Tuesday 10 September 2019

Sugar levy cash gets swallowed

Last summer the IEA published a little paper written by me about sin taxes. In it, I mentioned the ringfencing trick in which politicians and campaigners lure voters to sin taxes by promising the money will be hypothecated for feelgood causes.

.. history shows us that tax hypothecation is rare. The public are more likely to support sin taxes if they are told that the revenue will be ring-fenced for health or education, but the money is usually diverted towards general state spending sooner or later (Hoffer and Pellillo 2012; Jacobson and Brownell 2000). Tobacco and alcohol taxes have been used to finance routine government expenditure for centuries and if the USA is any guide, sugary drink tax revenue will be treated no differently (Tanenbaum 2018).

Recent examples of soda tax revenue being syphoned off to the general pot after being promised for cuddly initiatives include Philadelphia and Oakland.

When the UK government promised to use the filthy lucre from the sugar levy to fund a school's breakfast programme and school sports, I thought there was a chance that it would happen. It was such a high profile commitment.

But it seems that I was not cynical enough...

Sajid Javid admits Treasury has swallowed sugar tax cash

The Treasury has pocketed taxes raised through the soft drinks sugar levy that were supposed to support children’s health, new chancellor Sajid Javid has admitted.

This week’s spending review promised an extra £13.4bn in public spending for 2020-21 as he promised to “turn the page on austerity”.

However, the Treasury confirmed that earlier commitments to ringfence the taxes raised by the levy to help tackle the obesity crisis in schools had been dropped.

Forecast to raise £340m in 2020-1, the prospect of the sugar tax disappearing into the Treasury’s coffers appeared was confirmed as the review failed to contain any commitment to ringfence the income for spending on programmes to improve children’s health and food.

And the earth still shifts on its orbit.

It was met with fury by campaigners who accused the government of backtracking on a promise to help children in schools via the tax.


“We’re profoundly disappointed not to get a clear reassurance from the chancellor today that the levy on sugary drinks would continue to deliver a direct dividend for children’s health,” said Children’s Food Campaign co-ordinator Barbara Crowther.

Might as well scrap the tax then, eh?

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