Britain will introduce a sugar tax on soft drinks in 2018, the ‘Conservative’ Chancellor George Osborne announced on Wednesday. The shock announcement hit share prices in drinks and sugar firms, while left-wing campaigners celebrated the move.
Just months after the government ruled out a sugar tax, with the Prime Minister declaring there are “more effective” ways to tackle obesity, Mr. Osborne said the planned levy, which would be imposed on companies and based on the sugar content in drinks, would raise £520 million ($733m USD).
“Of course, some may choose to pass the price onto consumers and that will be their decision, and this would have an impact on consumption too,” Mr. Osborne told parliament during his annual budget speech today.
“We understand that tax affects behaviour. So let’s tax the things we want to reduce, not the things we want to encourage.”
But the move has drawn criticism from Mr. Osborne’s typical budget cheerleaders in the United Kingdom, such as neoliberal and right leaning think tanks.
Chris Snowdon of the Institute of Economic Affairs (IEA) has called the move “pathetic”, explaining that the policy will impact the poorest in society most.
“And what will we who will pay the price for Jamie Oliver’s little campaign get in return? Nothing. Sugary drink taxes have been tried all over the world and have never been shown to make the slightest impact on obesity,” he explains in a column for CityAM.
“This is hardly surprising since soft drinks make a negligible contribution to our overall calorie intake (in Britain it is just three per cent) and consumers are not very price sensitive when it comes to food and drink… It would be laughable if it were not so pathetic.”
Shares in drinks and sugar groups fell on the news, with Britvic and AG Barr, which makes Irn Bru, down between 3 per cent and 5 per cent. Sugar group Tate & Lyle was down 2 per cent.
Scandinavian countries have imposed similar taxes, and in 2012, France and Hungary joined that list, followed by Mexico in 2014.
The IEA studied areas with consumption taxes, and found that “even the wide-ranging food tax regime of Hungary only affects a fraction of the calorie supply,” adding: “Early evidence from Mexico suggests that a ten per cent tax on sugary drinks led to an average daily decline in consumption of 36ml per person (Colchero et al. 2016). As Tom Sanders, a professor of nutrition and dietetics, notes, this is the equivalent of 16 calories and is ‘a drop in the caloric ocean”.
2017: Soft drinks to be made with a delicious new artificial sweetener to avoid the sugar tax.
2027: Everyone is dead from the sweetener
— Sam Bowman (@s8mb) March 16, 2016
And Sam Bowman, of the Adam Smith Institute suggested that replacements for sugar in soft drinks may be more harmful than sugar itself. In California, a tax on sugary drinks also includes products which include sweeteners like Stevia, which studies have shown have impacted the fertility rates in male laboratory rats.
The campaign to tax sugar, especially in soft drinks, has been championed by big government activists on the left of the political spectrum, urging the government to penalise poorer families who on average consume more soft drinks. One noteworthy supporter is millionaire TV chef Jamie Oliver, who himself advertises sugar heavy desserts.
Reuters contributed to this report