Sugar Taxation

By admin |

Sugar pouring from a can

The UK government’s tax on sugary soft drinks was introduced in 2018 in an effort to tackle rising rates of type 2 diabetes and obesity. Former chancellor George Osborne announced the sugar tax in 2016, bowing down to pressure from scientists, doctors and campaigners.

The soft drinks industry is taxed for total sugar content over 5g per 100ml. This applies to soft drinks across the spectrum, including leading brands such as Irn Bru, Coke and Red Bull.

Aimed at raising around £520 million a year, the new tax is to be spent on funding more sport in primary schools to help children to get fit and to help prevent obesity.

© Wordley Calvo Stock / Adobe Stock

 

Background

The British Medical Association had urged the government to tax sugar in July 2015 and the move was supported by the campaign group Action on Sugar and by celebrity chef Jamie Oliver.

Two weeks later, a study by the University of Cambridge revealed 8,000 cases of type 2 diabetes per year were linked to the consumption of sugary drinks.

British campaigners pointed to the sugar tax that had been introduced in Mexico, which saw the sales of sugary soft drinks decrease by 6% in its first year, but in 2015, the then prime minister, David Cameron, said he believed there were “more effective ways of tackling obesity” than a tax on sugar. The sugar tax was eventually announced after the International Diabetes Federation added its backing to the campaign.

Another study by London’s Queen Mary University concluded that 300,000 cases of type 2 diabetes could be prevented by reducing sugar in soft drinks by 40% over a five-year period.

 

Sugar tax impact

Theresa May announced the sugar tax when she became prime minister in July 2016. There are two levels of tax – a lower one for soft drinks containing sugar of more than 5g per 100ml and a higher levy for drinks with a level of 8g per 100ml or higher.

The tax was put into place in April 2018. Shoppers pay 18p or 24p per litre extra on their soft drinks, depending on how much extra sugar has been added. However, the treasury isn’t looking forward to the anticipated tax windfall for the public purse. On the contrary, retailers and manufacturers are largely supporting the move.

Rather than waiting to see how consumers would react to the tax, manufacturers began altering their recipes to adhere to the new regulations. Many of the top brands have announced a reduction in sugar.

 

Revenue

The fact that the drinks industry is supporting the move by altering its recipes has been reflected in the anticipated revenue from the new tax.

In 2016, the projected revenue was £520 million. One year later, the estimated yield was £385 million. By the time the Budget documents were released in November 2017, the anticipated revenue had dropped further to £275 million per year.

Rather than the Treasury being frustrated that their estimated tax windfall has fallen, the sugar tax is being hailed as a success. The policy’s aim was to reduce sugar consumption to improve the nation’s health, so if companies are changing their drinks’ recipes, then it’s a good outcome.

 

Drinks companies’ response

Pepsi Co has announced that its range of drinks will contain less sugar by 2025. The makers of Irn Bru, the iconic Scottish drink, have stopped making their original full-sugar version. The sugar content is being cut by AG Barr as part of what they have called a “sugar reduction programme”.

They have announced they are aiming to have 99% of their soft drinks range below the sugar tax threshold. On the flipside, however, some customers have reportedly been stockpiling the original Irn Bru drinks, claiming they don’t like the taste of the new, low sugar variety.

Britvic has also reduced sugar across its drinks range, including J20, Robinson’s and Fruit Shoot, with the aim of 94% of its brand portfolio falling below the sugar tax rate.

Lucozade and Ribena (who are owned by the Japanese company, Suntory) are also cutting sugar. They say they have reduced the sugar content of their core portfolio by 50% since the tax was announced.

 

Consumer reaction

According to a survey carried out in 2018 by Nielsen, the sugar tax hasn’t had a massive impact on consumer behaviour. In fact, 62% of UK shoppers claimed their consumption behaviour hadn’t changed at all since the sugar tax was introduced.

Only 20% of consumers say they are checking products’ sugar content more frequently since the introduction of the tax, according to the Sugar Tax Shopper survey. A mere 1% of respondents had pledged to stop drinking sugary soft drinks, while 44% of those surveyed said they would continue to buy sugary drinks. Most people say they support the tax, with 54% saying they are in favour of it and 69% saying it should be expanded to biscuits and confectionery.

 

Future plans

Despite the sugar tax, health chiefs in the UK say excess sugar intake is still a major health concern for most Brits. It has been the health sector’s number one concern for four consecutive years. While the sugar tax has raised awareness, no significant changes have been seen in consumers’ habits, although it’s a positive sign that the drinks manufacturers have pledged to reduce sugar levels.

Most soft drinks now fall below the tax threshold, so the fact that consumer shopping habits haven’t changed is irrelevant, to a degree, since they are buying drinks with less sugar, whether they want to or not.

The prime minister is now understood to be more sympathetic towards a bolder and more far-reaching anti-obesity plan. Advertising restrictions on sugary foods are under discussion and many food manufacturers have voluntarily signed up to a sugar reformulation plan, which includes a calorie reduction target.

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