Wednesday, 4 May 2016

The Sugar Tax - Is It Fair?

by Oliver Clark

The sugar tax was undoubtably one of the most significant moves made by George Osbourne in his 2016 Budget. It was met by cross-party praise, as well as cries of joy from many in the food industry, seen as a step forward for tackling growing levels of childhood obesity in the UK. But as I look into the tax, my question is, will it actually change anything?

Firstly, the so called sugar tax is nothing of the sort. It omits items such as chocolate, sugary cereals and other high sugar snacks, focusing solely on the fizzy drinks industry. Now while the Coca Cola Santa who comes to our TV screens once a year may shed a tear, I can understand why sugary drinks are being scrutinised as highly as they are. A single can of coke contains an astronomical 35 grams of sugar. To put that into perspective, the recommended intake of daily sugar for those aged 11+ is only 30 grams.

Okay, so with that much sugar rotting the nations teeth, surely we must be taxing it at a level to show its true danger to society?! Nope. There will be two bands, depending on the sugar content of the drinks, a tax being levied at 18p and 24p per litre. This will effectively add 8p to a can of coke, a relatively small sum for the majority of families. With coke containing addictive substances such as caffeine, the demand curve is going to be quit sharply inelastic, meaning that if the price is changed, the quantity demanded will not be greatly effected.

The way that the tax is being implemented also causes it to be a regressive tax, meaning that the tax is a greater proportion of total income for the poor than for the rich. Although this is mostly unavoidable with indirect taxes, the fact of the matter is that this tax will have a greater impact on the poor, with the rich being able to afford the extra cost easily. Osborne expects the tax to generate £520 million a year, which will be spent on funding for sport in primary schools. However, it is expected by many that only £160 million will in fact go into that said cause with £285 million going towards the costs of extending the school day.

I would also argue that Osborne is being highly optimistic with his figures. There are a large number of produces of Cola, many stores having their own-brand versions, normally cheaper than the branded items. What is to stop the people who decide that the new price of Coca Cola is too expensive, to simply switch to an Asda or Tesco brand version, who's new price will most likely be cheaper than what Coca Cola was originally! Osborne has vastly underestimated the potential cheaper substitutes that are available to branded items, which are all too easy to switch to. These substitutes may contain even more harmful sugar substitutes that are even more harmful to health, such as artificial sweeteners.

There are two more glaring reasons as to why I believe the tax will not work. Firstly, the consumption of soft drinks is in fact already falling, with consumption down 19% since 2011 according to the Family Food Survey statistics, whereas the consumption of confectionary has risen by 1% in that time. And finally, if there was any more proof needed, similar taxes in France, Denmark and the US were all proved ineffectual, with negligible impact on both calorie consumption and obesity.

From a personal point of view, I feel there is a necessity for taxes on certain demerit goods. However, I am of the opinion that sugary drinks is not one of these aforementioned goods. Smoking, taxed at over 80%, has a strong negative externality, second hand smoke and air pollution being two examples. Alcohol is also something where I believe there is a fair argument for tax, with antisocial behaviour and vandalism being strong negative externalities. But outside of someone having slightly more yellow teeth, does drinking a couple of cans of coke a week really effect the surrounding community that much? If people can honestly argue that we should tax these drinks due to tax payers money being put into the NHS to help people with rotten teeth, I ask, why don't we tax people for playing rugby, driving cars in rain or walking down icy roads in Winter? Education is the direction that the government should have gone down, because this current tax is ineffectual, poorly targeted and will have a far bigger impact on those who cannot afford it.

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