The Sugar Tax: Sweet Idea, But Will It Work?
The sugar tax.
Arguably one of this week’s biggest talking points, and I can’t say I’m surprised.
What do you mean the price of a can of Coke will go up by 8p? What’s going on?
In this post I’ll take a brief look at what’s happened, and suggest that it may not actually have the desired effect.
The Sugar Tax
Introduced on the 6th April, the sugar tax is a UK government proposal that places a levy on soft drinks that contain what the government views as ‘excess sugar’. Companies will be taxed 18p per litre for drinks that contain between 5g and 8g of sugar per 100ml, and 24p per litre for those with more than 8g.
It’s worth noting that the tax is applied to manufacturers, so it’s up to them to either absorb it or pass it on to consumers.
Of course, this was introduced to try and combat the obesity crisis in the UK, which I’m sure everybody agrees is a problem worth addressing. The number of overweight people has quadrupled in the last 25 years, but more shockingly:
- 58% of women and 68% of men were recorded as overweight or obese.
- The NHS dealt with 525,000 hospital admissions where obesity was a factor.
These numbers don’t look good no matter how you try and twist them, but will the sugar tax help?
How Change Works:
Realistically, for the sugar tax to solve the problem of obesity, it must do two things.
- Alter the behaviour of companies to sell products with less sugar.
- Alter the behaviour of consumers to buy products with less sugar.
That’s pretty much it. It’s all about whether or not it will change behaviour for the better.
Now, here’s why I don’t think it will.
There’s no denying that drinks manufacturers have reacted to the tax. The question is whether or not they’ve done so in the way we want them to. Straight away, we can see that companies have done one of two things:
- Cut the amount of sugar in their drinks (Sprite, Fanta, Lucozade, Ribena, 7up).
- Increase the price (Coke, Pepsi, Red Bull).
On the face of it, this is exactly the sort of behaviour that the sugar tax was introduced to promote. The thing is, I really don’t think it’s a solution. For starters, by reducing the sugar content, companies will no doubt turn to artificial sweeteners, which can be just as as bad for you. Some interesting research found that while sweeteners themselves might not be unhealthy, they may force us into adopting an unhealthy lifestyle. One study found that they overstimulate our sugar receptors, which then makes things like vegetables taste worse. Additionally, it’s been suggested that they prevent us from associating sweetness with calorie intake. This could lead us to consistently choose more unhealthy snacks, leading to weight gain.
In essence, this tax might have created a bit of a ‘broken incentive’.
What I meant by that is that it could end up incentivising undesirable behaviour, which completely defeats the point. After all, public knowledge surrounding sweeteners and how good or bad they are is extremely limited. This means companies have a great incentive to replace traditional sugar with synthetic alternatives, and consumers might not realise the damage they’re doing.
So if artificial sweeteners aren’t the solution, what about the companies that are raising the price? A can of Coke is now 8p more expensive, and a 2 litre bottle is now 48p more expensive. Surely this will put customers off and reduce obesity?
Probably not. Here’s why:
Sugar is 8x more addictive than cocaine. I think that’s quite important to keep in mind when thinking about the effects of the sugar tax.
After all, if the price of cocaine went up by 10% (roughly the increase of a can of coke), I doubt we’d suddenly have a drug free country. People who crave it would still buy it, and the problem would almost be worse because they’d get poorer while doing so.
Although much less extreme, I think the same can be said for sugary drinks. If people crave them, a price increase of 8p won’t be much of a deterrent.
Even if people did decide that an extra 8p was too much to justify, how would that solve obesity? In my view, it’s more likely that people will just find a more cost effective way of getting their sugar fix. Yes, the sale of Coke and Pepsi might go down, but the sale of high sugar snacks (which aren’t taxed) could go up. Before you know it we’d be back to square one. Perhaps the solution is taxing excess sugar in all food and drinks, but that could be a long way off.
Hurting The Poor?
On top of all of this, is this tax fair when looking at individual wealth?
The short answer is no.
Drawing on some basic economics, I can say with some confidence that any tax on spending is regressive, meaning the poorest are hardest hit. This is because poorer people are effectively forced to spend a larger proportion of their income. If you decide to tax that spending, then somebody earning £15,000 a year will notice it far more than somebody earning £50,000.
It’s also widely discussed and agreed that an unhealthy diet is much cheaper than a healthy one. A 227g punnet of Strawberries is £1.20 in Tesco, whereas a 300g pack of chocolate digestives is £0.60.
So maybe the sugar tax isn’t the fairest solution?
Well, just before I give my final verdict, I want to compare it to a much more successful government idea, the 5p plastic bag charge.
5p Plastic Bag Charge
Last week, The Guardian published an article claiming that a reduction of plastic in UK seas has been directly linked to the introduction of a 5p plastic bag charge. This is great news, and I don’t think it would be too much for somebody to argue that the sugar tax could be equally successful.
After all, surely paying 5p for a bag will have the same effect as paying an extra 8p for a can of Coke?
I don’t think so.
In fact, I think there are some key reasons as to why these two ideas are so different.
Firstly, a plastic bag is more of a necessity than a desire. People resented paying 5p for something that they didn’t actually want. In fact, they’d go as far as cradling a full basket of products on the bus home just to prove a point.
Sugary drinks aren’t like that. We don’t need them, we want them, and that makes all the difference. I’m pretty sure people will just pay the extra charge.
Secondly, it didn’t provide companies with a broken incentive. As opposed to the sugar tax, the plastic bag charge didn’t make companies do anything undesirable. Considering that the 5p went to the companies and not the government, you might think that shops would try and sell as many plastic bags as possible. However, what actually happened was that most shops realised they would make more money through selling bags for life. Even on the plastic bags that were sold, roughly 80% of that 5p was voluntarily donated to various great causes.
I just can’t see the sugar tax having the same effect.
I’ve made no secret as to where I’ve been going with this post, but I don’t see the sugar tax as the perfect solution to obesity.
Firstly, I worry that companies will just bypass it using sweeteners, which I don’t think will solve anything. Of the companies that just raise the price, I think the £240m of revenue that the government will receive will be at the expense of poorer people.
Admittedly, a sugar tax has been in force in Mexico for a few years, and sales of sugary drinks have fallen by 12%, but it’s far too early to see if it impacts obesity. Generally speaking, I worry that governments will be able to twist statistics to easily make it sound like a success. They may say that they’ve been able to spend £240m on healthy living projects, or that drinks sales have declined, but the real test will be in the obesity figures.
But it’s not all doom and gloom. After all, this does show that the government are relatively committed to tackling obesity.
I just think they could do so in other ways. As Mintel’s Emma Clifford has said, the sugar tax is too much stick, and not enough carrot. Why not work towards reducing the cost of a healthy diet instead of increasing the cost of an unhealthy one?
I suppose there are many different ways to tackle a problem.
For now, we just have to wait and see if the government have chosen the right one.
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Hi! I’m an author and blogger within the fields of social impact and responsible business. I believe that businesses can be a force for good in the world, and this website contains my thoughts on how that can work.