George Osborne, who gave up folding towels at Selfridges to have a go at managing the UK’s finances, has just lobbed a hand grenade into the taxation public policy debate. Somewhere among his usual farrago of bribes, cuts, back-of-an-envelope growth prognostications and hoary platitudes about compassionate conservatism, he managed to find a way to plug his little finger into the £4bn fiscal hole in the dam: a tax on sugary drinks.
With his trademark sardonic smirk, he gushed about how the revenue raised would be poured back into funding school sports. All jolly good, I suppose: a Tory Chancellor caring so deeply about worrying rates of child obesity, that he introduces a policy which will reduce sugar consumption and get kids more active again. Call me a cynic, but I don’t think this policy will achieve, or is intended to achieve, what it is supposed to – more on that later. Yet I have been more interested in the reactions to this from across the political divide, both in the UK and back here.
National, in the guise of Health Minister Jonathan Coleman, moved quickly to dampen down speculation that they might adopt a similar policy here. Labour and the Greens are probably agonising over this: on the one hand, they have been banging the drum about rising obesity rates, especially among Maori and Pasifika children, for some time; on the other hand, if National were to follow their British centre-right counterparts in adopting the policy, there would be more miserable hand-wringing from Labour in particular about National stealing all their best ideas and taking the credit.
Unusually, I find myself in agreement with ACT leader David Seymour’s analysis, which means I need a stiff drink and a lie-down. The data from Mexico, where a similar tax has been trialled, is inconclusive. While consumption of fizzy, sugary drinks has fallen among the poorest quartile by 12%, consumption of other untaxed beverages has gone up: the tax does not apply to fruit drinks and juices which also have high levels of sugar. And what about other foods with large amounts of ‘hidden’ sugar, such as processed foods? It is all too easy to target Big Soda in the first instance, as it is compressed into a handful of corporate global behemoths (Coke, Pepsi etc.) and therefore handy villains for the most passionate political advocates.
Hence, any real attempt to use excise taxation to influence healthy behaviour surely needs to be more comprehensive if it is to work. Obesity rates may well start falling in Mexico, or they may not. Supporters of a sugar tax point to the successes of hiking duty on tobacco, and price has long been accepted as having a powerful effect on changing habits. Yet it seems these signals are best read by those from middle and higher socio-economic groups, who have quit in steadily increasing numbers over recent decades. Inveterate smokers these days tend to be concentrated in low socio-economic groups, and disproportionately among Maori and Pasifika. This is classic user pays. It is a semantic argument as to whether the tax revenue covers some or all of the associated healthcare costs for smokers, but it is an unavoidable truth that people whose smoking habit takes a significant slice of their meagre earnings are making a huge personal contribution to tax coffers which offsets their drain on health resources.
Why would it be any different for sugary drinks? A tax on it is one of consumption, and is therefore regressive. There is already evidence that mere lobbying for a sugar tax in the US has prompted better educated and more affluent consumers to reduce their consumption of fizzy drinks quite drastically. Many of those of lower socio-economic status, however, may well struggle to wean themselves off sugary drinks, as many have with cigarettes. Their personal freedom to purchase and consume is unaffected, but they would now contribute to the cost of treating their potential obesity themselves. Again, this is a very user pays, free market approach to the problem. Chillingly for Labour, there is nothing to stop John Key adopting such a sugar tax to burnish his ‘progressive’ credentials, knowing full well that the burden will actually fall mostly on poorer people, and to use the revenue for a tax cut!
The danger for Labour and the Greens here is that they fall into the same tactical elephant traps again and again which National keep setting for them. The Greens’ advocacy of a sugar tax to ‘combat obesity’ has distracted them from its regressive nature. If National now adopt one, as Osborne has done, they will claim it as a progressive policy (and public perception is likely to agree with them), ignoring the fact that it may only just be a handy extra revenue stream funded disproportionately by the poorest Kiwis.
The same criticism could be levelled at Labour for their currently suspended policy of raising the retirement age to 67. It is nothing other than a benefit cut which would hurt the poorest Kiwis (who generally work in the worst / most arduous jobs). As a teacher, it wouldn’t kill me to work an extra two years, but it might well do if I laboured at something more menial. Of course, many on the left just assume that any policy decision of Key’s is neoliberal, and therefore raising the age is the compassionate, progressive thing to do, without considering on whom the burden of consequences falls the most.
Even if we accept that the savage hikes in smoking excise tax over the years in OECD countries has worked in reducing smoking, it would be easy to forget that the progressive governments which introduced them suffered at the polls, and saw many of their most loyal working class voters desert them, never to return. There are fairer and more effective ways to reduce obesity and address the growing costs and needs of an ageing population that should be considered.