Soft Drinks Tax: is the UK moving in the right direction?

Christopher Snowdon on The Spectator highlights the counterfactual evidence against the three main claims used by the UK Treasury to justify the introduction of a of the Soda Tax in 2018, as announced by former chancellor George Osborne earlier this year.

According to the Treasury’s the tax will only affect corporate profits, not consumers; yet the author contends that consumers, not companies, will be the most affected. While he recognizes that companies are not forced to raise the prices of their products, he points out that the national Office for Budget Responsibility (OBR) expects the levy “to be passed entirely on to the price paid by consumers”.

The second claim is that the tax will incentivise large-scale sugar reduction in soft drinks; Snowdon denounces that “the government has picked on the one part of the food and drink industry that has undergone extensive reformulation and told them to somehow do it all over again”. He argues that the soft-drink industry already provides low and no-calorie alternatives of their products, suggesting there is little room left for further reformulation. The amount of sugar consumed through beverages solely depends on consumers’ preferences.

The third claim presents the tax as the best way to raise money for anti-obesity initiatives. According to the OBR the levy will raise £500 million a year, yet it requires a cost of £1 billion for its implementation alone, enforcement costs and the rise of index-linked salaries, benefits, and public sector pensions are on top of that. Phil Wadsworth, chief actuary at JLT Employee Benefits, estimates that the sugar levy will add £3 billion to UK pensions liabilities. Snowdon warns that any revenue generated by the levy will have no other purpose than to cover its costs for many years to come.

Snowdon concludes with an appeal “the sugar levy aims to do something that has already been done (reformulation of soft drinks) with a tax that will lose the government money… a rethink is urgently needed”.

You may find the original article on The Spectator website