Tackling the rising national rates of obesity in the UK.

A Policy brief on Sugar tax in the United Kingdom.

The World Health Organization (WHO) considers obesity as a major risk factor for multiple chronic diseases, including diabetes, cardiovascular diseases and cancer. Obesity has nearly tripled worldwide since 1975 according to WHO (Key facts on obesity, 2020). It has therefore become imperative for governments to do all they can to reduce this increasing public health hazard. 

In 2016, the former Health Secretary of the United Kingdom described the rise in childhood obesity as a “national emergency” and promised a strong response from the government  (Guardian, 2016). This led to an official announcement in the same year that a tax on sugary soft drinks would be introduced in the UK. The "Soft Drinks Industry Levy" (SDIL) was introduced in April 2018 (BBC News, 2018). 

This Pigovian tax brings manufacturers to pay a levy on the high-sugar drinks they sell. The aim of this tax was intended to correct the undesirable and inefficient market outcome by offsetting the external marginal cost of sugar consumption. Reinforcing the sugar levy would require an analysis of the economic efficiency of such a policy along with the effects on people’s well-being.  

Findings 

By the end of 2018, the Exchequer Secretary to the treasury highlighted the early positive impacts the new tax on soft drinks has had on society through the provision of healthier alternatives to people (UK Gov, Press release 2018). The tax has also appeared to be an incentive for the industry to diversify their offering by introducing some low or zero-sugar products which should normally be a healthier option for consumers. 

While many manufacturers have reduced the sugar contents in their drinks products, it is notable that hundreds of traders have registered to pay the new levy, raising millions of pounds in new tax revenue. According to official reports, some of the revenue from the SDIL has been allocated to a number of programmes to support pupils’ health and well-being by funding the Primary Physical Education and Sport Premium and Health and Social Care Departments (UK Gov Official Statistics, 2018). This translates into higher spending on healthcare which is a plus in the fight against obesity. 

This major government intervention undoubtedly had a mixed response. It was fully welcomed by prominent pressure groups and health campaigners such as the British  Diabetic Association (BDA) who are currently calling for an application of the sugar levy on all food products based on the positive figures recorded in the soft drink industry (BDA  Policy Statement, 2020). Reversely, the additional costs and strains the new government’s intervention has placed on manufacturers pushed them to be innovative and more conscious about their impacts on consumers’ wellbeing. 

Since the aim of government intervention is to fix market failures, it would appear logical to consider the sugar levy on a wider scale based on the first positive results on people’s wellbeing. Health campaigners consider the government approach as being efficient following all the seemingly good national outcomes. 

However, it is worth taking a closer look at the deep effects of the new levy on people’s buying behaviour. In fact, the introduction of a “sin tax” on sugary drinks in Mexico saw people of lower socio-economic backgrounds being more affected as they had to pay a  higher percentage of income to obtain a drink compared to higher income earners. It could be argued that with the introduction of a sugar tax, poorer people would be less able to afford some sugar-containing products. This would qualify the new tax as regressive, for taking a higher share of income from those on low incomes (Evans, C., 2018). The negative impact of this levy on equity requires some consideration if the government wishes to impose more taxes on sugary drinks or impose a similar levy on other food products.  

The unfairness of the new sugar levy on low-income groups is not the sole challenge facing the government. It is reported that such a levy would seriously threaten some drink manufacturers with the prospect of job losses. A reputable pressure group, the Taxpayer’s  Alliance (TPA) described the new tax to be arbitrary and not efficient in encouraging a  healthier diet. In a report supported by the Taxpayer’s Alliance, (Ben Ramanauskas, 2018), a  Policy Analyst claims that 62 per cent of UK consumers have not changed their buying behaviour since the introduction of the new tax on sugary drinks. The tax lobbyists fear that people would simply be price sensitive and switch to other sugary products such as chocolates and cakes for their calorie kick. 

There are also those groups who see the sugar levy to be unacceptable and a mere infringement on people’s freedom of choice. Several organizations including the TPA believe that people should be left to decide what they want to consume. 

Additionally, there are fewer economic doubts that the levy on sugary drinks has led to a  decrease in industrial production since price-sensitive consumers would be switching to alternative products. Anderton (2008) demonstrates that demand and production have a  causal relationship. An indirect tax on sugar means an increase in the cost of production which leads to a decrease in supply. The decrease in supply could in turn lead to negative externalities such as job losses. 

Policy recommendations 

A prominent doctor claims that the levy on sugary drinks is not a silver bullet to fix unhealthy diets (London School of Hygiene and Tropical Medicine, 2018). A complex problem generally requires a complex solution with considerable trade-offs in order to achieve efficiency. While the SDIL is a step in the right direction, additional government actions can be implemented. 

Some campaigners suggest that other regulatory policies such as banning the advertising of sugary drinks - targeted at children - would considerably reduce their desire to opt for unhealthy drinks (BBC News, Health, 2014). The government’s regulations on advertising within the tobacco industry have proven to be successful in reducing tobacco consumption so it could also work in the fight against obesity. It could even be necessary to evaluate other corrective regulations placed on “big tobacco” such as plain packaging which is continuing to deter a proportion of the population from using those potentially dangerous consumer products. 

The use of nudging campaigns could be another effort in the national fight against obesity.  Although controversial in its application due to ethical considerations, it appears to be an efficient factor of change in consumer behaviour and behavioural science. Additionally,  minor changes in manufacturer marketing messages or in government awareness campaigns are proven to be effective in creating a change or in instilling discipline in consumers (Brigitte C. Madrian, 2014). The focus here would need to be on reframing the  “choice architecture”.  

Furthermore, as a fact, industrial regulations can be a burden on businesses as they often create new costs to businesses which in turn could result in costly products for consumers.  An alternative to regulation could be an incentive for competition in the market (The Yale  Law Journal, 1973). Clearly, government subsidies could be provided to manufacturers who choose to diversify their production for the creation of healthier or sugar-free products. This would represent a government intervention which takes into account both equity considerations and people's freedom of choice as consumers would be able to select between new sugar-free options and unhealthy drinks or products. 

Also, information asymmetry being a potential problem in obesity, it could be argued that government regulation on clear labelling can educate people on the risks associated with their choice of drink or food. Many important campaigners are in favour of clearer labelling and they believe this could reduce the number of diabetics in society because people would be more educated on their products and diet (The Obesity Health Alliance, 2020). 

Finally, there is still room for research and development to be conducted which will provide some scientific evidence on which to base government decisions. Although, it is obvious that the nature of this health crisis involves both the food and drink industries and consumers,  hence the need for a policy that encompasses all considerations without creating any other negative externalities.
It is increasingly becoming clear that no one solution would stop obesity and that a  combination of measures is required (BDA Report, 2018). The right combination of measures as described above could lead to a more considerable reduction in obesity in the country as a 2019 “House of Commons” briefing paper shows that 64.3% of the UK  population is either overweight or obese. It is time to act.

Policy Brief submitted to Oxford University Department for Continuing Education, August 2020.