The Chancellor said he expects to pocket less money from his tax on sugary drinks following an “aggressive” industry drive to change their ingredients.
Philip Hammond announced “good news for our children” in his Budget speech after his soft drinks levy — which was billed as a health measure — surpassed expectations in forcing the industry to cut the sugar content of their products.
Mr Hammond confirmed a two-tier levy of 18p on drinks with 5g of sugar per 100ml, and the higher 24p rate on those with more than 8g per 100ml from April 2018.
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Last week, Irn Bru maker AG Barr accelerated its sugar reduction programme, with over 90 percent of its products cut below the 5g threshold.
The Chancellor said: “I am delighted to announce a reduction in the expected yield of a tax—the soft drinks levy.
“I can confirm today the final rates of 18p and 24p per litre for the main and higher bands respectively, but producers are already reformulating sugar out of their drinks, which means a lower revenue forecast for this tax. This is good news for our children.”
The Office for Budget Responsibility revised the Treasury’s projected income from the sugar tax downward.
It said: “We expect the soft drinks industry levy to raise prices less than we had expected, because producers have responded to the levy by reducing the sugar content of drinks more aggressively than previously assumed.”
British Soft Drinks Association director general Gavin Partington said: “We support the need to address the public health challenge the country faces, but it’s worth bearing in mind that there is no evidence taxing a single product or ingredient has reduced levels of obesity anywhere in the world.”
However the Obesity Health Alliance described the levy as a “bold, positive and necessary move”.
A spokeswoman said: “There is evidence from other countries that show similar taxes have helped to reduce the amount of sugary soft drinks consumed.”
Pure fruit juices will be exempt from the levy as they do not carry added sugar, while drinks with a high milk content will also be exempt because of their calcium content.
Alcoholic drinks with an alcohol by volume of up to 1.2 per cent (ABV) are included in the levy, although some of these drinks will be exempt.
The tax is expected to net £520m in 2018/19, with a further £500m in 2019/20 and £455m in 2020/21.
The Royal Society for Public Health (RSPH) chief executive, Shirley Cramer, said: “We are delighted that, as shown by the downgrading of the Treasury’s revenue expectations, the sugar levy is already working to spur reformulation of sugary drinks by manufacturers. This is a crucial development for the health of our children, who receive the highest proportion of their added sugar intake from such drinks.”
Action on Sugar campaign manager Jenny Rosborough said: “Sugar-sweetened drinks are the biggest contributor of sugar in the diets of children and teenagers and unless they are reduced these drinks will still contribute to the high levels of obesity, type 2 diabetes and tooth decay, all of which are preventable and cost the NHS billions of pounds each year.
“We now strongly urge all manufacturers to reformulate and avoid the levy.”