Budget 2016: Chancellor to introduce surprise sugar tax on soft drinks in two years' time

Francesca Washtell
Follow Francesca
SEC Launches Investigation Into Coca-Cola's Earnings History
Coca Cola is one of the companies that will be affected by the government's new levy on sugar in soft drinks (Source: Getty)

George Osborne has announced the government will introduce a surprise new levy on the sugar drinks industry that will come into effect in two years' time.

A sugar tax was widely considered to not be making an appearance in the Budget, with other strategies thought to take precedence in the government's fight against childhood obesity.

Citing supermarket brands such as Sainbury's, Tesco and the Co-op that have all committed to reducing sugar content across their ranges, and brands such as Robinsons that recently removed added sugar from many of its cordials and squashes, Osborne added that many the soft drinks industry already "recognise there's a problem and have started to reformulate their products".

Read more: The sugar tax would be laughable if it weren't so pathetic

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 five grams per 100 millilitres; a second, higher band for the most sugary drinks with more than eight grams per 100 millilitres.

"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.

The tax on soft drinks will raise £520m for the government and will be put towards primary school sports, approximately doubling their funding, according to the budget announcement.

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

"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, we knew it caused disease but we ducked the difficult decisions and we did nothing."

The Food and Drink Federation, the organisation representing the UK's largest manufacturing sector, criticised the move.

"We are extremely disappointed by today's announcement of a new tax on some of the UK's most successful and innovative companies. For nearly a year we have waited for an holistic strategy to tackle obesity. What we've got today instead is a piece of political theatre," Ian Wright CBE, director general of the Food and Drink Federation said.

"The imposition of this tax will, sadly, result in less innovation and product reformulation, and for some manufacturers is certain to cost jobs. Nor will it make a difference to obesity."

The soft drinks maker Irn Bru also slammed the new tax: "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.

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

However, others praised the government for linking sugar, taxes and obesity so readily.

"It is really important that the government is taking seriously the sugar issue and its links to obesity," Professor Isabelle Szmigin, from the University of Birmingham, said.

"The challenge now will be whether the large soft drinks manufacturers will reform the contents of their products, rather than simply raising prices."

Also celebrating the new levy, Jamie Oliver, the chef and high-profile sugar tax campaigner welcomed the new move on Twitter:

Keep on top of the latest Budget 2016 stories as they happen with our live coverage here or follow @CityAM on Twitter for updates.

Related articles