Reformulation success: UK says planned sugar tax revenues to fall by €160m

By Louis Gore-Langton contact

- Last updated on GMT

Photo: iStock
Photo: iStock
Thanks to drink manufacturers reformulating sugar out of their products, the UK’s Office for Budget Responsibility (OBR) now predicts significantly less revenue from the sugar tax - but does this really signal a change in the public diet?

Last year’s planned tax on soft drinks containing 5 g sugar per 100 ml and up was confirmed on Wednesday at the British finance minister Phillip Hammond’s budget 2017. 

Speaking at Parliament, Hammond said: “Unusually for a chancellor I am delighted to announce a reduction in the expected yield of a tax - the soft drinks levy. 

“I can confirm today the rates of 18 and 24 p per litre for the main and higher bands respectively but producers are already reformulating sugar out of their drinks which means a lower revenue forecast for this tax - this is good news for our children.”

The OBR originally planned a yearly revenue of around £900m (€1.2bn), and then announced this figure would likely drop to nearer £520m (€595) as the intended effect of the levy - to discourage high sugar content - took place. 

This projection has again been dropped, now to around £380m (€434m), suggesting pre-emptive action in the industry and early signs of success for policy-makers. 

Sweetened predictions? 

Critics of the levy say the drop in tax revenue will actually reflect factors having little to do with what the public is consuming. 

Chris Snowden, director of lifestyle economics at the Institute of Economic Affairs, told FoodNavigator: “I’m sceptical about the claim that the tax will only relieve taxpayers of £385 million a year.

There have been some unexpected reformulation announcements, notably Irn-Bru last week, but there is no question of the country’s top selling fizzy drink (Coca-Cola) being reformulated. Sugar taxes generally bring in more money than expected because they have less effect on consumption than campaigners predict. In the current market, a sugar levy would raise £900 million.

A drop to £385 million seems highly optimistic, even taking into account the downward trend in sugary drink consumption that has been seen in recent years. We shall see, but if I had to put money on it, I would bet on the tax raising more than £385 million.”

Snowden has pointed out​ in the past that not only are half of all soft drinks already below the taxable bracket, but companies will also now have the 'perverse incentive' to increase sugar content in their low sugar brands to the maximum possible level the new levy will allow. 

The British Soft Drinks Association (BSDA) concurred with Snowden, saying: “We support the need to address the public health challenge the country faces, but it’s worth bearing in mind that there is no evidence taxing a single product or ingredient has reduced levels of obesity anywhere in the world.”

Others however feel that the fall in predicted tax revenue is indeed a sign that companies are already moving to effectively stem the flow of sugar pouring into the public diet. 

Nutritionist Dr. Carrie Ruxton told us: “I feel delighted about the announcement because it shows that the regulation is very effective. The whole point is to tackle obesity and the regulation was there to reduce the sugar content of drinks and hopefully of the diet. We know its the case that companies are already dropping content. it was said quite clearly that Irn Bru and Coca-Cola have already made or scheduled sugar content changes. 

“Even the threat of regulation, which we haven’t had before, has been effective. The UK diet has been static in terms of fat sugar and salt, and calories are actually rising. I praise the companies for doing the right thing.

“This cannot work in isolation however - 40% of food typically on promotion is HFSS (high in fat, salt and sugar) - this needs to be reduced and we need to rebalance promotions to fruit and vegetables and healthier foods. 

“Unless you start to fix this.. all that money is a drop in the ocean compared to the scale of the obesity crisis.”

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