Budget shock: sugar tax on soft drinks

The government is to introduce a £520M levy on sugary drinks, which will come into force in two years’ time. The delay was to allow manufacturers time to reformulate their products, he said.

The two-tier tax will include one level applying to drinks with more than 5g of sugar per 100ml and a second level applying to drinks with 8g of sugar per 100ml. Fruit juices and will be exempt from the new tax.

Announcing the new tax Osborne said: “I am not prepared to look back at my time here in this Parliament, doing this job and say to my children's generation: 'I'm sorry - we knew there was a problem with sugary drinks. We knew it caused disease. But we ducked the difficult decisions and we did nothing'.”

Anti sugar campaigner Jamie Oliver was jubilant. He posted on his Instagram account: “We did it guys! We did it!” Read the full post in the box below.

Oliver said the decision was “a profound move” that will “ripple around the world”.

Every primary school

Chair of Action on Sugar, Professor Graham MacGregor was equally delighted by the announcement, which will be used to double the funding dedicated to sport in every primary school, he said.

But, in order to be effective, it was imperative that the levy was at least 20% on all sugar-sweetened soft drinks and confectionery, MacGregor added.

Moreover the levy should “escalate thereafter, if companies do not comply to reformulation targets – and this must be implemented immediately”.

‘Extremely disappointed’

But the British Soft Drinks Association (BSDA) was “extremely disappointed” by the decision. The government had decided to “hit” the only category in the food and drink sector which has consistently reduced sugar intake in recent years – down 13.6% since 2012, said BSDA director general Gavin Partington. 

“We are the only category with an ambitious plan for the years ahead,” he added. “In 2015 we agreed a calorie reduction goal of 20% by 2020.

“By contrast sugar and calorie intake from all other major take home food categories is increasing – which makes the targeting of soft drinks simply absurd.”

‘Simply absurd’

The Food and Drink Federation (FDF) shared the BSDA’s dismay. FDF boss Ian Wright said the move represented a new tax on some of the UK’s most successful and innovative companies. 

“For nearly a year we have waited for an holistic strategy to tackle obesity,” said Wright. “What we’ve got today instead is a piece of political theatre.

“The imposition of this tax will, sadly, result in less innovation and product reformulation, and for some manufacturers is certain to cost jobs. Nor will it make a difference to obesity. Many of those singled out today by the chancellor have been at the forefront of efforts to provide consumers with healthy choices. The industry will now ask whether such efforts are still affordable”  

Meanwhile, shares in soft drink manufacturers plunged on the news. The value of Nichols shares fell by 10%, while AG Barr and Britvic also saw values tumble.

Adopting a more positive view, business consultancy Ayming predicted the tax would spark innovation. The firm’s director of R&D Tax and Grants Justin Arnesen said: “Over the next two years we expect to see a surge in investment in innovation as soft drink manufacturers look to achieve the same level of taste whilst reducing the sugar content of their drinks below the taxable threshold.

“As manufacturers look to ramp up innovation in this area, it’s essential that they are aware and making use of the many government tax incentives that exist for businesses investing in R&D.”