The Soft Drinks Industry Levy expansion will bring an additional 12% of soft drink litres sold into scope of the levy, a new report by the Institute of Fiscal Studies has revealed.
However – in contrast to the original SDIL – the effects of these changes on sugar consumption will be “extremely small”, reducing the average per-person calorie intake by just 0.3 kcal per day, according to the IFS.
This was around 60 times smaller than the effect of the original SDIL and reflected “lower baseline sugar consumption from soft drinks compared with 2018, a smaller share of the market being brought into scope, and smaller expected reductions in sugar per product”, the IFS said.
“Small effects do not in themselves make these reforms misguided,” the IFS said. “One advantage of the reforms is that they are expected to have larger effects for households who purchase the most sugar, who are most at risk of excess sugar consumption.
“But set against the government’s claims that the changes will ‘protect children and improve health’, these effects won’t move the dial on sugar consumption or childhood obesity.”
Other key findings from the new research include that producers and manufacturers were highly responsive to the original soft drinks levy, with many reformulating drinks to sit just below the existing taxable threshold.
Prior to the introduction of the SDIL, 2% of soft drinks sold had 4.5g-5g of sugar per 100 ml, but this has now risen to 8% of the market. Recent changes to the tax announced last year will bring these drinks into scope of the tax.
Meanwhile, the reforms were found to be “somewhat targeted” at households that purchase the greatest proportion of their calories from sugar. Some 14% of soft drinks bought by this high-sugar-consumption group will be affected by the expansion of the levy, compared to 10% for the households with the lowest sugar intake.
However, even for this high-sugar-consumption group, the effects of the reforms would “still be very small,” the IFS said, pointing out the changes were only likely to cut out 0.4 kcal of sugar per day from this cohort.
”Increasing taxes on the highest-sugar drinks would be a better way to target the heaviest consumers of sugar,” the IFS claimed.
A 7p increase in the higher rate of the SDIL would have the same average effects on sugar intake as the actual reforms, but would reduce sugar intake by 0.6 kcal per day for the households that consume the most sugar, it said.
Gautam Vyas, research economist and coauthor of the report, said: ‘A well-designed tax on soft drinks can be an effective way to improve diets – but the Soft Drinks Industry Levy gets the targeting backwards. Among in-scope products, sugar is taxed most lightly in the drinks that contain the most of it. The recent changes do nothing to fix this design flaw.
“A levy that taxed the most sugary drinks more heavily would be better aligned with the harms it is intended to address – and would do more to reduce sugar intake among the households who consume the most of it.”
The government announced plans to expand the scope of the SDIL last in November, extending the levy to soft drinks with 4.5g-5g of sugar per 100ml and bringing pre-packaged milk-based drinks with added sugar into the tax for the first time.
Analysis by The Grocer following the announcement showed hundreds of soft drinks products, including many household names, would escape the expanded levy.
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