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Is the sugar tax working?

We previously reported on the introduction of the Sugar Tax, or ‘Soft Drinks Industry Levy’ (SDIL), to give it its proper name. The main aim of the new tax is to be part of the government’s strategy to tackle the serious national issue of childhood obesity. Using money raised through this extra taxation in order to fund children’s health programs, including breakfast clubs and sports initiatives.

When it was announced in April this year, Steve Brine MP, the Public Health Minister said: “Our teenagers consume nearly a bathtub of sugary drinks each year on average, fuelling a worrying obesity trend in this country. The Soft Drinks Industry Levy is ground-breaking policy that will help to reduce sugar intake, whilst funding sports programmes and nutritious breakfast clubs for children.

The progress made so far on our obesity plan is promising—but with one in three children still leaving primary school overweight or obese, we have not ruled out doing more in future.”

What did the soft drinks industry levy actually tax?

The idea was to encourage companies to reduce the amount of sugar in their drinks recipes, or face an extra tax. Manufacturers are taxed at two different rates. Drinks containing eight grams, or more, of sugar in every 100ml are on the higher rate of 24p. Those that have between five and eight grams per 100ml are taxed an extra 18p. It is up to the companies to decide if they are going to pass on this increase in tax to their customers. This is a tricky choice for manufacturers that are potentially already paying VAT, Corporation Tax and employee pension and National Insurance contributions – amongst other things.  Many companies chose to alter their recipes so that the drinks simply contain less than the five grams per 100ml threshold.

How much tax has it raised?

The government has recently announced the results of the initial impact of the sugar tax. After only six months, the sugar tax on soft drinks has raked in £153.8m from the 457 registered manufacturers. More than 90% of the tax paid on soft drinks was at the higher, 24% level for drinks containing at least eight grams of sugar per 100ml. Also, 85% of the SDIL has been paid on drinks made in the UK.

The end of year projection is £240m, less than half of the original £500m projection. The tax has raised so much less than estimated because so many companies have reduced the amount of sugar in their drinks recipes.

As these figures were announced, Robert Jenrick, Exchequer to the Treasury, said: “Today’s figures show the positive impact the soft drinks levy is having by raising millions of pounds for sports facilities and healthier eating in schools, as well as encouraging manufacturers to cut sugar in over half the drinks found in UK stores. Helping our next generation to have a healthy and active childhood is a priority for us, and I’m pleased to see the industry is playing its part.”

Where has the money gone?

The sugar tax money is being used for several health awareness programmes for children. The Healthy Pupils Capital Fund receives £100m. The sugar tax also contributes £415m of the £320m needed to run the primary physical education and sport premium. The rest of this pot is made up of £60m from the Health and Social Care budget and £100m from the Education budget.

Is it working in terms of reducing childhood obesity?

Obviously, there is a lot more to tackling such a widespread health problem than just taxing sugary drinks. The most recent data from the National Child Measurement Program shows that childhood obesity must remain a top priority for everyone. Since 2005-06, this organisation has surveyed one million children, living in England, every year. They measure children in Reception and Year Six in mainstream state schools. They record the Body Mass Index (BMI) of each child. This is worked out using a number of factors: weight, height, sex and age. This information is then analysed by sex, age, geography, deprivation and ethnicity.

Their findings for the 2017/18 academic year make for grim reading:

  • Reception: Obesity prevalence is an average of 9.5%, that’s 58,196 children. This figure is the same as the previous year.
  • Year 6: Obesity prevalence is an average of 20.1%, that’s 116.134 children. This is an increase of 0.1% on last year’s numbers.
  • Sex: in both Reception and Year Six, boys had higher obesity prevalence than girls.
  • Deprivation: in the most deprived areas, obesity prevalence was 12.8%. In the least deprived areas, 5.7%. That’s more than double.

There is much more detail in the full document. A good point of reference is that 10% of a class of 30 children is three children. The current average for a Year Six class is six children that are in the obese category.

What needs to happen now?

The government are considering a ban on promotions of consumables that are high in calories or sugar at supermarket checkouts, or “high visibility areas” as they are called in the trade. As reported in the Independent, the leader of the Obesity Health Alliance, Caroline Cerny, said: : “We know that where products are located in shops influences how likely we are to purchase them. Sugary treats prominently displayed at checkouts or store entrances will be highly tempting to anyone, but especially children who will then likely pester their parents to buy them.”

Public Health England’s research shows that 90% of the general public are happy that the government are working with food and drinks manufacturers to tackle health issues and 87% support a ban on unhealthy foods at shop tills. 79% of those involved think that obesity negatively affects the NHS and only poor mental health and cancer are considered to be bigger health problems than obesity.

Interestingly, 90% see the responsibility for solving the nation’s problem with obesity as lying with the individual and families. 72% said the government had responsibility and 80% feel the food industry itself must shoulder the responsibility. So it’s really a matter for everyone to ensure the future health of the country.

November 26th, 2018|Tax News|

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