UK Government Proposes Extension of Sugar Tax to Milk-Based Drinks

The sugar tax, previously applied primarily to fizzy drinks, is set for a major expansion to include milkshakes and similar dairy-based beverages. This move comes as part of the UK Government's continued efforts to address the nation's obesity crisis. The plans, announced on Monday, propose ending the current exemption on dairy-based drinks and similar non-dairy substitutes like oat or rice beverages.

According to Chancellor Rachel Reeves, this tax extension aligns with the government's strategy, as outlined in her previous autumn budget speech, to further pressure manufacturers towards sugar reduction. Subsequently, the Treasury confirmed additional measures, including lowering the sugar threshold that triggers the levy from 5g to 4g per 100ml, suggesting that manufacturers might need to adjust recipes to comply.

Since the introduction of the Soft Drinks Industry Levy (SDIL) in April 2018, significant reformulation efforts have resulted in 89% of fizzy drinks avoiding the tax. Under current proposals, an estimated 203 pre-packed milk-based drinks, comprising 93% of the market, may face taxation unless they reduce sugar content.

Originally, milk-based drinks were exempted from the levy due to concerns over calcium intake for children. However, the Treasury notes that only a small percentage of daily calcium intake comes from such drinks, leading them to prioritize sugar reduction over calcium concerns.

Despite these health-driven objectives, opposition voices have emerged, pointing out potential consumer cost impacts. Christopher Snowdon from the Institute for Economic Affairs criticized the sugar tax as ineffective and advocated for its repeal instead of expansion.

The consultation period for these proposals is set to run until July 21, offering manufacturers and the public an opportunity to express opinions on this significant policy shift.