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The move has proved unpopular both with most manufacturers and within the Conservative party – reports state that four out of five Conservative MPs were against the new tax, which will raise an estimated £520 million every year for the Treasury.
The Institute of Fiscal Studies has described the effects of the sugar tax as “incredibly uncertain,” while the Institute for Economic Affairs has stated that larger drinks manufacturers will be able to absorb the extra costs by raising the consumer price of their other items (for example, pure bottled water).
“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,” Mr Osborne said on the day of the announcement.
Kate Smith, senior research economist at IFS
“The effects of this tax are incredibly uncertain and will depend crucially on how people respond to their tax - both on the consumer and on the food industry side.
“Indeed, the effect of the tax on people’s sugar consumption might be offset if people switch to fruit juices or other high sugary products.
“The design of the tax leaves a lot to be desired. Levying the tax per litre means that sugary drinks will attract a lower tax per gram of sugar and really a much more sensible schedule would have been to have a constant or an increasing tax per gram of sugar.”
Paul Bendit, Metro Drinks
The sugar tax is based on all non-alcoholic drinks other than pure fruit juice or milk based drinks. It will be levied at two levels: 18p/litre for drinks between 5 and 8g/sugar per 100ml and 24p/litre for drinks over 8g/sugar per 100ml. Metro Drinks (and Folkington’s Juices) consider that these proposals need to be thought through further, for the following principal reasons:
Tax should be on added sugar, not naturally occurring fruit sugars, and tax should not be levied on the manufacturer but instead charged to the consumer and paid to the Exchequer by the retailer. I believe that a sugar tax should be an excise duty levied at the point of purchase by the consumer, rather than a tax on production.
Metro Drinks believes the following will be a more effective and simpler method of achieving the same aims: 1. All bottle labelling to disclose the amount of added sugar per 100ml; 2. All drinks with added sugar greater than 8g/100ml should have a VAT rate of 33%; 3. Result for typical bottle of 500ml soft drink with 8g+/100ml sugar currently sold at an average price of £1.20.
Damien Kennedy, Co founder of Wheyhey
“It’s positive to see that Government is taking some action to tackle the obesity epidemic. However, the reality is that a tax on sugary drinks is not going to solve or really put a dent in the obesity epidemic. A few extra pence on top of a sugar packed drink will not deter someone purchasing it.
“We need to educate consumers, especially when it comes to food labelling, so they can make more informed decisions, based on a knowledge of what is actually in the food that they are putting in their body, but also what impact that will have on their health.
“It’s a start and great to see that there will be money invested in school sports as a result. However, like the saying says, you can’t out exercise a bad diet.”
For more information about this year’s Budget visit https://www.gov.uk/government/publications/budget-2016-documents/budget-2016