The levy on sugar sweetened-beverages was announced by Chancellor George Osborne during his Budget 2016 speech yesterday, and will come into effect in April 2018.
But the industry has slammed the tax, which will apply only to sugar-sweetened beverages and does not cover other food categories.
Both Coca-Cola GB and A.G. Barr say the soft drinks industry has been ‘singled out,’ and point to the efforts they have already made in reducing calories. Coca-Cola adds that these initiatives “are doing more to reduce sugar and calorie intakes than a tax will”.
Meanwhile, industry associations say they are “extremely disappointed,” calling the tax a “piece of political theatre” and “simply absurd”.
The tax: What to expect
The levy will have two bands: one for total sugar content above 5g per 100 ml; and a second band for drinks with more than 8g per 100 ml.
Based on the government’s revenue targets, the levy will be around 18 pence ($0.26) or 24 pence ($0.34) per litre unit (for each band respectively). For a standard 330ml sized can, this would equate to 6p ($0.09) or 8p ($0.12).
The government says it expects this to be ‘passed entirely onto the price paid by consumers.’
Small operators will benefit from an exclusion, and pure fruit juices and milk-based drinks will not be subject to the levy.
The government says the levy is designed to encourage companies to reformulate and reduce the amounts of added sugar in their drinks. This would move consumers towards lower sugar alternatives and reduced portion sizes, it added.
“Under this levy, if producers change their behaviour, they will pay less tax,” says the government in the budget.
“The levy is expected to raise £520m ($747m) in the first year. The Office for Budget Responsibility expects that this number will fall over time as the total consumption of soft drinks in scope of the levy drops, in part as a result of producers changing their behaviour and helping consumers to make healthier choices.”
Tackling childhood obesity is at the heart of the tax: with a Public Health England report reporting that sugar consumption is a major factor in childhood obesity, and sugar-sweetened soft drinks are now the biggest source of dietary sugar for children and teenagers.
The revenue from the tax will be used to fund more sport in schools.
The manufacturers’ reaction: Coca-Cola says levy ‘flies in the face’ of evidence
Coca-Cola Great Britain says that, while obesity needs to be tackled, soft drinks have been ‘singled out’. It points to its existing sugar and calorie reduction efforts, which it says are having greater effect than a tax ever will.
Jon Woods, General Manager of Coca-Cola Great Britain, said: “We understand obesity is an issue that needs to be addressed and will continue our work to reduce the sugar and calories consumed from our drinks. We have already done a great deal and our actions are doing more to reduce sugar and calorie intake than a tax will.
“It’s disappointing that the Government has chosen to single out soft drinks in its attempt to tackle the problem. If the aim is to reduce obesity, this levy flies in the face of evidence from around the world which shows taxes do very little, if anything, to reduce sugar and calorie intake or obesity levels but do add to people’s cost of living.”
Soft drinks manufacturer A.G. Barr, who produces Irn-Bru and distributes Rockstar under an exclusive licence, also gestured to the efforts it has already made in reducing calories.
“It is extremely disappointing that soft drinks have been singled out given it is the only food and drink category to have made any real progress in reducing sugar intake in recent years, down 13.6% since 2012,” said Roger White, A.G. Barr chief executive.
“At A.G. Barr we have reduced the average calorific content across our brand range by 8.8% in just four years and are actively contributing to the soft drinks industry-wide five year target to make a 20% reduction by 2020.
“We will await further details and ensure that we are fully involved in the consultation process to ensure our position, and progress to date, are well understood.”
Shock announcement
In September 2015, the UK government ruled out a sugar tax, a position reinforced by Prime Minister David Cameron the following month.
And yet six months later, Chancellor George Osborne has announced a sugar tax on sugar-sweetened beverages.
Like many other countries, the UK has seen plenty of debate around the idea of a sugar tax, with strong feelings both for and against.
Celebrity chef and media personality Jamie Oliver has been a high-profile voice leading calls for a sugar tax, and his petition last year gained more than 150,000 signatures, forcing the government to debate the issue.
However, as the sugar tax was announced yesterday, Oliver told the BBC there had been no indication a levy would be introduced and the announcement in yesterday’s budget was a “massive surprise.” Asked when he had detected a change in attitudes within the government towards the idea, Oliver responded: “Today.”
The industry reaction: tax is ‘piece of political theatre’ and ‘simply absurd’
The British Soft Drinks Association has branded the targeting of soft drinks as “simply absurd,” given that the soft drinks industry has made efforts to reduce calories while calories in other categories are increasing.
Gavin Partington, director general of the BSDA said: “We are extremely disappointed by the Government’s decision to hit the only category in the food and drink sector which has consistently reduced sugar intake in recent years.
“We are the only category with an ambitious plan for the years ahead – in 2015 we agreed a calorie reduction goal of 20% by 2020.
“By contrast sugar and calorie intake from all other major take home food categories is increasing – which makes the targeting of soft drinks simply absurd.”
The Food and Drink Federation, which represents the industry in the UK, has called the tax a “piece of political theatre.”
Ian Wright, director general, said the tax will cost jobs in some manufacturers while failing to make a difference to obesity.
"We are extremely disappointed by today's announcement of a new tax on some of the UK's most successful and innovative companies,” he said. “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 reaction from public health campaigners
Campaign group Action on Sugar has welcomed the levy.
"We are delighted to see in today’s budget announcement that the government will be introducing a new sugar levy on soft drinks which will be used to double the funding they dedicate to sport in every primary school,” said Professor Graham MacGregor, chair of Action on Sugar.
“However, for this to be effective it is imperative that the levy is at least 20% on all sugar-sweetened soft drinks and confectionery and escalate thereafter if companies do not comply with reformulation targets – and this must be implemented immediately.”