Reformulation takes sting out of the sugar tax
THE sugar tax is here at last, although the levy’s impact on prices will be more muted than first thought as soft drinks firms have been quick to reformulate their ranges.
Coming into force on 6 April, the Soft Drinks Industry Levy was expected to raise £520m in revenue in year one when it was first announced by then-chancellor George Osborne in 2016. However, the Office for Budget Responsibility (OBR) has continually revised this estimate down.
As part of his Spring Statement, chancellor Philip Hammond revealed the OBR had again downgraded its prediction, and now expects the levy will raise £240m in the first year, just 46% of the original estimate.
The OBR’s major reduction in its revenue estimate has been driven by reformulation from producers. Brands including Irn-Bru, Lucozade and Fanta have all been reformulated so as not to fall foul of the levy, although CCEP has opted to reduce pack size rather than reformulate Coca Cola for the UK market.
Under the levy, those soft drinks with a sugar content of 5g or more per 100ml are subject to an 18p per litre levy, with a higher band of 24p per litre for soft drinks containing 8g of sugar per 100ml.