A tax change that has worked for the Government

By Chris Rogers March 10, 2017 1:16 pm

Dial the clock back a year and it was George Osborne rather than Philip Hammond at the despatch box setting out the Budget. And back in those pre-Brexit days, the then-Chancellor and noted rabbit out of a hat enthusiast was also in the front pages over tax.

In Mr Osborne’s case it was because he’d set out plans for a sugar levy – a charge on sugary drinks with the money going to fund school sports. Reaction to the announcement was varied. Public health campaigners welcomed the tax in principle, but many decried it as not going far enough. Others, having finished choking on their sugar laden fizzy drinks, condemned the announcement as a tax on business, on consumers, and an example of the nanny state run amuck.

Fast forward to Wednesday, and Philip Hammond was the man with the plan. But amidst the furore over his changes to National Insurance contributions for the self-employed and jokes about how he had a reputation to defend when it came to the ‘spreadsheet bit’ (who knew Mr Hammond did jokes?), one announcement went more under the radar than you might have expected.

That announcement was that the sugar levy was set to raise less money than anticipated but that the Government would fund the amount pledged for school sports anyway.

Doubtless this will be viewed in some quarters as an example of a failed government initiative. A tax that hasn’t worked and now needs public money to bail out a government commitment. But that would entirely miss the point.

The Government’s approach when it comes to public health, and specifically overweight and obesity, has always been what you could describe ‘light touch.’ That’s not to suggest for a minute that ministers and government departments are ambivalent. Far from it. There’s been significant time and money invested in the likes of the Responsibility Deal (for all its failings) and Change4Life. Rather, the approach has always been to ‘nudge’ the public towards better health, as opposed to imposing regulation and legislation that compel healthier eating and greater levels of physical activity.

In putting forward the sugar levy, the Government successfully combined the carrot and stick – incentivising soft drinks manufacturers to either start reformulating their products or, in the case of many that had begun the process, to accelerate their efforts. The ‘failure’ of the sugar levy to generate revenue shows it’s at least some way towards achieving the desired effect. And the unexpected robustness of the economy since the Brexit referendum has given the Chancellor leave to fund the commitment to school sports made by his predecessor.

Inevitably some of the opponents of the sugar levy will insist it hasn’t worked. But on this occasion, the Government can point to a successfully implemented tax policy.

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