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A tax positive solution to Britain's obesity crisis

    Public Health England (PHE) announced this week that “Britain needs to go on a diet”. Those were the words of PHE Chief Executive Duncan Selbie, who warned of obesity’s threat to public health and finances.

    PHE estimates that a 20% calorie reduction in family foods could save the NHS and social care sector around £9 billion a year, as Cancer Research’s ‘obesity is a cause of cancer’ advertising campaign continues to alarm with its public health warnings.

    In less than a month the government’s Soft Drinks Industry Levy – the sugar tax – will come into force, applying to drinks with more than 5g of sugar per 100ml and a higher levy for drinks with 8g per 100ml. This is Britain’s first attempt to tax itself out of an obesity crisis.

    The tax forms part of a wider long-term strategy to address the long-term costs associated with harmful activities. But as levies on vices such as sugar and tobacco become more popular, sin tax should not be viewed as an opportunity to arbitrarily raise revenue by punishing legal activities.

    Take smoking, for example. Recent years have seen increasingly draconian measures taken to curb smoking. Smaller quantities of tobacco were phased out of distribution last year while cigarettes now incur a duty of 16.5% on retail price plus £4.16 per packet of 20.

    On top of this, the price of cigarettes goes up every year by two percentage points above the rate of inflation. The sum total of these increases is a tax revenue that exceeds the cost of smoking to the NHS.

    Research produced by the Institute of Economic Affairs (IEA) estimated that the duty paid on tobacco products is £9.5 billion a year, while the immediate costs of treating smoking-related diseases is £3.6 billion and up to £1 billion collecting cigarette butts and extinguishing smoking-related house fires. Once the savings encountered due to premature mortality are taken into consideration, the IEA estimates a gross financial benefit to the government of £14.7 billion per year

    The government receives far more than it spends on smoking-related costs, and they should now consider reducing the fiscal burden on smokers and transferring it to other vices known to be just as harmful.

    If the government chooses to take a value judgement that smoking is more dangerous than obesity, then for every smoker that is being punished for their addiction with higher taxes, there are still millions of people placing themselves in danger of cancer through over-eating.

    The sugar tax is intended to address this problem, but does not go far enough to plug the cost of obesity on public coffers, which is a net £2.5 billion per year. This figure could rise dramatically if the World Health Organisation’s estimates are to be believed: three-quarters of men and two-thirds of women in the UK will be overweight by 2040.

    How might a tax on fat work in practice? Denmark introduced the world’s first example in 2011 with a tax on processed foods containing greater than 2.3% saturated fat. It was abolished just a year later after it led to increased cross-border trading of cheaper goods that harmed Danish business. The UK is not subject to the same pressures of cross-border trading as mainland Europe and would experience only a minor increase in fatty products arriving from France or Ireland.

    This would be the perfect complement to the upcoming sugar tax. A well-known ploy of foods labelled as ‘low fat’ is to boost their sugar content. A saturated fat tax would disable manufacturers from replacing one vice with another.

    Criticisms of such taxes argue that they do little to encourage healthier eating and simply punish low-income families who spend a higher proportion of their budget on food. Health experts also argue that the causes of obesity are numerous, and that a fat tax would penalise foods naturally high in saturated fat like cheese and butter.

    The simple solution is to target processed foods and ready meals which lie at the heart of our poor diets. These satisfying, convenient options are staples of time-poor families, and should not be confused with eating a slice of cheddar.

    By reducing the tax burden on smokers and implementing a fat tax, it is a reasonable expectation that food manufacturers will create a new line of products low in both fat and sugar, still marketed for their traditional consumer base. Given the likelihood of increased levels of childhood obesity over the next decade, this is likelier to be a more successful tactic than traffic lighting the nutritional value of foods to a younger audience. 

    It is unavoidable that the costs of a fat tax would be passed onto the consumer. Such a levy would be regressive, affecting low-income families the most. But given that low-income families are at high risk of obesity, their heightened price sensitivity should be viewed at least as potential for the levy’s success.  As far as this tax would go to punish so-called sensible consumers, their moderate consumption would render the levy’s effect negligible on their finances.

    Fatty foods are the last remaining vice that cause a net loss to public finances. We now have the opportunity to stop punishing smokers so heavily, and at least moderately transfer these obligations to obesity related products. 

    George Dabby is an Economic Research Intern at the Centre for Policy Studies. He graduated in 2016 with a degree in History & Politics and is currently pursuing a career in political and economic research.

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    Comments

    Anonymous - About 45 days ago

    Dear Mr Dabby,
    I can see that you are spot on about the figures, but health is not measured in pounds sterling. Which health bodies have you consulted with when collecting your evidence?

    Bring on the fat tax, but there is no argument at all for reducing tax on tobacco. Both the treasury and many smokers' health have indirectly benefitted from the smoking restrictions and incremental tax increases.

    The reader can't help but feel that you are calling for the tobacco tax cut purely to balance out the proposal tax increases elswhere for political reasons to tick the box for an overall "low tax " policy. We are better off cutting tax elswhere to tick this box.
    The foremost candidate for this is the basic tax allowance for low earners which most agree is too small.
    Good luck!


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