Should tax be used to control consumer behaviour?

Allegra Stratton

Former National Editor

Drinks manufacturers have two years to reduce the sugar in their products or pay the tax. Credit: PA Wire/PA Images

Back in the early days of David Cameron, when his then top adviser Steve Hilton padded around Downing Street in a t-shirt, jeans and no shoes (journalists like me miss those days...the stories were always amusing) the government did a lot of nudging.

The Tories didn't talk much about Europe, immigration or crime... But about how to subtly encourage people to change their behaviour to change the country.

It was called 'Nudge' after Steve Hilton's favourite book by the behavioural economist Richard Thaler which looked at how people can be encouraged to live more healthy lives without even really realising they are being encouraged.

That's why it was called 'Nudge'.

Then along came UKIP and the Tories reached for the election guru Lynton Crosby to take it on. And their preoccupations changed.

They got harder nosed. They stopped sticking those noses into people's fridges. The nanny of the nanny state was sacked.

There is a debate about which version of the Prime Minister was and is right and whether he has always managed to merge the two... Let's leave that to the academics.

Yesterday with the announcement of the sugar tax, I am told we are seeing a return to some of these earlier ideas.

The link between sugary drinks and obesity are said by some experts to be 'clear and stark'. Credit: PA Wire/PA Images

On the surface of things using tax to send messages about society is a "deeply un-Conservative" thing to do, in the words of Tory MP Andrew Percy. But I also know that a lot of Tory MPs don't agree.

There is not, according to one, the cultural cringe at looking at obvious social problems and then reaching for the tax system to target them.

A lot of these new MPs are too young to remember the Thatcher era and her dogma that tax = bad.

Instead they look at behaviour, look at the cost of dealing with it, and make a calculation.

Now on the sugar tax. George Osborne has given the soft drinks manufacturers two years before this levy comes in.

That two year window is the message that was already being sent by Department of Health officials, behind the scenes. They have already been in talks: the govt saying, 'you have two years to figure out to change, or we'll tax you'.

By announcing that the sugary drinks levy will come in, in 2018, the Chancellor has made those private discussions public.

There is a view that Britain's food and drinks industry is world class and will probably within that time, or not long after, have developed substitutes for sugar that taste the same but aren't sugar.

The Prime Minister and his Chancellor were very concerned about raising a tax (unlike some of their young MPs they just about obey the Thatcherite taxing reluctance) but they were convinced by their head of policy, the former Times columnist Camilla Cavendish.

She showed them that the link between sugary drinks and obesity are clear and stark. And if they are not tackled the cost to the NHS are too expensive to bear.

There are others sugars (apparently there is a lot of sugar in a chicken korma ready pack) but these other sugars are not such obvious triggers.

So for the time being, it seems only sugary drinks will be targeted.

The tax on sugary drinks will come into effect in 2018. Credit: Brian Lawless / PA Archive/PA Images

But boy will they be targeted. The government will come forward with decisions on where sugar drinks can be sold - near schools? In vending machines inside schools? In hospitals?

The Health Secretary has talked about clamping down on a lot of this already.

There are other implications for this social policy.

Will a Chancellor who has done a sugary drinks tax go for other sin taxes? If you get drunk, walk into a A&E and assault the staff... Should there be a three strikes and you have to then pay for your care? This is the question put to me by one influential Tory yesterday.

And then one last thought to leave you with.

The money raised from the sugary drinks levy will go to school sports (the education establishment will have to watch that it doesn't become a back door means of boosting school funds). This is called hypothecation.

The Treasury historically does not like taking the revenue from a tax and clearly linking it to something else. They think the public finances are too fluid for that.

Well that all changed yesterday and so will we see more in future?