Benefits of Sugar Tax 'A Rounding Error' When Compared to Costs

Benefits of Sugar Tax 'A Rounding Error' When Compared to Costs

Supporters of a new tax on sugary drinks in London are promoting it on the grounds that it will save the NHS in London £39 million over the next twenty years. But their own figures show that it would cost Londoners £2.6 billion in the same time period. This means that the cost to Londoners will be worth more than 67 times the benefit.

The Children’s Food Campaign is promoting a 20p per litre duty on sugary drinks, on the grounds that over the next 20 years it could reduce diabetes cases by 6300, prevent 1100 cases of cancer and “improve the quality of life” for thousands of Londoners. It contests that Croydon, Enfield and Southwark are amongst the London boroughs most likely to see savings as a result of the sugar tax, whilst claiming that Tower Hamlets and Hackney will see the highest impact on calorie reduction.

The campaign is being backed by over 60 organisations, including the Royal Society for Public Health, European Public Health Alliance, Netmums, the Trading Standards Institute and the union UNISON, as well as environmental NGOs such as Friends of the Earth, the Soil Association and Compassion in World Farming.

Malcolm Clark, co-ordinator of the Children’s Food Campaign, said: “A duty on sugary drinks of 20p per litre would be the most practical and effective way of tackling a significant source of unnecessary calories and sugar in children and young people’s diets.

“We urge London’s mayor and council leaders to include a sugary drinks duty in their review of how London might manage devolved taxation powers, and to make the case to Westminster for the introduction of such a duty nationally.”

Professor Damien Walmsley, British Dental Association’s scientific adviser said: “A tax on sugary drinks and food is a no brainer. It’s a scandal that one in eight of our three-year olds currently experiences tooth decay. It’s time we tackled the problem at source.”

However, the Institute of Economic Affairs has looked at the campaign’s own figures and discovered that the policy would cost Londoners nearly £2.6 billion over twenty years, or £180 million a year. If rolled out nationwide, it would cost British consumers a whopping £1 billion a year.

Christopher Snowdon, Director of Lifestyle Economics at the Institute for Economic Affairs said: “If the Children’s Food Campaign estimates are correct, a tax on sugary drinks would be a horrendously inefficient policy. Taxpayers would have to spend £67 to save £1 in healthcare costs.

“It is easy to make back-of-an-envelope calculations about how much money will be saved by a particular policy, but it is meaningless unless you look also at the cost. The Children’s Food Campaign’s own figures suggest that the cost of a sugary drinks tax to London taxpayers will be £2.6 billion over twenty years. A ‘saving’ of £39 million in this context is extremely trivial. It is a rounding error.

“You don’t reduce the burden on taxpayers by raising taxes and you can’t make policy by looking at putative benefits while ignoring real costs. Taxes on soft drinks have had no measurable effect on healthcare costs in the few countries that have experimented with them. In reality, they are lucrative stealth taxes which increase the cost of living and hit the poor hardest.”


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