Obese populations place strain on national economies. According to government watchdog the National Obesity Observatory (NOO), in 2007 the projected indirect costs of obesity in Britain by 2015 were £27 billion. In 2014 consultancy group McKinsey and Company put the costs closer to £47 billion.
The link between sugar consumption and obesity is well documented. To help fight the nations bulging waistlines, a coalition of the British Medical Association (BMA), Public Health England (PHE), and Jamie Oliver advocate for a (not especially new) sugar tax on soft drinks, in its report Sugar Reduction: The Evidence for Action. But will such a system work?
There’s little question that a lot of British sugar consumption comes from soft drinks. Given the weight of the problem, Chancellor George Osborne said from 2018, a two tiered tax on drinks with 5g sugar per 100ml, and a higher levy on drinks with 8g per 100ml (with milk based drinks and fruit juices being exempt) will be put on drinks. Any economist worth their salt knows about supply and demand. When prices rise, sales fall. A sugar levy will raise prices, and therefore reduce sales. The Office of Budget Responsibility forecast a 1% fall in demand for every 1% rise in the price of sugary drinks. PHE’s report (see paragraph 2) point to Mexico – which saw an average 6% decline in drink consumption after imposing a 10% sugar tax. It’s one of the few aspects of the budget that finds cross aisle support. Labour Party leader Jeremy Corbyn commended Jamie Oliver on his push for a sugar tax
Of course, the true goal of a sugar tax isn’t to cut demand, but obesity. In this regard, the effectiveness of a sugar tax is less certain. A 2013 systematic review (or study of studies) published in the Journal of ClinicoEconomics and Outcomes Research, examined how levies on soft drinks changed consumption, caloric intake and weight. The study found caloric intake was not reduced as much as campaigners had hoped for, with no evidence that price levies caused weight losses in the population. Denmark had to abandon sugar tax plans after their implemented fat tax didn’t change eating habits and raised food prices. A study titled The Incidence of Taxes on Sugar-Sweetened Beverages: The Case of Berkeley, California found soft drink prices rose by half of what was expected. Costs were absorbed by businesses, rather than passed on to consumers. People don’t always respond how campaign groups want.
The PHE report states 29% of eleven to eighteen year olds daily sugar intake come from soft drinks. However sugary drinks are disproportionately consumed by this demographic, who are least likely to suffer from obesity. At population level, only 3% of Britain’s caloric intake comes from sugary drinks. A 2013 study in the British Medical Journal (BMJ) predicted a small reduction in obesity rates of 1.3% with a 20% levy proposed by the PHE and BMA. For context: 2014 findings by NOO say 61% of British adults are overweight or obese. Any reductions in obesity rates from a sugar tax would be small.
Somewhat awkwardly for Labour, consumption taxes on sugar and alcohol are often regressive. The Institute of Economic Affairs, an admittedly right-wing think-tank, point out 37% of the disposable income of Britain’s poorest 20% go to so-called “sin taxes”. Perhaps the tax can be justified if it lowers obesity rates among low income groups, but the 2013 BMJ study above found no changes in obesity rates across socioeconomic groups.
In a nation with ever growing waistlines, sugary beverages are hard to defend. But tackling obesity requires holistic solutions, not ineffectual taxes. Especially ones that hurt poorer groups, without improving public health. Mr Osborne will need to do more to wean Britain off its sweet tooth.