Чи є податок на цукор ефективним способом зниження ожиріння у Великобританії?

Представники політичної еліти і прості громадяни Великої Британії не зрозуміють вас, коли ви скажете, що їхня країна живе без писаної Конституції. Як пересвідчився студент другого курсу юридичного факультету нашого університету Владислав Данилюк, який вивчає правові, політичні та економічні дисципліни в Університеті Глазго (Шотландія; Велика Британія) Конституція Великої Британії є феноменом, що не має аналогів у світі. Британська конституція існує в так званому «матеріальному значенні» і є сукупністю нормативно-правових актів, судових прецедентів, конституційних угод, доктринальних джерел, які встановлюють права і свободи людини, та порядок формування і повноважень органів публічної влади, а також принципи взаємовідносин між державою, суспільством і людиною.

In general, government intervention is any action implemented by the government that has impact on markets. Interventions may occur if prices are unstable, suppliers struggle with their minimum income, prices for essential goods are excessive or government can stimulate people to buy merit goods rather than demerit ones.

The sugar market is huge in the UK. According to ABSugar (2021), demand for sugar is 2 million tones annually: 85% of demand comes from drinks and food manufacturers and 15% by retail sector. The reason why government intervenes this market is because sugar causes obesity, so the government wants to reduce the obesity in society.

In this essay, I will discuss the sugar tax policy in the UK, benefits and limitations of this policy, how it affects market and highlight how government intervention works. In next part of report I will describe backgroun d of sugar market. In third part I will analyze this topic from the point of economics and in last part I will summarize key points of my analysis.

 

As I mentioned, the main reason of government intervention into sugar market is the obesity problem in the UK. According to NHS (2020), the majority of adults in England are obese or overweight, in particular 67% of men and 60% of women have such problem and 26% of men and 29% of women are obese. Basically, sugar is one of the main causes of obesity, so the government tries to take actions to regulate this market. Also, the sugar market is quite huge in the UK. The market size is £699 million, however there are only 7 main businesses in this industry, so sugar market is quite monopolized (Ibisworld, 2021). As a result, the government wants those businesses to pay more taxes, so country will have better income in long term.

Basically, the government can intervene into markets in different ways, for example it can provide minimum or maximum prices to control markets. In this case, British government decided to provide extra taxes for sugar producers. In general, taxation is worthy method for the government because taxes discourage consumption and increase income for country (Tejvan Pettinger, 2019). 

 

British government introduced the sugar tax in 2018, so if drinks containing more than 8g of sugar per 100ml, their suppliers will face a tax which equals 24p per litre. At the same time, if drink includes 5-8g of sugar per 100ml, its producer will pay 18p per litre (Thornton, 2018). However, a lot of analytics had doubts; they considered that overweight is complex problem, so government will just destroy sugar suppliers. Some people suggest that banning advertisement of sugar drinks would be better idea how to reduce consumption of sugar drinks in society.

Source:(Graph 1) https://bmcmedicine.biomedcentral.com/articles/10.1186/s12916-019-1477-4 (2020)

 

 

Judging by graph below, we can consider that this policy works. As we can see, there was a significant fall in consumption of sugar drinks in 2018 compares to 2015. The consumption of Lucozade Ribena Suntory LTD decreased by 72% and Tesco PLC by 37%. At the same time, the consumption of Red Bull increased by 21% and Innocent Drinks CO LTD by 39%.

 

Source: (graph 2) https://www.economicshelp.org/microessays/equilibrium/govt-intervention/ (2019)

This graph shows how taxation works from the point of economy. Supply curve shifts to the left because the cost of production increases so producers need to increase the price of product and decrease its production. However, there are some limitations of taxation, for example, taxation can cause demand curve to be inelastic. Also, the government can provide too high tax, suppliers will avoid it, so country will have less income from taxes. 

There are some benefits and limitations of sugar tax. The main benefit of this tax is reducing external costs on society. As we considered in previous parts, sugar can cause such health issues as diabetes, overweight, obesity, heart problems, tooth decay etc. As a result, the government needs to spend more money on NHS to treat citizens. In addition, poor health and wellbeing negatively affects productivity and work. Judging by this information, we can consider that the social cost of sugar consumption is higher than the private cost of it. (Pettinger, 2020). Also, we consider sugar and sugar drinks as demerit goods that negatively affect our health.

Source: (Graph 3) https://www.dineshbakshi.com/a-level-economics/government-microeconomic-intervention/revision-notes/535-negative-production-externalities (2020)

This graph shows the impact of a good with external costs, where free market price is Q1, but the socially efficient level is at Q2. Due to negative effects sugar on consumer’s health, such as obesity, overweight and heart diseases, therefore government is forced to spend more money on health insurance rather than other public services and needs. It means that social marginal cost of sugar consumption is higher than private marginal cost. As a result, we can see that the desired amount of sugar consumption is at level Q1 but the actual is at Q2. Judging by this information, we can consider that sugar is overconsumed. Second benefit of sugar tax is increasing revenue for the government. It is calculated that 20% of sugar tax could raise around £1 billion revenue. As a result, government can reduce other taxes and VAT for people or spend money on NHS or other public services. Finally, this policy reduces supplying and consumption of drinks that contains huge amount of sugar. Judging by graph 1, we can consider that sales of sugar drinks producers decreased in 2018 compares to 2015, as a result the consumption of sugar drinks in society decreased too.

 

However, there are some limitations of this policy. Firstly, this tax causes to unemployment in sugar areas. It happens because the cost of production increases, so suppliers need to optimize their expenses by reducing staff. Also, shops, restaurants and pubs need to spend more money to buy drinks, so they will increase price of products some people will be fired. Such rapid increasing in unemployment can cause huge problem in UK’s economy. Secondly, companies will increase the price of products, so people need to pay more money for sugar drinks. It is unlikely that most of the people will stop buying sugar drinks because price slightly increased, however some people will stop buying it because they cannot afford it. From moral point of view, it is unfair for people with low income to pay more money for drinks that they like. Finally, some people argue that taxation is not the best solution of sugar problem. Some people suggest that banning advertisement or providing education initiatives will be better ways to solve this problem. However, as we concluded, this policy perfectly works from the point of sugar drinks consumption. 

 

 

In conclusion, we can consider that taxation is quite successful policy for British sugar market. The consumption of sugar drinks significantly decreased in 2015 compares to 2018 and government received more income from suppliers. In this report, I highlighted benefits and limitations of sugar tax and considered that there are disadvantages of this policy, that connects with unemployment and people with low income. In addition, I highlighted that sugar drinks are overconsumed. We concluded that there are other methods to reduce consumption of sugar drinks in the UK, such as banning advertisement, explaining to children why sugar has negative effects for our health etc. However, in general, sugar tax policy shows good results from the point of economy.

 

 

AB Sugar | World leading sugar business | UK Sugar Sector. (2021). Retrieved 1 November 2021, from https://www.absugar.com/sugar-markets/uk-sugar-sector#:~:text=The%20UK%20demand%20for%20sugar,drink%20manufacturing%20and%20retail%20markets.

 

: Dineshbakshi. (2021). Negative Production Externalities [online]Retrieved from https://www.dineshbakshi.com/a-level-economics/government-microeconomic-intervention/revision-notes/535-negative-production-externalities

[Accessed 5 November 2021].

 

IBISWorld - Industry Market Research, Reports, and Statistics. (2021). Retrieved 1 November 2021, from https://www.ibisworld.com/united-kingdom/market-research-reports/sugar-production-industry/

 

Pettinger, T. (2019). Government Intervention in Markets - Economics Help. Retrieved 1 November 2021, from https://www.economicshelp.org/microessays/equilibrium/govt-intervention/

 

Pettinger, T. (2020). Sugar tax debate. Retrieved 6 November 2021, from https://www.economicshelp.org/blog/14884/economics/sugar-tax-debate/#:~:text=Excess%20consumption%20of%20sugar%20is,%2C%20diabetes%2C%20and%20tooth%20decay.&text=A%20tax%20on%20sugar%20would,from%20those%20on%20low%20incomes

 

Statistics on Obesity, Physical Activity and Diet, England, 2020. (2020). Retrieved 1 November 2021, from https://digital.nhs.uk/data-and-information/publications/statistical/statistics-on-obesity-physical-activity-and-diet/england-2020 

 

Graph 1: BMC Medicine, 2020. The total volume of sugars sold by top ten UK soft drink companies, 2015 and 2018. [image] Available at: https://bmcmedicine.biomedcentral.com/articles/10.1186/s12916-019-1477-4

 [Accessed 1 November 2021].

 

Graph 3: Dineshbakshi. (2021). Negative Production Externalities [online]Retrieved from https://www.dineshbakshi.com/a-level-economics/government-microeconomic-intervention/revision-notes/535-negative-production-externalities

[Accessed 5 November 2021].

Graph 2: Economics Help, 2019. Tax Graph. [image] Available at: https://www.economicshelp.org/microessays/equilibrium/govt-intervention/