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Levy on sugary drinks announced in Budget

Levy will have to be paid by companies that market soft drinks with added sugar from 2018

Ingrid Torjesen

Thursday, 17 March 2016

Soft drinks companies will have to pay a levy on products with added sugar from April 2018, Chancellor George Osborne announced in the Budget.

The levy will be determined by the volume of sugar-sweetened drinks the companies produce or import and how sweet they are. There will be two rate levy bands – one for products with sugar content above 5 grams of sugar per 100 millilitres, and one for products with more than 8 grams of sugar per 100 millilitres. The levy will not apply to pure fruit juices and milk-based drinks.

Although the levy will be applied to companies marketing the products rather than applied at the point of sale, Osborne expected that companies would pass the costs on to consumers. “Of course, some may choose to pass the price onto consumers and that will be their decision, and this would have an impact on consumption too,” he said in his Budget speech. “We understand that tax affects behaviour. So let’s tax the things we want to reduce.”

Ian Wright CBE, Director General of the Food and Drink Federation, said: "We are extremely disappointed by today's announcement of a new tax on some of the UK's most successful and innovative companies. For nearly a year we have waited for an holistic strategy to tackle obesity. What we've got today instead is a piece of political theatre.

“The imposition of this tax will, sadly, result in less innovation and product reformulation, and for some manufacturers is certain to cost jobs. Nor will it make a difference to obesity.  Many of those singled out today by the Chancellor have been at the forefront of efforts to provide consumers with healthy choices. The industry will now ask whether such efforts are still affordable."  

The levy is expected to raise £520 million per year and this will be used to double the additional money given to primary schools to spend on PE and sports to £320 million a year, and to fund a quarter of secondary schools to provide longer school days so they can offer pupils a wider range of activities, including extra sport.

Dr Ian Johnson, nutrition researcher and Emeritus Fellow, Institute of Food Research, said that the government had made an “imaginative” response to the scientific advice it had received that would send out an important message. “I believe it is a valuable first step towards bringing obesity and its associated illnesses under control in the UK.”

Richard Tiffin, Professor of Applied Economics at the University of Reading, said: “The government has heeded warnings that a tax on consumers will not change consumer behaviour sufficiently to have a significant impact on obesity.

“This is a revenue-raising measure and it is pleasing to see that revenue from the tax will be spent on measures that may have a more significant impact. The measures being proposed are somewhat blunt however, and will probably have the biggest impact on those children and young adults that are already participants in sporting activities, rather than those who do nothing.”

The announcement was unexpected because any decision on taxing sugar was expected to appear in the childhood obesity strategy, which last month the government announced would be delayed until the summer after the referendum on whether the UK should remain part of the EU.

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