The U.K. will tax sugary drinks, both those made at home, and those imported. Chancellor of the Exchequer George Osborne’s new budget lays out plans to raise the prices of soft drinks, and also what the government plans to do with all that extra tax money.
Places like Denmark and Berkeley, California, have already tried out their versions of a soda tax to reduce obesity rates. New York City tried to pass one a few years back, but an outraged public defeated it. There is evidence that they work. In Mexico, one of the earliest places to tax sugary drinks, soda sales fell by 6% in a year.
The new U.K. tax will operate in two bands—drinks with 5-grams of sugar per liter, and drinks with over eight grams per liter. The tax is expected to raise $744 million, which will be used to promote sport in elementary schools. Those numbers translate to around 30 cents on a quart bottle. According to the U.K. Office for Budget Responsibility, the price on a half-gallon bottle could rise by as much as 80%.
“Five-year-old children are consuming their body weight in sugar every year,” said Osborne in his speech. “Experts predict that within a generation over half of all boys, and 70% of girls could be overweight or obese.” the U.K.
Catching kids early is key. In the U.K. and other developed countries, poor kids are twice as likely to be obese as rich kids. Other measures, which have strong support with the U.K. public, are banning the advertising of junk food to kids, or taxing junk food.
This new sugar tax neatly sidesteps one problem of taxing junk food—how do you define junk? Sugar is less open to interpretation. The sugar in a drink can be measured. Two effects are likely. One is that “diet” soda (despite its own issues) will look a lot more attractive on the shelf when the sugar-laden version next to it is way more expensive. And second, manufacturers will reduce the sugar in their drinks—the idea to use two tax bands for different sugar levels looks pretty smart, encouraging manufacturers to reduce sugar to achieve a lower tax rating. In fact, the Office for Budget Responsibility predicts a two percent increase in drinks at the lower rate, with a corresponding 5% a year drop in sales of the most sugary drinks.
The U.K. has one of the highest obesity rates in Europe, and this could be an important step to combat that. We’ll have to wait to find out, though, because the new taxes won’t be introduced until 2018-19.