Budget 2016: Drinks
Sugar tax for Irn-Bru; whisky tax ‘still unfair’
Tonic water and lower sugar fizzy drinks such as Fanta will face an 18p a litre rate when the tax comes into force in two years time.
It will apply to drinks containing more than 5g of sugar per 100ml, with a higher rate applying above 8g per 100ml, and is aimed at persuading manufacturers to reformulate their recipes to cut sugar levels.
The Chancellor said the tax would reduce childhood obesity and “put the next generation first”. It will raise around £500 million that he intends to spend on school sports, though the devolved governments can choose to use it differently.
Mr Osborne told the Commons: “I am not prepared to look back at my time here in this parliament doing this job, and say to my children’s generation, ‘I’m sorry, we knew there was a problem with sugary drinks, we knew it caused disease, but we ducked the difficult decisions and we did nothing.'”
The announcement knocked the shares of quoted fizzy drinks companies including AG Barr, maker of Irn-Bru.
Chief executive Roger White said: “It is extremely disappointing that soft drinks have been singled out given it is the only food and drink category to have made any real progress in reducing sugar intake in recent years, down 13.6% since 2012.
“At AG Barr we have reduced the average calorific content across our brand range by 8.8% in just four years and are actively contributing to the soft drinks industry-wide five-year target to make a 20% reduction by 2020.
“We will await further details and ensure that we are fully involved in the consultation process to ensure our position, and progress to date, are well understood.”
Celebrity chef Jamie Oliver, who has campaigned for the tax, described it on Twitter as “a profound move”.
But the food and soft drinks industry criticised Mr Osborne for “a piece of political theatre” and warned that the tax would cost jobs and fail to tackle the obesity issue.
The SWA said a cut would have provided a bigger boost for consumers, the industry and the economy.
In a statement it said: “As a result of today’s freeze, tax – VAT and excise duty – remains at 76%, a level that three quarters of the British public believe is too high. The excise duty on a 70cl bottle of Scotch at the average price of £13 is £7.59 and the total tax burden is £9.91.
“Last year’s 2% cut in excise helped boost revenue from spirits for the Treasury by £102 million and the Scotch Whisky Association had argued that George Osborne should do the same this year to help the public finances, a home-grown industry and consumers.”
David Frost, Scotch Whisky Association chief executive, said: “We welcome the freeze in excise duty on spirits. We hope that this will sustain continued growth in the UK market for Scotch Whisky and thus help improve the public finances.
“But tax is still 76% of the price of an average bottle of Scotch and the majority of the British public think that is unfairly high. We will continue to call for fairer taxation of Scotch, a vital UK industry, and we urge duty reductions in future years.”
Excise duties on tobacco are to rise by 2% above inflation.
Dougal Sharp, founder and master brewer of Scottish craft brewery Innis & Gunn said: “It’s good news that beer duty has been frozen in this budget. Most in the industry would have been hoping for a cut or at least a freeze, the fact that the duty isn’t going up with the rate of inflation is welcome news. We are supportive of all initiatives that benefit beer drinkers across the country.
“Amid the praise of the freeze, it should be said that the UK beer market has entered an era that is governed less by incremental shifts in price and more by the quality of product and the variety available to customers. The dawn of this era is perfectly exemplified by the continued success of craft beer pubs in the face of a general trend of weekly pub closures across the country.
“The British beer drinker is a lot more discerning about what beer they drink, and this is the reason why the craft beer movement has flourished over the last few years. We don’t expect this trend will be reversed.”