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Sweet! Upcoming Tax Scares UK Into Taking It Easy On Sugar

Beverage companies have responded to the planned tax by reducing the sugar content of their drinks.

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Richard Martyn-Hemphill

LONDON — Sugar hasn't just played its part in Britain's reputation for tea, cakes and bad teeth; it's also a major contributor to the country's obesity and diabetes crisis. A U.K. parliamentary briefing paper published last week lays it bare: Over a quarter of the population are now classified as obese — the second highest rate in Europe after Hungary and the sixth highest in the world. There are nearly 3.7 million diagnosed diabetics in the country, according to Diabetes U.K. Related costs to the National Health Service are in the ballpark of $200 million per week, pretty close to the amount the U.K. spends on its EU membership fee each week after rebates.

It's an issue you might think would weigh on the mind of Prime Minister Theresa May, herself a diabetic, though not a known sugar addict. In fact, May has been, at best, a part-time flagbearer for sugar intake reduction, having scrapped such a tax as one of her first moves in 2016, a cave-in to heavy industry pressure. That will hopefully change this April, when a tax on sugary products — announced last year by Chancellor Philip Hammond as the Soft Drinks Industry Levy — comes into effect.

The move has risks. Inflation, at around 3.6%, is running higher than the Bank of England would like, and the result could be more expensive food and drink at a time when people are feeling a pinch from rising prices and stagnant wages already. Nevertheless, even before the law comes through, producers are showing a willingness to slash their sugar inputs rather than fork out money for an additional tax.

Despite initial warnings that consumers would be faced with smaller cans and higher prices, Coca Cola recently announced a new range of low sugar options. Scottish soft-drink company Irn-Bru will no longer stock its original high-sugar recipe, supposedly known by just three people. Other drinks producers are making similar steps.

The tax is worth a try and other countries are bound to follow suit.

So after giving companies plenty of time to adjust, they did. This is a good example how fiscal policy can be used to cattle prod companies in the right direction. Still, the government should now go further, widening its scope to other types of sugary snacks.

Tax is just one part of this, and greater consumer awareness may yet change the game more than any fiscal intervention. Regulators also have every reason to be tougher on the use of synthetic sweeteners as replacements, which may bring other harmful side effects. Ironically, any successful reductions in sugar that companies make ahead of the tax mean a smaller tax intake than initial Treasury projections. What does come in will be fittingly allocated to the education ministry for spending on youth sport.

This will put the U.K. in the company of just a few nations willing that go for such a tax policy. Norway is another; it has had a similar tax in place since 1922, and cranked it up further at the start of this year. Largely hailed as a success story, keeping obesity low in this Nordic nation of fiercely successful Winter Olympians, it has also driven many Norwegians across the border to Sweden for their fix. Similarly, shops in the Republic of Ireland could well be stocking up, tempting the Northern Irish southwards with cheaper fizz.

Even so, the tax is worth a try and other countries are bound to follow suit. In 2014, the global population of diabetics reached 422 million, from 108 million back in 1980. Diabetes, of course, is not just an inconvenient ailment; in its worst form, it can cause blindness, kidney failure, limb amputation or cardiac arrest. Its prevalence means companies can expect more political pressure to act, including against sugar. In an age of populism, where demand is high for dramatic, simple and sudden fixes, it'll be better for companies to be on the side of the solution rather than the problem.

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