Treasury has offered soft drinks makers ‘wiggle room’ with levy detail delay

Slapping 8p on the cost of a can of Coke might not seem very much, especially in the face of a national obesity crisis. But the Treasury has seen enough in the way of opposition to pause for breath before it reveals the full extent of the sugar tax.

The Soft Drinks Industry Levy, to give it its official name, was officially unveiled by The Treasury today, nine months after former chancellor George Osborne shocked the industry by including it in his last Budget.

However, as The Grocer revealed last week, some big holes remain in the plans. Not least the actual rates that companies will have to pay, amid rising fears that the tax could push up overall levels of taxation at a time when the economy is already on the edge of a precipice.

While the government has pushed ahead with a two-tier system for the levy – the lower level for drinks with more than 5% sugar content, and a higher charge for those with more than 8% – it has shunted back the crucial decision on what that will actually cost manufacturers until the next Budget.

When the plans were first announced by Osborne, the Office for Budget Responsibility estimated the cost of the levy would ‘be passed entirely on to the price paid by consumers’ at a rate of 18p per litre for the lower tier and 24p per litre for the upper tier. That figure, which would put an estimated extra 6p on a regular can of Fanta and Sprite, and an extra 8p on a regular can of Coca-Cola, Pepsi or Irn-Bru, is now up for grabs. Campaigners fear it gives the industry too much ‘wiggle room’ in negotiations.

Perhaps predictably, the Taxpayers’ Alliance came out this morning with a dire warning on the potential inflationary impact of the levy. It warned of another unintended consequence in the form of a big shortfall in Treasury estimations if the public simply turns away from sugary soft drinks.

This is, presumably, exactly what ministers want. Financial secretary to the Treasury Jane Ellison – who has spent long enough debating the levy’s pros and cons in her previous role as public health minister that she should be an expert – today admitted this was a tax the government would rather not collect at all.

Having already seen the likes of Tesco and Lucozade announce plans to duck below the level of taxation, it will be fascinating to see how many more such commitments ministers would have to see before they decided that maybe, just maybe, the threat of a tax was enough after all.

As it is, the uncertainly over the economic impact and the potential shortfall in the UK’s coffers all add to what is already a sense of unease about a strategy supposedly about public health being overseen by government bean counters. Right now the Treasury has plenty of other matters to deal with without overseeing the war on sugar.