October 5, 2016
Conservative Home: The Conservatives won the last election by telling us that they had a long term economic plan which included creating more jobs by backing small business and enterprise.
Within weeks of coming to office this vision was supported by the new Prime Minister who praised small and medium sized businesses as the backbone of the country.
So why then is this Conservative Government intent on introducing a tax which will hit small businesses across the UK costing thousands of jobs?
Recently published analysis from global forecasting experts Oxford Economics revealed that the UK soft drinks tax will lead to over 4,000 job losses across the country.
The report shows that the impact of the tax will also be particularly felt among smaller retailers and the hospitality sector. Lower sales will cut the industry’s contribution to the economy by £132 million.
The soft drinks sector is the fifth biggest contributor to convenience store sales. 91,000 of all retail jobs directly reliant on the sale of soft drinks. It also accounts for £1 in every £20 spent in pubs, restaurants and bars across the UK.
The impact of the tax on our local high streets and communities needs some serious and urgent consideration.
Hitting consumers too
When the soft drinks tax was proposed in the last Budget the accompanying report by The Office for Budget Responsibility clearly stated that it expected the tax to be passed entirely onto the consumer.
Current estimates suggest it would add 48p to a two litre bottle of soft drink – making it effectively a 50 per cent tax for consumers. This increase will have a significant impact on smaller retailers with twice the sales drop in convenience stores than will be experienced by supermarkets.
Yet, unbelievably the Government has not produced an impact assessment of the tax, so has no clear indication of the impact on businesses and consumers, including pricing, when implementing the policy.
At a time of economic uncertainty this seems a careless approach to implementing policy.
An ineffective tax
There are many strong economic arguments why the Government should not go ahead with this tax but there is also another fundamental reason; there is no evidence worldwide that it will have any impact on levels of obesity in this country.
In fact, the soft drinks tax in Mexico has reduced the average calorie intake by a mere six calories per person, per day in a country where the average daily calorie intake is over 3,000. In 2013, Denmark scrapped its fat tax and evidence from France shows that while sales of soft drinks initially fell after a tax was introduced in 2012 they are now back up to the levels before the tax was introduced.
The proposed UK soft drinks tax will reduce calorie intake by only five calories per person per day – the equivalent to a bite of an apple.
What will work?
Obesity is a major public health challenge and the Government is absolutely right to address it but any policy should be based on the evidence.
The most comprehensive study into tackling obesity, the McKinsey Global Institute report and Public Health England, found that a tax would be much less effective than reducing portion sizes and reformulating products.
These are steps that the UK soft drinks industry is already taking and as a result has reduced sugar intake by more than 16% since 2012. Just last year they agreed to a calorie reduction target of 20 per cent by 2020.
An un-Conservative policy
Evidence based policy truly matters more than ever before. This summer Manufacturers’ organisation EEF said that the sector’s recovery was under threat as business confidence had fallen in every region of England and Wales. At the same time research by GfK showed the biggest slide in consumer confidence for more than 26 years.
This tax will have serious financial consequences which smaller retailers simply cannot absorb.
Local jobs, pubs, shops and the wider supply chain must be protected.
As Conservatives MPs and supporters gather this week in Birmingham, I urge them to express our concerns to the Government and ask that they review this damaging policy immediately.
If they are the truly the party of business then they need to scrap this ineffective and harmful tax before it’s too late.