Sugar tax should be axed not extended, says think tank – Daily Business

The sugar tax should be scrapped instead of extended as it has been a “dramatic failure”, according to a think tank.

A plan to impose the soft drinks levy on milk-based products will not only add to the cost of living but has not been effective in tackling obesity, says an economist.

Responding to the UK Government’s consultation on the levy, Dr Christopher Snowdon, head of lifestyle Economics at the Institute of Economic Affairs, said: “The sugar tax has been such a dramatic failure that it should be repealed, not expanded.

“It has been costing consumers £300 million a year while childhood obesity rates have continued to rise.

“To claim it has been a success on the basis of a hypothetical reduction of one calorie a day is absurd. Sugar taxes have never worked anywhere. What happened to Starmer’s promise to not raise taxes on working people?”

The tax applies to manufacturers of fizzy drinks and was introduced by the Conservative government in April 2018 as a means to tackle obesity.

Chancellor Rachel Reeves announced in her autumn budget last year that the government was considering widening the levy. It would mean ending the exemption for dairy-based drinks, as well as non-dairy substitutes such as oats or rice.

Shadow chancellor Mel Stride described the move a “sucker punch” to households when Labour had “already pushed up the cost of living for families”.

On Monday, the Treasury also confirmed proposals to reduce the maximum amount of sugar allowed in drinks before they become subject to the levy from 5g to 4g per 100ml.

About 200 pre-packed milk-based drinks on the market, which make up 93% of sales within the category, will be hit with the tax unless their sugar content is reduced in accordance with the proposals, government analysis says.

The exemption for milk-based drinks was included because of concerns about calcium consumption, particularly among children.

The Treasury said that young people only get 3.5% of their calcium intake from such drinks, meaning “it is also likely that the health benefits do not justify the harms from excess sugar”.

“By bringing milk-based drinks and milk substitute drinks into the SDIL, the government would introduce a tax incentive for manufacturers of these drinks to build on existing progress and further reduce sugar in their recipes,” the Treasury said.

The government estimates that 89% of soft drinks sold in the UK are not subject to the tax because of widespread reformulation by manufacturers since 2018.

According to government statistics released last September the SDIL has raised a total of £1.9 billion since its introduction in 2018.

The soft drinks industry, pubs and off licences have argued that the levy disproportionately affects lower-income families and does little to tackle obesity.

The government consultation will run from Monday until 21 July.

The Food and Drink Federation said it welcomed the chance to share its views in the consultation. It said investment in research and development had reduced sugar in soft drinks by 46% in the last five years, with a 30% sugar reduction in pre-packed milk-based drinks in the last three years.