take further steps forward and I would predict those steps will be taken.’

The hardcore public-health warriors went even further. Professor Graham McGregor, founder of Action on Sugar, declared that ‘sugar-sweetened drinks are no better than cigarettes’ and called on the Treasury to reduce the threshold of sugar content where the tax cuts in down to zero. In other words, the tax would apply to any drink that contained any added sugar at all.

Other attempts to impose sin taxes on food – for example, in Denmark – have proven to be failures and have been scrapped. Let us hope the sugar tax meets a similar fate. But it seems much more likely that we’ll see just the kind of ‘slippery slope’ that we’ve seen with other public-health interventions. Unless we all tell the government to back off, and assert the importance of personal choice, our food and drink is going to get more expensive and less pleasant.

Rob Lyons is science and technology director at the Academy of Ideas and a spiked columnist.

PIcture by: Getty