The UK sugar tax scam

After the UK made the mad decision to tax sugar in beverages there has been a push from the health troughers to do the same here.

Oliver Hartwich from the NZ Initiative out lines why that is just silly.

[T]he sugar tax claims to address a real problem: child obesity. Everything else about it is slightly surreal, to put it mildly.

To start with, the tax won’t raise a sugar cube in the ocean of government finance. If everything goes according to plan (and what does?), it will yield £520 million a year. To put it into perspective, the UK budget deficit stands at £55 billion.

Okay, you might say, the limited scope of revenue-raising for HM Treasury does not matter. Taxing sugar is not about the money but about reducing the amount of sugar consumed. Fair enough. But then it is surprising what is taxed – and what is not. Though they call it a sugar tax, it is actually a fizzy sugary drinks tax.

Chancellor of the Exchequer George Osborne probably did not draw up his tax plans over a Starbucks coffee. Otherwise, he might have realised the great irony in the tax he is about to introduce.

Starbucks’ “Mulled Fruit – Grape with Chai, Orange and Cinnamon Venti” holds the record for the most sugary drink available anywhere in the UK. If a spoonful of sugar makes the medicine go down, Mary Poppins could serve you the content of a travel aid kit with this monster of a drink. It contains 25 teaspoons of sugar – or 99g. By comparison, a standard can of Coke has about two-thirds less sugar.

Under Mr Osborne’s tax, however, coffees like this are exempt from the sugar tax, no matter how sweet they are. In fact, any milk-based drinks or fruit juice will not be liable for taxation.

There is just as much sugar if not more in fruit juices than soft drinks.

It may not have occurred to the UK government but sugar does not only come hidden in fizzy drinks. It is prevalent in muffins, chocolates, fruit yoghurts, canned soups, salad dressings, tomato sauce, dried fruits and bread. Will there be a sugar tax on any of them? Of course not.

So let’s be clear, the so-called sugar tax is just a fizzy drinks tax. But even as such, it does not have logic on its side, as the respected Institute for Fiscal Studies has pointed out.

The problem is that there will be two tax rates: drinks with a total sugar content above 5g per 100ml will be taxed 18p per litre. Drinks with a higher rate of more than 8 per 100ml will attract a tax of 24p per litre.

What sounds straightforward actually means that once a drink is beyond the higher threshold, adding extra sugar actually reduces the tax per 100 grams of sugar. In this way, the sugar in Coca-Cola (10.6 grams per 100ml) will be taxed at 23p per 100 grams. But the same amount of sugar in a typical energy drink (15.9 grams per 100ml) will only attract 15p.

If the idea behind the tax was to move customers away from the white stuff, then clearly this policy setting does not make much sense.

No sense at all, and I predict it will be quietly ditched when it doesn’t do anything remotely like what has been claimed.

Then again, it does not make sense in any case. That is because consumers will not pay the tax directly. It is up to the producers to pay the levy and they decide how to recoup the money from their customers. In this way, a company such as Coca-Cola will spread its extra costs over all its brands, which include bottled water and juices.

Yep, which is what would happen here, so a sugar tax would mean the price of bottled water would go up.

With a different design of the tax, the UK government might have overcome these technical issues. And still, even then the tax would not have worked. The main problem with sugar taxes, from all we know, is that they do not change behaviour in the way they intend to.

There is just no evidence that a smallish tax on fizzy drinks will reduce the overall sugar intake of those consumers the legislation is meant to protect from themselves. Even if there were a reduction in the demand for fizzy drinks, the availability of untaxed forms of sugar leaves the measure powerless.

So the best things one might say about the sugar tax is that it is ineffective. The worst thing is that it hits the poorest households hardest.

Because let’s face it: consumption of soft-drinks is relatively more prevalent in households from lower socio-economic backgrounds. Meanwhile organic, hand-squeezed fruit juices and soy-decaf lattés are the prerogative of the haute volée – and remain mercifully untaxed. Seen from this perspective, it really looks like an old Tory tax – not like the progressive kind of tax Messrs Cameron and Osborne would like it to be. Let them eat cake (and drink Coke)!

This is the thing that rips my y-fronts. There is no evidence anywhere int eh world that a sugar tax works as claimed. None. The scientists can’t prove it…yet they are telling us to just try it. Apart from climate change where else in science is faith-based reasoning relevant?

If you really care about obesity and nutrition, and if you want to reach people from lower socio-economic backgrounds, there would be a better alternative: Educate them, don’t just tax them.

In all of this, perhaps we should still be thankful that they are only introducing a new tax. It could have been worse, a lot worse.

Back in 2007, when the Conservatives were still in opposition, they were toying with another idea for reducing the sugar content of food and beverages. It was not a tax but effectively an emissions trading scheme. It would have assigned tradeable rights to food producers for the use of sugar in their products. If you think the fizzy drinks tax is bad (and it is), imagine what a sugar trading scheme would have looked like.

With the so-called sugar tax introduced, the tampons tax abolished and the budget deficit marginally addressed, perhaps Mr Cameron and what remains of his cabinet could now seriously debate what is important to them: how to harmonise soft-drinks taxation in the EU.

Education followed by the implementation of a Fat Bastard Tax that directly taxes fat bastards would seem to be the only sensible solution.

 

– NBR

 


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  • Davey

    I saw Boyd Swinburn on Paul Henry the other morning. Paul kept asking about the evidence that a sugar tax works to reduce obesity and EVERY TIME Boyd Swinburn talked around the question. Not once did he actually offer up any evidence. It was quite funny.

  • Seriously?

    Maybe we just need to have a way that people contribute to the cost of their own healthcare.

    • David Moore

      No, not at all. It’s about stopping people, esp poorer people, having things they like. Every other justification is just smoke.

      That’s why coffee, consumed mostly by the aspirational middle classes, is exempt and it’s targeted on low class pop.

    • Doug

      Nope, this is just a way to collect a few extra pennies. It is small enough to not discourage many people, as much as it is pointed out that the tax take will be miniscule compared to the deficit, in this type of situation every little bit counts.

  • Nige.

    The sugar tax is there for one reason. To raise beaurocacey.

    • OneTrack

      I thought it’s main goal was to punish big American companies. Take that George Bush.

  • cassandra

    chew white bread for thirty seconds, it converts to sugar in your mouth, the same as is does in your gut when you eat a bit faster. White rice, not much better. Why stop at sugar, why not tax refined grains , why not subsidise kale and almonds? Imagine, thousands of bureaucrats in the ministry of nutrition deciding on the appropriate tax/subsidies on all foods, thats the ultimate wet dream for these intellectual pigmies?

  • Rebecca

    The political objection to the Fat Bastard tax is that the data confirm that obesity and related illness is greater in lower socioeconomic and/or ethnic areas.

    For example, adult obesity in South Auckland is 38% and in one study, Pacific women in South Auckland had a 15% age-standardized prevalence of diabetes which is enormous compared to other ethnic and higher decile groupings. A tax falling disproportionately on Pacific women in South Auckland will be less palatable to many than at least trying the behavioral interventions proposed by the National government. There’s precedent: when uptake of free cervical and breast screening was low in some ethnic groups and regions, targeted behavioral intervention made a measurable difference. Coleman is no fool so IMHO it’s worth giving National’s proposals a chance. Also it seems reasonable for him to decline the clamoring for a fizzy drink tax until they provide unfudged evidence that taxing the poor will work.

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