As waistlines have widened, views on obesity within the Conservative Party have narrowed. Gone are the May and Johnson era sympathies for reducing disparities and improving health outcomes, replaced by philosophical preference for bonfires of red tape and the end of the nanny state.
Liz Truss made no bones about it in the leadership campaign saying that HFSS taxes are “over”. And she’s wasted no time, instructing health secretary Thérèse Coffey and Chancellor Kwasi Kwarteng to carry out a review or “internal summary” of the evidence around obesity policies targeting HFSS foods.
The review takes place against a backdrop of a ticking clock with the first of the three impending HFSS policies (locational restrictions) due to come into force on 1 October 2022. Of course, millions of pounds have already been spent by retailers to retrofit their properties, bringing them in line with the locational restriction rules – and the ink is very much dry on the statutory instrument giving effect to the regulations. Similarly, the Soft Drinks Industry Levy has been in place for some time and arguably has been both effective at inducing reformulation and raising revenues for Treasury.
Changing course might require some bureaucratic navigation, but procedural issues will not stand in the way of such unwavering dogma.
So what does this small window of insight tell us about the government we will have for the next two to seven years, and how will food and drink policy be affected?
Fundamentally, Truss and her top team believe enabling business to succeed will mean everyone will reap the rewards. Therefore the goal is to create a small state, low-tax economy with all barriers to growth removed.
Small state
Central to Truss’s vision is for government to encroach less in people’s lives. That means trusting people to make good decisions and spending less on public services. It’s from this perspective that HFSS policies are deemed incompatible with her vision for the country.
As much as the media decried handouts for a number of years prior, the pandemic period gave rise to unprecedented levels of government spending in the form of furlough, Covid loans, business rates relief and grant pots. This is viewed as entirely unsustainable by Truss and her top team, and they will be scaling back spending where possible, taking a laissez-faire approach to market shocks.
There is, of course, one gigantic energy-shaped elephant in the room, with the government set to fix wholesale energy prices for six months at a cost of £150bn. The difference here is that a significant cross-section of businesses, especially those in the hospitality and retail space, will cease to exist without this state support.
But the sharpness of this philosophy could be felt for producers who utilise CO2. The support given to CF Fertilisers is unlikely to be resumed. Producers may have to look abroad for a sustainable CO2 supply, which could result in a sharp uptick in costs and price inflation. Such is the price to pay for a small state.
Tax cuts
The second strand of Truss’s ideology is for people and businesses to keep more of the money they earn. This will, in theory, drive productivity, increase employment and encourage investment through a self-fulfilling spiral of increased profits, demand for goods, and spending by the public.
Such is Truss’s commitment to not raising any form of tax – the estimated £170bn in profits energy companies are set to make over the next two years are safe from the windfall tax proposed by Labour Party leader Keir Starmer. If that level of profits are safe, it would be a surprise to see tax rises for food and drink businesses.
So with tax cuts on the agenda, how might the fmcg sector stand to benefit? We can safely assume that former Chancellor Rishi Sunak’s 1.25% National Insurance contribution increase will be a goner, as will the planned corporation tax rise from 19% to 25%.
Sunak’s mooted income tax threshold change from 20% to 19% could remain on the cards, and there may be holistic changes to the way business rates are calculated and levied, which would be most welcomed by the hospitality and retail sectors.
There has been speculation that business rates may be reduced on an area-by-area basis. Areas where the government believes enterprise is desperately required could see their rates slashed in an attempt to stimulate economic activity.
The extent to which the government wishes to slash taxes will have been made more clear in today’s “fiscal event”, and will be made more so in the subsequent Budget, expected to follow in late October or November.
Removing barriers
The final element of Truss’s magic mixture is deregulation. Her view is that there are too many policies preventing businesses from fulfilling their profit-generating potential, still too much EU regulation within UK law, and too many societal protections, such as policies aimed at mitigating climate change, which suppress business activity.
Looking through this lens, the introduction of a deposit return scheme, extended producer responsibility and the plastic packaging tax could be deemed as too costly for business, ineffective at delivering against their aims and might be reviewed in a manner not unlike HFSS policies.
EU laws could see sunset clauses attached to them, with Truss keen to see advances in agricultural drone use and precision breeding technologies.
National living wage increases have supported the workforce but increased business debts, reduced profits and driven inflation. It’s at Truss’s discretion whether she follows the advice of the Low Pay Commission, but if the overall aim of government is to reduce costs for business, would it be a surprise to see 2023’s £10.32 level scrapped?
The months ahead will go some way to demonstrating whether the incendiary, anti-nanny state rhetoric can be matched by action. There will be procedural barriers, outcry from interest groups and the OBR to contend with as Truss seeks to emulate her hero Margaret Thatcher in creating a low-tax, deregulated business environment. As these hurdles emerge, soon it will become clear whether the lady is for turning or not.
This piece was written before the government’s mini-budget on 23 September
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