As Soda Levy Looms, UK Study Questions ‘Sin Tax’ Cost-Benefit Rationale

By Kevin McCandless | August 24, 2017 | 10:19 PM EDT

Soft drinks with extra sugar content will be subject to a levy in the U.K. from next April. (Photo: Husky/Wikimedia Commons)

London ( – Hate the sin, love the sin tax?

Like other countries across Europe in recent years, Britain taxes goods such as tobacco and alcohol which the government claims are a financial drain on its national health system.

Now, with effect from next April, a new levy will be introduced for companies making soft drinks with extra sugar content, a step which the Department of Health says will help to combat childhood obesity.

However, a new study by the London-based Institute of Economic Affairs (IEA) challenges some of the thinking behind so-called “sin taxes,” arguing that the financial benefits from smoking products and alcohol far exceed the annual cost of dealing with the problems associated with their use.

According to the report, the British government spends 3.6 billion pounds ($4.6 billion) a year treating smoking-related diseases on the National Health System. Up to another one billion pounds ($1.28 billion) is spent on fighting smoking-related fires and picking up discarded cigarette butts.

At the same time, the government brings in 9.5 billion pounds ($12.16 billion) a year on tobacco duties, and saves an estimated 9.8 billion pounds ($12.54 billion) annually on pension, healthcare and other payments as a result of the “premature mortality” of smokers, who die on average more than 13 years earlier than non-smokers.

When it comes to alcohol, the IAE authors estimated that the government gets a net benefit of 6.1 billion pounds ($7.8 billion) a year.

The report also noted that previous reports on the cost of drinking included the costs of such factors as drinkers’ negative impact on social occasions or failure to keep their word.

“Since no man is an island, the ups and downs of personal relationships can be viewed as societal costs in a cosmic sense,” the report said. “But it is doubtful whether the average person has these tenuous emotional costs in mind when told that drinking costs society billions of pounds.”

Report co-author Christopher Snowdon said that the justification for “sin taxes” put forward by policymakers is an illusion.

“We are constantly being told that people who choose to drink, smoke or eat too much are a burden on the U.K. taxpayer,” said Snowdon, head of lifestyle economics at the IEA.

“This is one reason why we have seen such aggressive hikes in taxes on alcohol, smoking and, very soon, a tax on sugar.”

Britain has one of the highest obesity rates among developed countries and the government cites over 60 public health care organizations who are supportive of a tax on sugary drinks.

Other countries like France, Finland and Hungary have introduced taxes on soft drinks and the British government says the new levy is partially designed to encourage less sugar in drinks.

It also said hundreds of millions of pounds raised by the new levy would go towards programs that support sports and health eating in schools, although the Local Government Association has warned the government against using the money to plug gaps in core school spending.

A previous report from the IEA estimated that obesity costs the government 2.5 billion ($3.2 billion) a year, but the report authors estimate the new levy will cut that by one-fifth.

Snowdon said Wednesday he has no problem with a tax on soda but wants the government to be honest about it.

Part of the reason sin taxes have increased in recent years, he said, was because they were the political path of least resistance.

“It’s one of those few taxes that politicians can introduce and get patted on the back for,” he said.

Kevin McCandless
Kevin McCandless
CNS London Correspondent

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