Would new health taxes in the budget be such a sin?

With food prices, at last, showing signs of moving in the right direction, just as the industry enters its vital golden quarter, it would surely be a sin for Rachel Reeves to contemplate interventions which might push prices in the opposite direction.

With the bust-ups over last year’s infamous budget and continuing concern over the impact of the government’s taxation agenda including NIC, business rates and EPR, surely the chancellor wouldn’t consider another raid on the food industry, even if it was good for the nation’s health and the future of our NHS. Or would she?

Accountants UHY Hacker Young yesterday released figures suggesting Labour, despite all the talk about budget black holes, actually has substantial headroom to look at a new wave of so-called “sin taxes” when Reeves gets out her famous red box in a month’s time.

It reports that by recent standards, the Treasury’s take from taxes on products like tobacco and alcohol has gone off a cliff, with the total revenue from sin taxes in 2024/25 of just under £25bn a whopping 35% down on the figure in 2015/16.

UHY Hacker Young suggests Reeves may look to such quarters, including the possibility of moves to expand the soft drinks levy to other less healthy food categories, as a way for Big Food’s most unhealthy products to fill the gap left in the Treasury’s coffers due to the public’s falling spend on cigarettes and alcohol – itself a response to repeated tax increases.

Funding an ‘obesity crisis’

Talk of expanding health taxes doesn’t seem quite as crazy when one considers the daunting prospect of raising £3bn to fund the NHS. Whilst the track record of Keir Starmer’s government has shown a reluctance to follow through with some of its more radical policies on health and the environment – and a desire to keep business on side – taxes on junk food have widespread public and political support from many traditional Labour quarters.

Remember it was a year ago, almost exactly, that a House of Lords inquiry was on the front pages calling for a swathe of new taxes on the food industry, claiming Big Food must be “held to account” for causing the obesity crisis.

Only slightly longer has gone by since a Labour-commissioned report by Lord Darzi contrasted governmental inaction on junk food with the plethora of smoking interventions, including by the Treasury in its tax measures.

Fast forward to last week, and a report by the Food Foundation called for Labour’s new food strategy to introduce a levy on HFSS food categories beyond soft drinks, suggesting the money raised could be reinvested to subsidise initiatives to support affordable, healthy diets for the poorest families.

The Foundation is among several of those experts advising the government on its food strategy, also including chief medical officer Chris Whitty, who argues the government should bring in new taxes. Whitty recently told the audience at the IGD conference that the food industry was failing when it came to improving public health.

Chancellor under pressure

Yet the Chancellor will also be under huge pressure to reduce, rather than increase, the bill on business, with some in the industry even hopeful the budget will row back on some of the nasty medicine dished out previously.

“Rather than additional taxes, we want to work with government to help businesses further invest in developing healthier options, whilst avoiding measures that would increase food prices,” says the FDF.

Meanwhile, drinks manufacturers are hoping Reeves may be persuaded to halt, or at least postpone, an expansion of the Soft Drinks Industry Levy to include hundreds more products, thanks to a decrease in the threshold from 5g to 4g.

The argument made by the BSDA is that it is unfair for the chancellor to punish a sector which has led the industry on removing sugar and reformulation of its products, whilst other sectors, such as confectionery, have done far less yet remain out of scope.

Of course, that is exactly the same argument being made by health campaigners and experts like Whitty, who hope that despite the chancellor’s constraints, she may yet decide to expand the fiscal net to punish us for our sins.