Chancellor George Osborne has pulled a rabbit out of the hat by announcing a new ‘sugar tax’ in his eighth Budget today, saying that excessive sugar consumption was associated with growing health problems costing the economy an estimated £27bn a year but consumers will not be hit initially
Osborne said the new sugar levy on the soft drinks industry will be paid by manufacturers. There will be two bands. The lower rate band will apply to drinks with more than five grammes of sugar per 100ml, while the higher rate will apply to drinks with more than eight grammes of sugar per 100ml.
The tax will be introduced in 2018, giving manufacturers two years in which to adapt drinks to lower the sugar content. Osborne suggested that the levy could raise up to £520m annually.
Peter Dylewski, chair of the CIOT’s indirect taxes sub-committee, said: 'There had been wide speculation about a "sugar tax", but these measures just target the soft drinks industry. As with the introduction of any new tax, we welcome the long lead in period, and the consultation on how the levy will operate. The industry will no doubt also welcome the time to refine their processes, but it is clear that the government still expects this to be a revenue-raiser, and has committed to spending the funds helping schools support healthier pupil lifestyles.
'While the tax starts with the soft drinks industry, clearly if it is judged a success it could be extended. Other sectors will now know the government’s warnings over obesity have teeth and, if they are felt not to be pulling their weight, the tax could be extended to swallow them too.'
Although this measure is limited to fizzy drinks, it could have an impact on behaviour too, funding and encouraging sports in schools.
But Audrey Fearing EY's government and public sector tax lead, cautioned: 'The Treasury has committed to spend this additional revenue on increasing the sports premium paid to schools, extending the school day by expanding breakfast clubs and providing increased access to extra-curricular activities at the end of the school day. But how long will the fizz last?
'If the industry reacts in the way anticipated and reduces the amount of added sugar then revenues from the levy will decline. If so the Chancellor may need to turn his lens on other parts of the food industry in order to maintain spending in these areas.. My favourite chicken korma ready meal contains 4.5 teaspoons of sugar!'
This measure is part of the Chancellor's Budget ‘for the next generation’ and is a key part of government actions to tackle childhood obesity.
