Opinion: In defence of the soft drinks sugar tax

Chris Losh

Chris Losh

16 March 2016

In a budget that was largely ‘as you were’ for the drinks industry and the on-trade (barring the helpful raising of the threshold for small business rate relief), one issue stood out: the proposed implementation of a sugar tax on soft drinks.

You can just imagine the sardonic grins at Diageo, Accolade and British American Tobacco.

Ah, food manufacturers… Welcome to our world.

Okay, so the tax is not due for another couple of years and the exact details (for instance, how much the duty will actually be) are still somewhat sketchy, but it’s still a headline-grabbing initiative.

TV chef Jamie Oliver, unsurprisingly, is delighted – he’s led a campaign in favour of a policy like this for years – and frankly, it's impossible not to share some of his joy. Sugar, after all, has no health benefits, myriad negatives and as a nation we consume way too much of it.

The Food and Drink Federation might have dismissed the move as 'political theatre', but for once, I'm more minded to agree with George Osborne who said, 'I am not prepared to say to my children's generation: "I'm sorry - we knew there was a problem with sugary drinks. We knew it caused disease. But we ducked the difficult decisions and we did nothing."'

The Chancellor has proposed two tax bands: one for drinks with a sugar content of over 5g/100ml, and another for those over 8g/100ml. Fruit juices and milk-based drinks are unaffected: this is aimed squarely at the likes of Coke, Irn-Bru and Ribena.

The levy will be charged directly to producers and importers rather than being a consumer tax, though any charges are likely to ripple through to the point of sale, whether that's a corner shop or bar-top.

By giving the food and drink industry two years before the policy comes into force, the government is clearly hoping that manufacturers will use the period to drop the sugar content of their products so they either avoid having to pay the tax altogether or squeak into the lower band.

It's a good example of 'nudging' rather than heavy-handed legislation, and the government is to be applauded for it.

By my calculations, that on-trade giant Schweppes tonic – at about 3.5g/100ml – would be unaffected. But for many drinks even attaining the lower tax band would represent quite a challenge. Coca Cola and Red Bull, for instance, are both well over 10g/100ml and would require a drop of 25% in their sugar content to get below 8g/100ml. The likes of Old Jamaica Ginger Beer – at 16g – might as well give up now.

For the on-trade the sugar tax is likely to have two key impacts.

Firstly, for all venues, it’s likely to mean more expensive soft drinks for the customers of 2018, or smaller margins for venues.

Secondly, if brands do go about lowering their sugar content, bartenders everywhere might need to rethink what goes into some of their key cocktails.

As a final observation, I would expect that in five years’ time, the bands themselves will be lower (say, 4g and 6g) and the duty itself (whatever it’s set at in two years time) will be higher.

The government clearly has the bit between its teeth on this one, and once the principle of extra taxation has been established, duty levels tend mostly to go one way.

And that's a fact that there really is no way of sweetening…

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