Monday 11 July 2016 6:00 am

Sugar tax will leave soft drinks jobs and Treasury income with crashing low

It seems a spoonful of sugar will make jobs and Treasury income go down. 

More than 5,500 jobs could be under threat if the sugar tax has the same effect as it did in Mexico, according to research from the Taxpayers' Alliance. 

The TPA has called on the government to abandon the levy on soft drinks, after its study calculated 5,624 jobs in the soft drinks industry and associated sectors such as hospitality will be lost, equivalent to £90,622,36 in average industry and related-sector pay. 

If this bore out, it would lead to the Treasury receiving £17,399,370 less in job-related taxes, including £11,188,648 of employee's National Insurance contributions and Income Tax, as well as £6,210,723 of employer's National Insurance contributions.

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Jonathan Isaby, chief executive of the TPA, said:

Not only will the sugar tax fail in its public health aims, there is a very real risk that it will destroy jobs and harm economic growth. Given it will also hit the poorest households the hardest, the already flimsy case for a sugar tax is rapidly dissolving.

The government should be focusing on policies which encourage economic growth, so the sugar tax should be immediately scrapped.

In Mexico, where the soft drinks industry is a larger contributor to the economy than in the UK, the sugar tax implemented on 1 January 2014 led to an estimated 10,815 fewer jobs.

The TPA has previously hit out at the government's decision to pursue a levy, calling it a "bungled" tax that will "hit the poorest families hardest" and claiming it will have no "meaningful" impact on calorie intake

Mexico's 10 per cent tax on sugar-sweetened drinks has widely been lauded for bringing down purchases by an average of six per cent in its first year, according to figures from the Mexican National Institute of Public Health and the University of North Carolina. 

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An HM Treasury spokesperson said: "The soft drinks industry levy is a major step forward in our efforts to tackle childhood obesity, treating obesity and its consequences costs the taxpayer £5.1bn every year. The levy will be charged on soft drinks because they are the main source of added sugar in children's and teenagers' diets, many with no intrinsic nutritional value.

"The money from the levy will go towards funding more school sport, and expanding school breakfast clubs. The levy is designed so that producers don't have to pass the tax on to consumers and if they change their product mix to reduce sugar content, then they will pay less or no tax."

There will be two bands of tax assessed on the volume of the sugar-sweetened drinks companies produce or import, which will come into effect in 2018.

One band will be for total sugar content above five grams per 100 millilitres. A second, higher band will hit the most sugary drinks with more than eight grams per 100 millilitres.