In a surprise announcement on March 16, the UK government unveiled a tax on sugary drinks amidst its budgetary plans. Companies have 2 years to reformulate their products, but the director general of the Food and Drink Federation (FDF) said they were “extremely disappointed” by the decision and called it “a piece of political theatre.” Soft drink makers, including Coca-Cola, are reportedly considering suing the government to force the tax to be scrapped.
The tax will be determined by the volume of sugary drinks companies produce or import, with two ‘bands:’ one for total sugar content above 5g per 100ml, such as Fanta, Sprite and Schweppes tonic; and a second for sugary drinks with more than 8g per 100ml, such as standard Coca-Cola, standard Pepsi, and Red Bull. The smallest producers are expected to be kept out of the scope, and fruit juices and milk-based drinks will be excluded from the tax.
“Of course, some [manufacturers] may choose to pass the price onto consumers and that will be their decision, and this would have an impact on consumption too,” Finance Minister George Osborne said during his budget speech. “We understand that tax affects behaviour. So let’s tax the things we want to reduce, not the things we want to encourage.”
The government expects to raise £520 million (over US $730,000) through the tax in its first year. In England, the proceeds will be spent on primary school sports, while the administrations in Scotland, Wales and Northern Island will be able to decide how to spend their shares of the funds.
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Jamie Oliver, who has been perhaps the most famous advocate in favor of the tax, told the BBC that there had been no indication that the levy would be introduced and that the announcement was a “massive surprise.”
FDF Director General Ian Wright said, “We are extremely disappointed by today’s announcement of a new tax on some of the UK’s most successful and innovative companies. For nearly a year we have waited for a holistic strategy to tackle obesity. What we’ve got today instead is a piece of political theatre.
“The imposition of this tax will, sadly, result in less innovation and product reformulation, and for some manufacturers is certain to cost jobs. Nor will it make a difference to obesity. Many of those singled out today by the Chancellor have been at the forefront of efforts to provide consumers with healthy choices. The industry will now ask whether such efforts are still affordable.”
The sentiment was echoed by the British Soft Drinks Association, Institution of Commercial & Business Agents (ICBA), and the Union of European Soft Drinks Associations (UNESDA). The latter released a video in January on “Why food and drink taxes don’t work,” and its official statement on such taxes asserts, “Information and education, not tax, is the way to teach people how to eat balanced diets and lead healthy lifestyles. … The European soft drinks industry already contributes €22.3 billion each year in taxes both directly and indirectly. It supports over one million jobs in Europe and delivers €55.4 billion annually in value-added impact. Taxing food and drink will have a negative impact on competitiveness and threaten jobs and growth.”
The UK government is reportedly in talks with drinks makers to try to prevent a legal challenge.
“We understand obesity is an issue that needs to be addressed and will continue our work to reduce the sugar and calories consumed from our drinks. We have already done a great deal and our actions are doing more to reduce sugar and calorie intake than a tax will. It’s disappointing that the Government has chosen to single out soft drinks in its attempt to tackle the problem,” said Jon Woods, General Manager of Coca-Cola Great Britain.
“If the aim is to reduce obesity, this levy flies in the face of evidence from around the world which shows taxes do very little, if anything, to reduce sugar and calorie intake or obesity levels but do add to people’s cost of living.”
A Treasury spokesperson defended the tax to The Guardian by saying that the “new levy on the soft drinks industry [will] pay for a doubling of dedicated sport funding for every primary school in the country, a huge expansion of breakfast clubs to ensure that every child gets the best start to the day, and new funding for a longer school day."
They added, “The chancellor also made clear that this was a policy aimed at driving meaningful change. The new levy will not be introduced until 2018, giving companies plenty of time to change product mix and reduce sugar content.”
Supporters assert that soft drinks are not automatically seen as a treat, unlike a chocolate bar or slice of cake, so are more likely to be consumed more regularly. Further, soft drinks are “empty calories” with no nutritional benefit, unlike excluded beverages such as fruit juice or milk-based drinks. The BBC reports that soft drinks are the number one source of sugar intake for teenagers and account for one third of children’s daily sugar intake in the UK.
Recent research from Oxford University and the University of Reading suggested that a combination of a sugar tax on soft drinks and a food-based carbon tax in the UK could raise £3.6 billion in revenue, reduce carbon emissions by 19 million tonnes, and increase life expectancy.