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Supermarkets should face fines of up to 1% of their annual turnover from the Food Standards Agency (FSA) if they fail to comply with a system of mandatory healthy food targets, proposed today by an influential nudge unit.

The innovation charity Nesta claims the impact of a sustained programme of calorie reduction across the UK’s biggest 11 food retailers could lead to obesity rates falling by almost a quarter within three years of implementation.

But it claims that to achieve results, the scheme has to be mandatory with sufficiently sized financial repercussions for supermarkets that fail to comply. The proposed fining model is based on the powers available to the Groceries Code Adjudicator.

The Grocer revealed in October that Nesta, which in 2021 acquired the so-called Nudge Unit set up by former PM David Cameron, and is believed to have widespread support within Labour party circles, intended to present plans for a system of mandatory targets. The plans are in stark contrast to the voluntary system of health reporting currently being drawn up by supermarkets and suppliers working under the government’s Food Data Transparency Partnership.

Supermarkets including Asda and Sainsbury’s have already backed Nesta by saying mandatory targets are needed to tackle the obesity crisis.

Today’s report comes less than two weeks after a report by the Office for Health Improvement and Disparities (OHID) showed the voluntary programme of calorie reduction it inherited form Public Health England (PHE) had failed spectacularly to hit its target of reducing calories by 20% by the end of 2024.

Nesta is calling for the FSA to be given new powers to oversee the targets and enforce penalties, with retailers also being rewarded financially if they hit targets early.

It said its proposals could save the NHS up to £20bn a year in the costs of treating obesity, yet said the change in calorie consumption required among people with excess weight was roughly 80 kcal per person per day, equivalent to a single milk chocolate biscuit.

Nesta’s proposals are aimed at rebalancing sales towards healthier food and product changes through reformulation or innovation, but it said they were deliberately geared to avoid moves that would reduce the total value of food products sold.

It said the “ambitious yet achievable” targets could allow retailers flexibility of how to achieve the targets and result in minimal changes to shopper baskets. This would make the plans far more practical than previously failed voluntary targets, which have extended across retailers and suppliers as well as the out-of-home system.

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Nesta’s predictions are underpinned by research across 36 million transactions from 30,000 households, which used the government Nutrient Profiling Model to assess the average healthiness of baskets in supermarkets.

Its economic forecast was compiled by Daniel Gordon, who was senior director of markets at the CMA from 2014 until last year.

Gordon said the system of targets would change the incentives of large grocery retailers, but because it did not prescribe rules, would allow them to determine the best ways to improve the healthiness of food and minimise the costs to supermarkets and consumers.

“The introduction of the regulatory target is not expected to have significant cost implication for the majority of grocery retailers,” he said.

“Some retailers are already operating very close to the target and are likely to be able to meet it with relatively little change needed.”

Gordon found there was a “compelling case” for the targets, which he found would not have a significant impact on the price of healthy food.

Nesta proposed the targets be introduced in a non-mandatory form before becoming binding in 2030, allowing supermarkets time to adapt.

“If we want to improve the nation’s health, we have to focus on our food system,” said Hugo Harper, director of Nesta’s health team. “The evidence shows pushing the onus on the individual to make changes doesn’t work – obesity has doubled since the 90s.

”That’s not because we have less willpower than we did 25 years ago. What’s changed is what is sold and marketed to us – it’s just harder to be healthy. Supermarkets are not the enemy in this story. If we incentivise retailers to work with us to make food healthier, then that’s a massive win for public health.”

Alison Tedstone, chair of the Association for Nutrition and former chief nutritionist at PHE, said: “For many years, government has encouraged the food industry to produce, market and sell healthier food through voluntary programmes. Despite the efforts of some companies, shopping baskets have not improved. Some large companies have ignored current voluntary reformulation targets, marketed and sold more unhealthy products. A move to mandatory targets is the right approach. It will incentivise companies to make and sell healthier food.”