IRN Bru manufacturer AG Barr has raised concern about the Chancellor's surprise sugar tax on soft drinks which caused its share price to tumble by more than five per cent.

George Osborne has announced he is to impose the levy which will raise £520m to be put towards primary school sports, approximately doubling existing funding. It is due to come into effect in two years' time. 

AG Barr chief executive Roger White said: "It is extremely disappointing that soft drinks have been singled out given it is the only food and drink category to have made any real progress in reducing sugar intake in recent years down 13.6 per cent since 2012."

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On the sugar levy, Mr Osborne told MPs: "Doing the right thing for the next generation is what this government and this Budget is about.

The Herald:

"No matter how difficult and how controversial it is.

"You cannot have a long-term plan for the country unless you have a long-term plan for our children's health care."

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He added: "I am not prepared to look back at my time here in this Parliament, doing this job and say to my children's generation, I'm sorry.

"We knew there was a problem with sugary drinks and we knew it caused disease but we dumped the difficult decisions and did nothing.

"Today, I can announce we will introduce a new sugar levy on the soft drinks industry."

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Mr White added: "At AG Barr we have reduced the average calorific content across our brand range by 8.8 per cent in just four years and are actively contributing to the soft drinks industry-wide five year target to make a 20 per cent reduction by 2020.

"We will await further details and ensure that we are full involved in the consultation process to ensure our position, and progress to date, are well understood."

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AG Barr's share price dropped by 5.4 per cent in the immediate wake of the announcement.

There will be two bands of tax assessed on the volume of the sugar-sweetened drinks companies produce or import.

One band will be for total sugar content above 5 grams per 100 millilitres; a second, higher band for the most sugary drinks with more than 8 grams per 100 millilitres.

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"Pure fruit juices and milk-based drinks will be excluded, and we’ll ensure the smallest producers are kept out of scope," Osborne said, adding that the government will consult on implementation. 

In January, the Cumbernauld-based producer of Irn Bru, Strathmore water and Rubicon, said it expected revenue to decline by about 1.5%, to £257m, for the year to January 30.

The Herald: AG Barr chief executive Roger White

Last year, Roger White, the chief executive of AG Barr took a swipe at supermarkets’ vilification of soft drinks as part of the ongoing so-called war on sugar.

He complained that soft drinks have been made the enemy of health food campaigners while the makers of sugar-laden snacks had not been targeted in the same way.

Mr White claimed that the drinks industry had been working hard to provide “ready alternatives and sugar-free products, whereas if a customer wants a cake or a chocolate bar there are no sugar-free alternative to cakes or chocolate”.