In March, the British government announced that it intends to introduce a tax on sugary drinks in 2018 to tackle childhood obesity. Whether the tax, which will be debated this summer, achieves its public-health goals depends on the details, and on rigorous evaluation of its effects.
The United Kingdom is not alone in worrying about the global rise in obesity-related ailments like diabetes and cardiovascular disease – costly conditions that can lead to significant disability and early death. Many countries have introduced, or are considering, taxes on unhealthy foods and drinks – in particular, those to which sugar has been added.
For example, Chile has an 18 per cent tax on high-sugar drinks; France taxes drinks with both added sugar and artificial sweeteners; and Hungary taxes food and drink with high sugar, salt, and caffeine content. Philadelphia, Pennsylvania, recently became the largest US city to introduce a tax on sweetened drinks.
These food taxes operate one of the most effective behavioural-change levers available to policymakers: price. But it would be premature to conclude that higher prices necessarily lead to lower consumption and thus better health outcomes. A tax’s effectiveness depends on how it is designed, and how consumers and the food industry respond to the incentives it creates.
The introduction of taxes on sugary drinks in Mexico and Berkeley, California, has demonstrated the industry’s willingness to fight legislation that might lower its profits. And evidence suggests that these taxes, once implemented, did indeed result in a change in price for customers, who subsequently bought fewer sugary drinks.
Unfortunately, however, little is known about the effect of these taxes on public health. Obesity and its related ailments take a long time to develop, and isolating the effects of food taxes from changes caused by other health policies and cultural trends is challenging. However, both mathematical modeling and simple logic suggest that these taxes will improve health. And detailed evaluations have been launched in Mexico and elsewhere to quantify the effect.
Interestingly, all sugary drink taxes, whether in France, Hungary, Mexico, or Chile, are sales taxes; they lead directly to point-of-sale price increases, often in proportion to the volume of the drink. In Mexico, for example, the tax is a peso per liter, which raises the price by around 10 per cent.
This is where the proposed UK scheme differs. Former Chancellor of the Exchequer George Osborne announced a two-tiered levy, with the explicit aim of encouraging the industry, rather than consumers, to change behaviour.
The possibility of the reformulation of existing offerings and new entrants into the market are other important uncertainties. In 2014, Coca-Cola introduced its low-sugar alternative, Coca-Cola Life. With its distinctive green packaging and wholesome image established through advertising campaigns, the new product captured more than two per cent of total Coca-Cola sales in the first year after its introduction. However, it is unclear whether these additional sales came from consumers who would otherwise be drinking full-sugar Coca-Cola, the diet version of the soft drink, or other beverages, such as fruit juice or water.
The debate has already begun. The UK soft drink industry is considering legal action, arguing that the tax is anti-competitive given that pure fruit juice and sweetened milk are not included (Mars Milkshake, for example, has 12.8 grams of sugar per 100 milliliters). On the other side, some campaigners want high-sugar foods, such as sweets and cakes, to be included in the proposed legislation.
The world will be watching the UK with interest, as its approach would be politically easier for other countries to adopt. Recently, Ireland became the latest country to announce its intention to levy a tax on sugary drinks.
If industry responds to the tax by reformulating products and changing its marketing strategy, and if this leads to a reduction in sugar intake in the UK, then the tax will have been a success. But accomplishing this will require policymakers to get the legislation right and to ensure that its effects are properly assessed.