The government’s impact assessment on its plan to switch to the 2018 nutrient profiling model is way off the mark in terms of costs to suppliers, the amount of products that would be reclassified as HFSS and the overall health benefits of the move, according to new research.
The impact assessment of the switch found that makers of impacted products would face one-off costs of just £53 per product. These include extra staff hours associated with implementing the new model as well as monies paid to external consultants and updates to IT and data infrastructure as suppliers look to at first understand and then implement the changes.
However, FDF-commissioned research by economic advisory firm Oxford Economics, which looked at 15,000 products from some of the UK’s biggest food and drink manufacturers, found that these fees would amount to £2,812 per product, 50 times the figure suggested by the government.
The FDF said the findings reflected a “massive underestimation” of the time required to interpret and implement the new, complex changes across a vast swathe of product ranges.
The Grocer revealed in April that the food and advertising industry were to launch a challenge against the government’s impact assessment. A consultation on its plans to use the new NPM to underpin restrictions including the new HFSS advertising ban and the in-store promotions clampdown wound up last week.
‘Assumptions’ about consumer behaviour
Critics claimed the government’s impact assessment was “not fit for purpose” and made huge assumptions about how it would affect consumer behaviour,
The new research, however, provides what the FDF hopes will be game-changing evidence to persuade ministers to think again about the switch.
It’s understood talks have been held in Westminster, with suggestions put to ministers that there could be a “two to five-year” implementation period for the new model, which would allow time to iron out some of the problems. However, it is understood ministers want it in force by September next year.
The report claims the number of products affected by the switch to the new model would be “substantially higher” than estimated, totalling a 40% increase in products that would be restricted from advertising and promotions – almost double the government’s assessment of 22%.
It also questions the government’s evidence of the health impact of the proposals, with the impact assessment assuming reductions in checkout sales for in-scope products range between 16% and 90%. The compensation rate (the extent to which consumers offset reduced purchases by making alternative food and drink purchases) ranges from 0% to 100%.
“The breadth of these ranges indicates there is considerable uncertainty regarding the policy’s impact on calorie consumption,” the report says.
And whereas the impact assessment assumes that neither one-off nor ongoing compliance costs are passed on to consumers, Oxford Economics says there is empirical evidence to suggest that cost pass-through was “both likely and significant”.
“In many cases, industry-wide cost increases are, at least partially, and sometimes fully, reflected in consumer prices,” the report finds.
“Shifting to NPM 2018 will have a detrimental impact on investment – and there are signs this is already materialising,” it adds.
“Surveyed manufacturers indicate the change would lead to a 6% fall in investment, with some firms already delaying investment in anticipation of the change.”
The report finds that more than one in 10 products from surveyed manufacturers were expected to be withdrawn because of the difficulty of reformulating to meet the NPM 2018 requirements.
“This risks a ‘two extremes’ outcome, where products are either fully compliant or remain clearly non-compliant, which may have adverse health outcomes for those shifting from relatively healthier withdrawn products to less healthy alternatives.”
The impact assessment also assumes that each manufacturer would require just 8.2 hours in total to familiarise themselves with the regulatory changes and share that knowledge internally.
“That assumes one production manager at a head office would read and review a 10,000-word document once and then share this knowledge with technicians in just 90 minutes,” the report says.
Suppliers told the survey that in some cases dozens, if not hundreds, of staff would be involved, taking vastly more time.
It adds that the assumptions in the impact assessment are further compounded by a lack of robust evidence on whether reductions in calorie intake would be sustained over the long term.
“The evidence base underpinning the impact assessment is limited, with material uncertainties and evidence gaps that have important implications for the overall cost-benefit assessment.
“The absence of post-implementation evaluation evidence on the effectiveness of the current regulatory regime reflects a gap in the policy cycle and limits the evidence base that can be used to inform the impact assessment.
“The government has committed to producing a final impact assessment following the consultation. This review provides a series of proof points that should be considered within that document, as well as within broader policy design and implementation.”
Uncertainty around health benefits
The report also highlights the significant uncertainty around the estimated health benefits in the impact assessment. For example, DHSC’s estimated calorie reductions for promotion restrictions are based on sales of ‘less healthy’ products reducing by between 16%-90%. The use of such a wide range underlines the lack of certainty around the policy’s real-world impact on calorie consumption.
“Our analysis of the government’s impact assessment suggests costs to businesses are being significantly underestimated, while the health impacts are unclear,” said Alex Stewart, associate director at Oxford Economics. “This reinforces the importance of post-implementation evaluation of existing policies and gathering further proof points, such as those from our analysis, to inform the final impact assessment.”
Kate Halliwell, chief scientific officer at the FDF, said: “This analysis shows DHSC has significantly underestimated both the cost and impact of its proposals on food manufacturers, while relying on limited evidence to support its health claims.
“By contrast, there are early indications that the current advertising and promotion regulations, the most recent of which came into force this year, are having an effect on what consumers are buying.
“At a time when food businesses are already under intense cost pressure, these proposals will add further strain on the sector and, perversely, risk removing from shop shelves many of the products that help consumers make healthier choices.
“We urge government to work with industry on a more proportionate approach that protects consumer access to healthier options while promoting healthier diets.”
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