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Sugar tax on soft drinks: What you need to know

In a surprise move, and one welcomed by health campaigners, Chancellor George Osborne announced a sugar tax on soft drinks companies in today's budget.

The levy is set to raise an estimated £520 million in its first year which will be spent on doubling funding for sport in primary schools.

ITV News consumer editor Chris Choi reports:

Announcing the levy, Osborne said that five-year-old children are consuming their bodyweight in sugar every year and that within a generation more than half of all boys and 70 per cent of girls could be overweight or obese.

He 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'."

Doing the right thing for the next generation is what this government and this budget is about 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 healthcare.

– Chancellor George Osborne

Health campaigners have welcomed the move describing it as "bold" and "brave".

Celebrity chef Jamie Oliver, a staunch campaigner for a sugar tax, said it was "amazing news" and a "profound move that will ripple around the world".

He added: "Business cannot come between our kids' health, our kids' health comes first."

Declaring that he was "so happy" following the announcement, he told ITV News the government had been "generous" in giving the drinks industry another two years to prepare for the changes.

He said all evidence pointed towards a tax on drinks being the most effective way to tackle consumption, being the single largest source of sugar intake in the diet of children and teenagers. Taxing all food was counterproductive by driving people towards fatty, salty foods instead, he added.

He also denied the tax would hit poorer people.

This is progressive. This is all about poorer people... the most vulnerable people in this country are the poorest.

They are hugely more likely to be unhealthy than the richest. I think that whatever happens, the most at-risk and poorest will benefit from this.

– Jamie Oliver
Jamie Oliver celebrated the announcement outside Westminster Credit: PA

Other health campaigners have also spoken out to welcome the move.

This bold and welcome action will send a powerful signal and incentivise soft drinks companies to act on the health consequences of their products.

It is a major first step to what must be a comprehensive childhood obesity strategy that will help us shed pounds off our waistlines, and save pounds on future NHS costs.

– Chief Exective for NHS England, Simon Stevens
£27bn
Total NHS spend on obesity-related illnesses
£520m
The amount sugar tax expected to raise in 2018/9 which will be put into school fitness programmes.

Professor Graham MacGregor, chair of Action on Sugar said he was "delighted" that a sugar levy has been introduced but said it needed to go further.

For this to be effective it’s imperative that the levy is at least 20% on all sugar-sweetened soft drinks and confectionery and escalate thereafter if companies do not comply to reformulation targets – and this must be implemented immediately.

– Professor Graham MacGregor, Action on Sugar
There will be two tax bands on soft drinks. Credit: PA

How will companies be taxed?

  • Soft drink companies will be taxed on the volume of sugary drinks they import or produce
  • Drinks that have more than 5g of sugar per 100ml will be taxed.
  • There will be two levy bands, a high one for those products with 8g per 100ml or more and a lower band for those above 5g per 100ml.
  • The charge will equate to 18p per litre for the lower band and 24p per litre for the higher rate.
  • Pure fruit juices and milk-based products will be exempt from the tax.

When will the changes take place?

  • The government has said that the sugar tax will be introduced in 2018 giving companies enough time to modify their product mix and promote low sugar items.
  • Osborne said that companies would be consulted on the implementation of the tax and that the smallest producers, producing less than 6ml a year, will be "kept out of scope".

How will consumers be affected?

  • Soft drink companies are likely to pass on the cost of the levy onto customers.
  • The Chancellor said that if companies choose to do so, it would have an effect on public consumption.

Of course, some [companies] may choose to pass the price onto consumers and that will be their decision - and this would have an impact on consumption too.

We as Conservatives understand that tax affects behaviour so let's tax the things we want to reduce, not the things we want to encourage.

– Chancellor George Osborne

What is the response from soft drinks companies?

  • The British Soft Drinks Association (BDSA) has slammed the government levy calling it "absurd" claiming that they are the only in the sector to have reduced sugar and calorie contents.
  • The Food and Drink Federation (FDF) called the move "a piece of political theatre".

We are extremely disappointed by the government’s decision to hit the only category in the food and drink sector which has consistently reduced sugar intake in recent years - down 13.6% since 2012.

By contrast sugar and calorie intake from all other major take home food categories is increasing – which makes the targeting of soft drinks simply absurd.

– Gavin Partington, Director General, BSDA
57%
The proportion of the soft drink market that is low or zero calorie, according to the BDSA

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.

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. Many of those singled out today by the Chancellor have been at the forefront of efforts to provide consumers with healthy choices.

The industry will now ask whether such efforts are still affordable.

– Ian Wright CBE, Director General of the Food and Drink Federation

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