Does Taxing Sugary Drinks Stop People Getting Fat?

A group of MPs is calling for a 20% tax on sugary drinks. Will it help?

An influential group of MPs has called for a tax on sugary drinks.

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The House of Commons cross-party health select committee, chaired by Sarah Wollaston, a medical doctor as well as an MP, has called on the government to put a 20% levy on soft drinks such as Coca-Cola. The committee says the tax will help in the effort to fight obesity.

It follows the (controversially delayed) publication of a report by Public Health England that finds sugar taxes significantly reduce the amount of sugary foods people buy.

The report says that Norway, Finland, Hungary, France, and Mexico have all seen the consumption of sugar go down since they introduced a sugar tax. After a 10% tax was levied in Mexico, it says, average consumption went down 6% – and 9% among people on the lowest incomes.

Earlier studies have found even more dramatic results. A 2013 meta-analysis, or study of studies, published in the journal BMC Public Health found that on average, every 1% rise in sugar taxes leads to a 1.3% drop in sugar consumption.

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The technical term is "price elasticity": how the price of something affects how much people buy of it. Generally, luxuries are more "elastic" than essentials.

Not all studies agree. This one found that soda taxes in the US have little effect on consumption. However, that study's authors say it's because soda taxes are usually low – rarely higher than 4% – and that higher taxes, such as the 20% called for by the health select committee, may have more impact.

The US study also says that the impact they do have is greater among poorer people, ethnic minorities, and the obese.

The findings of the meta-analysis and the Public Health England report suggest sugar taxes would be more effective than, say, alcohol taxes.

A UK government report last year found that a 1% increase in alcohol price leads to a 0.6% drop in beer consumption or a 0.86% drop in wine consumption. (That's an average of all the studies they looked at.) Tobacco is similar: A Warwick University study found that a 1% rise in cigarette prices leads to somewhere between a 0.5% and 0.7% drop in consumption.

Alcohol is already heavily taxed in Britain: 18p a litre for beer, and £2.73 a litre for wine. Cigarettes are taxed at 16.5% of retail price. (These taxes are over and above the usual 20% VAT.)

Jamie Oliver, an advocate for a sugar tax, outside parliament on the day of the health select committee hearing. Stefan Rousseau / PA

The next question is whether sugar taxes reduce obesity, not just sugar consumption. That's harder to measure.

After all, consumers could simply switch to other, equally fattening products. However, one Finnish study found a solid link, and suggests that sugar taxes can reduce obesity-related health issues such as heart disease and obesity.

The Public Health England report quoted above agrees. It says that if sugary drink consumption is reduced in five years' time until it's only 5% of Britain's total energy intake, it will prevent more than 77,000 avoidable deaths in the next 25 years.

Critics of a sugar tax suggest that it is a "regressive" tax – that is, it hits the poor harder than it hits the rich.

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The campaign group Action on Consumer Choice says: "Poorer people will be forced to choose between sacrificing more of their limited income or effectively facing a soft drinks prohibition." The Institute of Economic Affairs describes it as "an assault on the poor", while the Adam Smith Institute says "the poor will be most painfully affected" by the tax.

That's certainly true, in one sense. Poor people would spend a greater proportion of their income on this tax than would rich people.

That's true both because a single drink represents a larger fraction of a poor person's income than it does a rich person's, and because poor people tend to buy more soft drinks than rich people do.

However, advocates for the tax argue that poorest in society would also benefit the most from a sugar tax.

Public Health England / gov.uk / Via gov.uk

Wollaston, writing in The Guardian, said: "We do not believe that this is an attack on low-income families, as industry lobbyists will no doubt claim, but rather an essential part of trying to reverse the harm caused by these products."

Child obesity rates are twice as high among the UK's poorest residents as they are among the richest. Two studies (Smed et al, 2007; Brownell & Frieden, 2009) have suggested that the health impacts of sugar taxes would be much greater for poorer people.

So, it appears that a tax on sugary drinks probably will reduce the amount of those drinks consumed. It will probably have an effect on obesity and other health effects, too. However, it will also have a greater financial impact on poor people as well.