FOOD TAXES & SUBSIDIES A worldwide
Overall and income specific effect on prevalence of overweight and obesity of 20% sugar sweetened drink tax in UK: econometric and comparative risk assessment modelling study
In 2013, we published a study in the British Medical Journal that estimated that a 20% tax on sugary drinks in the UK could reduce the number of obese adults by 180,000 as well as raise around £275 million per year. High rates of obesity and diabetes have major implications for healthcare systems across much of the developed and developing world. One approach to tackling these problems is to tax drinks with added sugar, or sugar-sweetened beverages (SSBs).
Why tax sugar-sweetened beverages
Taxes on SSBs have been introduced in countries such as France and Mexico, and are being discussed in others such as South Africa and Ireland. Both per unit taxes and sales taxes have either been implemented or discussed, with a broad consensus that in order to have a meaningful effect on consumption, and therefore health, tax rates should approach 20% of the sale price. SSBs are a particularly appealing target for policy makers and health professionals for many reasons:
- there is increasing evidence that SSB consumption is bad for health (leading to both obesity and diabetes);
- SSBs offer no nutritional value aside from calories;
- their substitutes are likely to be healthier;
- people don’t tend to replace calories in SSBs by eating more; and
- SSBs are easy to define from a legislative perspective.
As such, a growing number of UK professional, governmental, and charitable organisations have come out in support of an SSB tax over the past two years, including the government’s Health Select Committee, Public Health England, the Academy of Medical Royal Colleges, and Cancer Research UK. This has all led to the tax imposed on manufacturers of SSBs announced by the UK government in March this year (to be introduced in 2018).
We aimed to inform the UK debate on SSB taxes in 2013 by modelling the possible effect on obesity prevalence of a 20% sales tax for people of different age, gender, and income groups.
We defined SSBs as cold drinks with added sugar, including energy drinks but not including pure fruit juice. We modelled the effect of a 20% tax in two steps.
First step: People’s reaction to price changes
The first step was to calculate how people would react to the price change, both for SSBs as well as for other drinks people may switch to. This was done using a national survey of household purchases called the Living Costs and Food Survey. Using shopping data from over 5000 households it is possible to estimate how people react to price changes of different food and drink products. Furthermore, this can be done separately for households with different incomes thereby allowing us to estimate how different income groups would change their purchasing habits. This told us the post-tax percentage change in purchases of SSBs as well as other drinks including diet soft drinks, milk, and fruit juice.
Second step: Modelling the shift in purchasing behaviour on obesity rates
The second step was to model what the changes to purchases might do to obesity rates in the UK. We used data on the volume of SSBs drunk for three age groups (16-29, 30-49, and 50+ years) and three income groups taken from the National Diet and Nutrition Survey, a UK survey of food and drink consumption. The income-specific responses to the tax estimated in step one were used to predict the changes to SSBs consumed for three different age groups in each of the three income groups. The resulting change to calorie intake was used to estimate the effect on obesity in the UK population as a whole, and on different income groups and age groups. We also calculated the potential tax revenue and how this would differ between income groups.
Obesity rates should decrease with taxes on SSBs
We found that a 20% tax could reduce the consumption of SSBs by about 15%, with the drinking of diet soft drinks, fruit juice, milk, and tea and coffee all increasing by between 3% and 4% to compensate. Overall, this would reduce the average daily energy intake by four kilocalories, however that number differs markedly by age. Younger adults (aged 16-29) would see the greatest reduction in daily calories intake (falling by over 13kcal) whereas there would be no change for adults aged over 50 years.
Overall, we predicted that the number of obese adults in the UK would fall by around 1.3%, or 180,000. The greatest impact would be among those aged 16-29 years where obesity rates would fall by 7.6%, compared to no change for adults aged over 50 years.
A similar effect on obesity among income groups
One of the main concerns about any type of sales tax is that they are regressive – those who are poorer end up spending a greater proportion of their income on the tax than those who are richer. Logically it might be expected that poorer populations would experience greater health benefits than those who are richer. This is because unhealthy behaviours and risk factors are often found more in poor rather than rich people, and it would generally be expected that poorer people would respond to price increases more. Surprisingly, our results suggested that there would be little difference in the effect on obesity by income group.
A step forward
Finally, we estimated that the tax would raise around £275million with each adult spending on average an extra 8p per week on drinks, or £4.20 per year. This would be more keenly felt in the poorest income group where adults would spend an extra 9p per week compared to 6p in the highest income group.
The work was not without its limitations. In dietary surveys, people often underestimate how much unhealthy food they eat, and over-estimate the amount of healthy food, we also assumed that all drink bought would be consumed, and that individuals of all ages would react to the price change in the same way. However, at the time our study provided the best estimate of what effect a tax on SSBs may have on obesity in the UK. Taking this work forward, it is unlikely that more detailed modelling studies are going to be of much use to policy makers around the world.
Instead I think we need to rigorously evaluate the how individuals and industry react in countries that have introduced an SSB tax, both in the UK and elsewhere. Mexico is a prime example of this. Data from the first year of their peso per litre tax (about a 10% price increase) showed a 6% reduction in purchases, not dissimilar from the 15% reduction we estimate from a 20% UK tax.