Why Osborne’s sugar tax is half baked
I’m all in favour of a sugar tax, as I wrote in the FT Magazine on Saturday. It’s a shame, then, that — despite the headlines to the contrary — George Osborne hasn’t introduced one.
His proposal instead is to tax the manufacturers and importers of a particular variety of sugary drink. I am no dentist or dietitian, but it seems strange to take the view that sugar in general poses no risk to the nation’s teeth or waistline, unless it comes in a soft drink.
Coke and Pepsi are a problem, apparently. But it seems that sugar lumps in tea or coffee are not. Neither are cartons of chocolate milk. Nor syrupy concoctions from Starbucks and Costa. Nor soft drinks produced by boutique producers. Mars bars are fine. So are cakes. So are Coco Pops and Frosties, and for that matter the remarkable quantities of sugar that infuse cereals such as Bran Flakes, or are buried in the recipes of many ready meals. All these forms of sugar will continue to reach our taste buds free of a sugar tax.
Mr Osborne’s proposal will work, after a fashion. There is abundant evidence that people adjust their behaviour in response to financial incentives, whether through the window tax-avoiding architecture of 18th-century Britain or the inheritance tax-avoiding feat of Australians in postponing the date of their deaths to a more tax-efficient time.
So yes, as Mr Osborne expects, large companies will try to put less sugar in their soft drinks, or raise the prices of those drinks, or both. Sugar consumption from those sources will fall. But they may well rise elsewhere. For many people, a chocolate bar and a fizzy drink are substitutes. If the fizzy drink gets more expensive, the chocolate bar is a tasty alternative for the sweet-toothed consumer. It has more fat in it, too.
It’s clear enough why the chancellor has opted for this approach. He wants to blame large companies, not voters, and hide the fact that ultimately consumers will pay the tax. A broad-based tax on sugar itself would have been simpler, braver and far more effective. But Mr Osborne wanted his Budget to leave voters with a sweeter taste in the mouth.
Written for and first published in the Financial Times.