In Defence of Liberty

Driven by data; ridden with liberty.

A Sinful of Sugar

Mayor Bloomberg of New York has sought a ban on soft drinks being served in bottles larger than 16 ounces. France has introduced a two cents tax on soft drinks, and Denmark has embarked upon a ‘fat tax’ on foods containing saturated fats. In a nation where three out of five adults are overweight, public health is enthroned as a major political battleground. Now, the soft drinks tax has bubbled to our shores. Oliver Mytton and Mike Rayner, academics at the University of Oxford, have called upon the government to institute a 20% tax on soft drinks. Dr Rayner had previously called for a 12p tax on sugary drinks. This call has been echoed by top political parties, with the Liberal Democrats arguing for such a tax at their 2012 party conference, and Labour Shadow Minister for Public Health Diane Abbott is also considering this tax.

Good for life, bad for health? (Photo thanks to Steven Snodgrass, found here: http://www.flickr.com/photos/stevensnodgrass/3991048528/sizes/l/in/photostream/)

Dr Mytton and Dr Rayner authored an article for the London School of Economics, entitled: ‘A tax on sugary drinks would not be a panacea, but it would be a sensible step in the right direction.’ They argued sugar-sweetened drinks cause numerous health problems, most notably weight gain, and the obesity problem in the UK is a matter of great concern. This tax on sugary drinks, they believe, will send a strong signal to people that these products are “not normal” and consumption of these products will fall, resulting in a healthier populace.

Dr Mytton and Dr Rayner reveal the sugary drinks consumption of a ‘typical child’: “4 to 5 sugar sweetened drinks, consuming just over 500 calories, each week”. Yet children at different stages of development have varying dietary needs, so it is difficult to determine precisely what the authors mean by a ‘typical child’. For example, a girl between the ages of 7 and 10 is recommended to consume 1740 calories daily, whilst a boy of the same age should consume 1910 calories. This means that sugary drinks account for about 4% of the weekly calorific intake of children.

Next, the authors state the tax is necessary to make the price of soft drinks be “better aligned with the true ‘external’ costs to individuals and society”. However, the authors noted that the costs of obesity borne by the individual are “huge”, but most of these costs are not ‘external’ to the National Health Service. Even Jacques Peretti, the journalist behind The Men who Made us Fat, recognises that the current tax revenue from confectionary and soft drinks far outweighs that the NHS expenditure on obesity. Dr Mytton and Dr Rayner also assert that early retirement by obese people is a cost to society, when in fact; it must be a cost to the retiring individual, through a loss of earnings. Obese people have a lower life expectancy than their healthier friends, and hence, are less likely to collect a pension and other state-age retirement benefits. This balance of costs and savings must be noted before seeking to apply a Pigouvian tax on obesity, or on ‘obesogenic’ products.

The authors also believe that some people may be bamboozled by advertisements into purchasing soft drinks when they do not really want them: “The companies promoting sugar sweetened drinks have used aggressive marketing techniques to create demand, particularly among the young and poor in inner city areas. How much of ‘our desire’ to consume these drinks are our true desire and how much is created demand by clever marketing?” If this assertion were true, that the manufacturers created demand through advertising, then it would weaken the Dr Mytton and Dr Rayner’s other argument that tobacco levies represent a “successful microeconomic policy”. This policy was not wholly one of raising tobacco duties, but also of banning tobacco advertising, which according to their own argument, would automatically reduce demand for tobacco products.

The concern over soft drinks is not how much the country as a whole is consuming, but how much certain individuals are drinking. Soft drinks are actually quite price elastic, meaning that people are generally sensitive to price increases. However, products have lower price elasticity for their heavier consumers than for their lighter consumers, especially when that product is addictive. As noted in Christopher Snowdon’s booklet for the Adam Smith Institute, The Wages of Sin Taxes, “the people who need reduce their consumption are least responsive to price rises.” This makes a tax on soft drinks a fruitless exercise. If people consume lots of soft drinks, then they are least likely to respond to the price increase from the tax, which means this tax will just make them poorer. If people consume soft drinks more casually, then they are likely to give up their soft drinks. However, such people still have thirst, and so would substitute their soft drink for another product on the shelf. There are numerous substitutes that people can make, including cheaper supermarket-branded soft drinks, milkshakes, smoothies, fruit juices, and energy drinks. J. Fletcher, D. Frisvold and N. Tefft found in their 2010 paper, The effects of soft drinks taxes on child and adolescent consumption and weight outcomes, that the reduction of soft drink consumption was “completely off-set by increases of other high-calorie drinks.” As for promoting a healthy society, Can soft drink taxes reduce population weight? was a 2009 paper by the same authors, which found that “a 20 percentage point change will lead to a decrease in BMI of 0.06 and that the impact could be larger for some demographic groups.” Since the heavier consumers of sugary drinks often have low incomes, this new tax can be seen as outstandingly regressive, without the balancing of “progressive health benefits”.

In the wake of excessive duties against cigarette smoking and alcohol drinking, politicians and academics have begun what the spiked magazine called “the war on Dr Pepper”. However, far from being a sensible step in the right direction, this tax would be an incredibly inefficient way of getting people to secede from soft drinks. People will simply replace their sugary drink with another drink of similar calorific content. Thus, this tax will have an almost invisible effect on the health of the nation.

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