Thirsty for money

We are used to single issue campaigners flagging up costs to the health service as a justification for raising taxes and restricting liberties. This week the big figure is £6 billion – the putative cost of ‘diet-related diseases’ to the NHS – which supposedly warrant a tax on a range of food and drink products which various charities, led by Sustain, consider to be ‘unhealthy’ or ‘unsustainable’. Although the campaigners have said that they want to go far beyond Pepsi and Coca-Cola, it is fizzy drinks that have grabbed the headlines. A 20p per litre sin tax, says Sustain’s chairman Mike Rayner – who must not be familiar with the work on Jonathan Swift – is a  ‘modest proposal’  which will raise £1 billion for the government.

It is interesting to see how these different costs are framed. The alleged £6 billon cost to the NHS is clearly portrayed as a burden on the taxpayer. The £1 billion that will be  ‘raised’ by the sin tax, on the other hand, is a nice little windfall. And while the £1 billion is seen as a sizeable lump of cash for the government, the individual sums of money that each person must pay to generate it are  ‘modest’.

In reality, all are unambiguous financial costs to the taxpayer. If the burden of taxation was really Sustain’s concern they would surely hesitate to take a further billion pounds from our wallets. Instead we are given a false dichotomy – either we pay £6 billion for ‘diet-related diseases’ or we pay £1 billion in soda taxes. But enough countries have experimented with these kind of taxes for us to know that they make virtually no difference to number of calories people consume nor to the prevalence of ‘diet-related diseases’. To have a real impact on people’s eating habits, sin taxes need to be levied at such a high rate that they spell political suicide for whichever government is foolish enough to introduce them. Britain’s pasty tax debacle and Denmark’s fat tax disaster both illustrate the unpopularity of even quite modest taxes on food.

The soda tax being mooted will simply turn a £6 billion cost into a £7 billion cost. Sustain do not even suggest that the £1 billion raised should go to the NHS. Instead, they want the money to go to organisations that will raise awareness of obesity – organisations like Sustain, for example. They also want to set up a new quango to implement and monitor the extensive bureaucracy that will be involved. This is pure public choice theory in action: concentrated interest groups extracting rents from a large population in order to enlarge their own bureaucracy and enhance their own power and prestige. It comes as no surprise to find that Sustain is largely dependent on handouts from the state (mainly from the Greater London Authority and the National Lottery), as are dozens of the other groups who have joined the campaign.

Sustain’s flagship policy is free school meals for all, paid for by a tax on soft drinks. There is, of course, no such thing as a free lunch. What they really mean is that the state will take money from parents by stealth so it can feed their children what the state thinks they should eat. The government is very unlikely to implement such a tax – unlike doctors, they have to stand for re-election – but this week’s campaign nonetheless gives an insight into the denizens of public health’s appetite for control.

Christopher Snowdon is the Head of Lifestyle Economics at the IEA. He is the author of The Art of Suppression, The Spirit Level Delusion and Velvet Glove; Iron Fist. His work focuses on pleasure, prohibition and dodgy statistics. He has authored a number of papers, including "Sock Puppets", "Euro Puppets", "The Proof of the Pudding", "The Crack Cocaine of Gambling" and "Free Market Solutions in Health".

7 thoughts on “Thirsty for money”

  1. Posted 30/01/2013 at 13:38 | Permalink

    Of course, it hardly bears remarking that there is another solution – abolish the NHS and replace it with private systems that might incentivise better lifestyles eg. lose weight and your premium falls. Instead, we have a system where being unhealthy is incentivised via ‘free healthcare’ and then punished via sin taxes. As you point out, such products have quite inelastic demand, so all this really does is tax the poorest and make food a greater part of their spending. It is amazing (or not) how such groups invariably lobby for solutions which expand the growth of the state, ignoring that the problem is caused by the state in the first place!

  2. Posted 30/01/2013 at 16:08 | Permalink

    “…£6 billion – the putative cost of ‘diet-related diseases’ to the NHS…”

    So because of that, they want to tax soft drinks.

    One wonders what the annual cost to the NHS is for Sport & Recreation related injuries. Considerable, I would imagine. So what course of action should they take with sports injuries? Tax them? Refuse to treat them on the grounds that they are essentially self-inflicted injuries (as they would like to do to smokers)? After all, no-one needs to do sport; they know the risks, it’s a lifestyle choice. So why should we have to pay for their irresponsible actions?

    Where do you stop with this idiocy?

  3. Posted 31/01/2013 at 09:38 | Permalink

    Just had a look at Sustain’s website concerning children’s food, and it seems that they are tackling it from completely the wrong angle. Their angle is all about repression – stop sweets at check-outs, stop vending machines in schools, stop this, stop that. Obesity is not going to go away by banning sweets at the check-out.

    If the people in the organisation don’t understand the complex reasons behind obesity, they are just wasting taxpayers’ money, and to ask for yet more money to ban even more stuff and restrict civil liberties even more is just scandalous.

    Sustain guys – repression doesn’t work, okay? You’re p*ssing in the wind.

  4. Posted 04/02/2013 at 16:15 | Permalink

    nisakiman makes the age old mistake of seeing only the costs immediately in front of us. Yes, I play sport. Once in my 25 years of life that has resulted in the need for hospital treatment – 1 X ray and a couple of casts. That sport is reducing my chances of chronic conditions which cost the NHS/economy/society an absolute fortune. You have to be a pretty poor economist to be so short-termist with such little regard for opportunity costs.

    I’m not against sin taxes when the alternative is income taxes. Some nudge taxes are highly effective (think bridge taxes in San Francisco and Copenhagen). That said, the argument against raising taxes to fund special interests is pretty difficult to deny.

  5. Posted 19/02/2013 at 11:49 | Permalink

    What David L said. Exactly. Its a complicated issue that demands serious thought, but it’d help enormously if we could reduce the “idiocy” on both sides. Sport participation self-evidently reduces costs to the NHS. Poor diet does not.

    I don’t fully agree with Sustain, but the idea that – on certain extreme issues – a portion of tax should be raised from the behaviour that creates the cost (rather than from wages) seems okay. A kind of polluter pays principle, where the alternative is to subsidise these costs from general taxation. It’d help everyone if we could have a sensible and informed debate – this would have been a more useful blog if it had devoted space to examining the evidence from the many countries that have tried this, rather than throwing abuse at Sustain. Unsurprisingly, they are largely state-funded you say. Indeed, but who funds IEA?

  6. Posted 19/02/2013 at 14:09 | Permalink

    @ David L and Ned H. “… just under a third (30 per cent) of the nation pick up 22 million sporting injuries per year.” “On average a person regularly participating in sport will pick up 1.65 injuries every year and will take up to five days off work or college due to incapacity and/or treatment.”
    “…he cost to the NHS of treating these injuries is estimated to be £590 million per annum”
    I’m not entirely convinced that the benefits outweigh the costs.

  7. Posted 19/02/2013 at 18:06 | Permalink

    Thanks @ nisakiman for the interesting links. I would still be absolutely staggered if the financial benefits from a healthier population don’t massively outweigh the costs of treating injuries. I think the whole NHS budget is around £100billion, for context. The second link you posted goes on to say “The total direct and indirect costs of physical inactivity, including earnings lost due to sick absence and premature mortality is a staggering £1.89 billion and is estimated to produce 8 million days lost from work each year.”

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