Soft drink tax won't save £39 million, it will cost £2,561 million

The Children's Food Campaign has relaunched its campaign for a 20 per cent sin tax on sugary drinks. The pressure group, which is part of Sustain, claims that the tax will save the NHS in London £39 million.

This figure comes from some research that has not been published and is based on a theoretical model which cannot be checked. Regardless of the reliability of the source, £39 million a year isn't very much. The NHS budget is over £100 billion a year.

But it's not £39 million a year, it's £39 million over the course of twenty years! This is less than £2 million a year in a city of over 8 million people—a saving of less than 25p per resident.

It gets worse. The Children's Food Campaign/Sustain have not offset the alleged saving to the taxpayer with the very real cost of the tax. Fortunately, we know that they have previously estimated that a 20 per cent tax on sugary drinks will take an extra £1 billion a year from UK taxpayers. As London is home to 13% of the British population, this means a cost to Londoners of around £130 million a year, or £2.6 billion over twenty years.

The net cost to London taxpayers would therefore be £2,561,000,000 over twenty years, or £128 million a year. To put it another way, taxpayers would have to spend £67 to save £1.

It is easy to make back-of-an-envelope calculations about how much money will be saved by a particular policy, but it is meaningless unless you look also at the cost. You don’t reduce the burden on taxpayers by raising taxes and you can’t make policy by looking at putative benefits while ignoring real costs.

If the aim is to save taxpayers money, the government should stop using our taxes to fund private pressure groups. Sustain's latest accounts show that it received £755,428 from the UK and EU governments in 2012/13, in addition to £400,984 from the lottery. As with so many illiberal, tax-raising campaign groups, these sources accounted for the majority of the charity's income.