Budget 2016: The sugar tax would be laughable if it weren’t so pathetic
George Osborne’s Budgets have a reputation for pulling populist rabbits out of hats.
Last time it was the so-called living wage. This time it was something the government has repeatedly said it was loathe to endorse – a sugar tax.
In his response to the chancellor, an angry Jeremy Corbyn berated the Budget on almost every count. But not the sugar tax. He liked that. Islington liberals do.
It is not, strictly speaking, a sugar tax. It is not on all sugar but on sugary drinks and it is not a sales tax but a levy on the manufacturers and importers of these drinks.
Osborne says he hopes the makers of fizzy drinks will reformulate their products. They have already done so. They are called things like Diet Coke, Pepsi Max, Coke Zero and Coke Life. For those us who prefer the original varieties, it is time to pay up.
Osborne said in his speech that it would be up to the companies whether they passed on the tax to customers but standard economic reasoning suggests that they will. The cost of doing business is bound to be reflected in prices.
The government estimates that this levy will bring in £520m. This money will come disproportionately from people on low incomes, a fact that both Osborne and Corbyn neglected to mention.
And what will we who will pay the price for Jamie Oliver’s little campaign get in return? Nothing. Sugary drink taxes have been tried all over the world and have never been shown to make the slightest impact on obesity.
This is hardly surprising since soft drinks make a negligible contribution to our overall calorie intake (in Britain it is just three per cent) and consumers are not very price sensitive when it comes to food and drink.
The inelasticity of demand makes sugar taxes nice little revenue-raisers. Osborne’s ruse of taxing the businesses rather than the product makes this stealth tax even stealthier. As a bonus, politicians can enjoy the halo effect that comes from deluding themselves into thinking that they are improving the health of the nation. That it is why governments like them.
It is not often that politicians get patted on the back for raising taxes. It is not often that the leader of the opposition – a self-proclaimed friend of the poor – will congratulate you for introducing a regressive tax.
It has taken several years of the most ludicrous, unscientific hysteria about a single ingredient to get us to this point, but this is the result: a reverse Robin Hood tax with a dismal track record in every country in which it has been tried being presented to the public as a health policy.
It would be laughable if it were not so pathetic.