The government has told the industry it will press ahead with plans for a fiscal levy on added-sugar soft drinks, despite the high-profile campaign for it to be canned.
Treasury officials met with industry sources and health campaigners today and confirmed that plans for the levy would be published in the government’s draft financial legislation on Monday.
However, it has emerged the Treasury has put back a decision on the rates to be paid under the levy until at least next Spring’s Budget. This has led to fears among health campaigners that the original proposals may yet be watered down.
The Grocer has also learned that the Treasury has decided to keep the exemption first proposed in the levy for added-sugar dairy drinks, despite both health campaigners and the British Soft Drinks Association calling for them to be added to the list of products targeted.
Organisations including the FDF and the BSDA have been spearheading a Can the Tax Campaign in a bid to get the government to drop the levy, which they claim will hit jobs and investment in the industry and will not tackle the obesity crisis.
’The Treasury has sadly now said that those rates won’t be set until at least the Spring Budget’
But today the Treasury confirmed it would push ahead on Monday, which will also see the release of its response into the consultation over the introduction of the levy.
Industry sources, however, will be given hope of a potential future u-turn or a weakening of the tax by the decision not to set the exact levies to be paid by drinks companies.
The government has set two tiers for the levy: the lower level for drinks with more than 5% sugar content, and a higher charge for those with more than 8%.
Gavin Partington, BSDA director general, said: “Evidence worldwide does not suggest that taxes of this sort have any impact on levels of obesity. However, we will review the legislation when published and will continue to work with Treasury officials during the process of implementation.”
After the plans were first announced by George Osborne, the Office for Budget Responsibility estimated that the cost of the levy would ‘be passed entirely on to the price paid by consumers’ at a rate of 18p per litre for the lower tier and 24p per litre for the upper tier.
That would put an estimated extra 6p on a regular can of Fanta and Sprite, and an extra 8p on a regular can of Coca-Cola, Pepsi and Irn-Bru.
“The Treasury has sadly now said that those rates won’t be set until at least the Spring Budget,” said a source. “It’s very worrying because it gives room for industry lobbying there and for rates to be set at a lower level, which makes the whole thing ineffective.”
There will also be anger among some respondents to the consultation over the decision to stick with the exemption of added-sugar dairy drinks such as milkshakes, but to tax sweetened water soft drinks.
The Grocer revealed in October that the BSDA had said it was “fundamentally unfair” for the government to target soft drinks, including sweetened water, while under the plans mooted by Osborne, any drink with 75% of milk or more would be excluded from the levy.
The Children’s Food Campaign had also called for the government to close the “loophole”.
A source said the Treasury was determined to focus on the core products contributing to sugar intake, but that Public Health England would now look at how reformulation of dairy drinks could be added to its ongoing talks with the industry on sugar reduction.