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1.1   The Soft Drink Industry Levy

In the 2016 Budget, the former chancellor, George Osborne announced the introduction of a levy on soft drinks. The levy would apply to manufacturers and importers of sugar added soft drinks and would be implemented in April 2018.  There would be exemptions for fruit juices and milk based drinks and for small producers.  The proceeds of the Levy would be used in England to increase spending on PE in schools, after school clubs and breakfast clubs.[1]

Box 1: Sugar and health

The consumption of high sugar food and drink can lead to weight gain which increases the risk of medical conditions such as type 2 diabetes, heart disease and stroke. High sugar consumption can also increase the risk of tooth decay.

There has been particular concern around the impact of high sugar products on children, and the levels of obesity in this group. Both the World Health Organisation[2] and the Scientific Advisory Committee on Nutrition[3] recommended a reduction in the daily intake of free sugars in 2015.[4]

In October 2015, Public Health England published its report, Sugar Reduction: The evidence for action which recommended interventions to reduce sugar consumption.[5]  The report stated that no single action would be effective in reducing sugar intake. It recommended a broad range of different measures, one of those was an introduction of a tax on high sugar products.  The report stated that “it is likely that price increases on specific high sugar products like sugar sweetened drinks, such as through fiscal measures like a tax or levy, if set high enough, would reduce purchasing at least in the short term.”  Proposals for a tax on sugar sweetened drinks have been supported in recent years by a number of medical organisations, such as the British Medical Association[6], World Health Organisation[7] and the Faculty of Public Health.[8] 

It is planned that the levy will consist of two rates, based on the sugar content of these beverages. Pure fruit juices and milk-based drinks are to be exempt from the levy, and there will be an exclusion for small producers.

The Government have said that the expected revenue for this levy will be £520 million in the first year.[9] Based on this, the Office for Budget Responsibility (OBR) has estimated that the rates implied are 18 pence/litre for the lower bracket sugary drinks, and 24 pence/litre for those drinks over 8g/litre.[10] 

The Government have emphasised that the intention of the policy is to encourage producers to reformulate their products to reduce sugar content, and therefore come under the threshold for the levy. In the second half of 2016, a number of producers, including Lucozade Ribena Suntory[11] and Tesco[12] have announced that they are taking action to reduce the total sugar content of their products.

Box 2: Soft drinks controlled under the levy

A chart published by the Behavioural Insights Team illustrates the different cut off points for the two levy rates against the sugar content on a wide range of sugary soft drinks:

The Soft Drink Industry Levy has been widely welcomed by health organisations[13].  For example, the President of the Faculty of Public Health described the levy as a step in the right direction, and that it will have a positive effect on the lives of the population.[14]  The Sports and Recreation Alliance Chief Executive, Emma Boggis, said that the funding for sport will deliver more opportunities for children to be active:

The Budget 2016 has a lot of positive outcomes for sport and recreation. The funding for sport in both primary and secondary schools from the reinvestment of the sugar levy will deliver more opportunities to get children of a young age active, which is crucial if they are to stay active in later life. There is a great opportunity for our members to engage with the education sector to deliver high quality sport and physical activity so that that the experiences of young people are positive. Sport and recreation makes a strong contribution to our economy which is why it is vital the industry is supported so it is good to see Government valuing the social and economic impact we see from hosting international tournaments.[15]

However, some industry representatives have expressed concerns about the levy, saying it could lead to job losses and not have a significant impact on obesity levels.[16] 

A Lancet study published in December 2016 looked at three possible industry responses to the Soft Drink industry Levy- reformulation, a price rise, and a change in the market share of low, medium and high sugar products. The authors’ modelling suggested that the first scenario, where industry reformulates its products would result in the greatest benefits to health.  In its best case scenario, the study estimated that there could be a 144,000 fewer obese adults in around two years following the introduction of the levy, and 19,000 fewer cases of type 2 diabetes in over ten years, following reformulation (a 30% reduction in sugar content of all high sugar drinks, and 15% reduction in medium sugar drinks).[17]

Draft Finance Bill 2017

The draft finance Bill was published in December 2016. Provisions relating to the Soft Drink Industry Levy are within clauses 51-78 and Schedules 15 and 17 of the Bill.  The draft Bill is currently subject to consultation until 1 February 2017.

The HMRC website provides links to:

This briefing does not provide a clause by clause description of this section of the draft Bill. However, the following bullet points provide some further detail on the proposed levy:

  • The levy will apply from April 2018 to producers and importers of soft drinks.
  • A lower tax rate will apply to drinks with a total sugar content of 5 grams or more per 100ml; a higher rate will apply to drinks with a sugar content of 8 grams or more per 100ml;
  • The 100ml applies to the ‘prepared drink.’ This will mean that any drink that requires dilution will be assessed at the diluted level (as indicated by information on the packaging of the product);
  • Fruit juice, vegetable juice and milk are not considered an added sugar ingredient. The Bill gives HMRC powers to prescribe what is meant by fruit/vegetable juice;
  • The levy will not apply to drinks where no sugar has been added, to milk based, or milk substitute based drinks;
  • HMRC have powers under the draft Bill to make regulations specifying further criteria for exempt soft drinks;
  • Drinks containing up to 1.2% ABV alcohol are included in the levy but provision will be made to exclude some of these drinks from the levy;
  • There are a number of exemptions to the provisions within the Bill. This includes baby formula and products used to treat dietary conditions;
  • Small producers will be excluded from the levy. The small producer threshold has been set at one million litres of product;
  • The Commissioners of Revenue and Customs may make regulations in regards of the payment, collection and recovery of the levy.

1.2   Childhood obesity and physical activity

The National Child Measurement Programme reports that in 2015/16 22% of children in England that 22% of 4-5 year olds were overweight or obese, and in year six that that proportion increased to over a third.[18]

Children living in deprived areas are substantially more likely to be obese. Among reception (age 4-5) children, 5.5% of those in the least deprived areas are obese compared with 12.5% of those in the most deprived areas. In Year 6 (age 10-11), 11.7% of children in the least deprived areas are obese, compared with 26.0% in the most deprived areas. So in both age groups, children in the most deprived areas are more than twice as likely to be obese, as shown in the chart below:

Childhood obesity by deprivation decile, England, 2015/16

Children in the most deprived areas are also marginally more likely to be underweight than those in the least deprived areas.

The 2015 Health Survey for England provides the following key findings on physical activity in children:

  • Excluding school-based activities, 22% of children aged between 5 and 15 met the physical activity guidelines of being at least moderately active for at least 60 minutes every day (23% of boys, 20% of girls). These proportions have increased since 2012, when 21% of boys and 16% of girls met the guidelines.
  • The proportion of both boys and girls aged 5 to 15 meeting current recommendations was lower in the higher quintiles than in the lower quintiles of equivalised household income.
  • Girls aged between 5 and 10 who were obese were less likely to meet the current guidelines than those who were neither overweight nor obese; 14% compared with 28% respectively.
  • Four in five children (79%) participated in activities such as walking and sports in the last week while in a lesson at school.
  • Time spent being sedentary (excluding time at school) during the week and at weekends increased with age.

Activity levels in 2015 were lower than in 2008 for boys, with 23% and 28% of boys meeting the guidelines respectively. Across the same period, activity levels among girls were at a similar level in 2015 as in 2008 (20% and 19% respectively).

1.3   Spending from the levy

The Government have said that income from the Soft Drink Industry Levy will be spent on school PE and sport provision and breakfast clubs in England. The 2016 Budget document provided more information about this investment:

  • double the primary school PE and sport premium from £160 million per year to £320 million per year from September 2017 to help schools support healthier, more active lifestyles. This funding will enable primary schools to make further improvements to the quality and breadth of PE and sport they offer, such as by introducing new activities and after school clubs and making greater use of coaches
  • provide up to £285 million a year to give 25% of secondary schools increased opportunity to extend their school day to offer a wider range of activities for pupils, including more sport
  • provide £10 million funding a year to expand breakfast clubs in up to 1,600 schools starting from September 2017, to ensure more children have a nutritious breakfast as a healthy start to their school day[19]

The Devolved Administrations will receive money from the levy through the Barnett formula.

The Government have said that the expected revenue for this levy will be £520 million in the first year.[20] The OBR have said that this revenue is likely to decrease due to reformulation and the promotion of lower sugar alternative.  They have estimated that income in 2019-20 will be £500 million and in 2020-21, will be £455 million.[21]

Information about sports in schools and breakfast clubs is provided in a number of library briefing papers:

The following sections highlight a number of relevant Government policies in this area.

Physical activity in the childhood obesity plan

In August 2016 the Government published Childhood Obesity: A Plan for Action, with the aim of significantly reducing the rate of childhood obesity in England within the next 10 years.  This included the Soft Drink Industry Levy, a Public Health England plan to run a programme to reformulate high sugar products and clearer food labelling.

The action plan highlighted the health benefits of physical activity and cited evidence of a link between improved academic performance, and physical activity and participation in organised sports. It stated that every primary school child should “get at least 60 minutes of moderate to vigorous physical activity a day”, with at least 30 minutes delivered in school and the remaining 30 minutes supported by parents outside of school time. A new online tool will be made available that will help schools plan at least 30 minutes of physical activity every day.

With regards to physical activity and sport in schools, the action plan also said:

  • Public Health England will develop advice to schools for 2017-18 on how they can “work with the school nurses, health centres, healthy weight teams in local authorities and other resources, to help children develop a healthier lifestyle.”

  • County Sports Partnerships have been asked to work with other providers, including National Governing Bodies of sport, “to ensure that from September 2017, every primary school in England has access to a co-ordinated offer of high quality sport and physical activity programmes, both local and national.”

  • A new healthy rating scheme for primary schools will be introduced from September 2017, which physical activity will be a key part of.

School Sports Partnerships

School Sport Partnerships were one strand of the last Labour Government’s Physical Education, School Sport and Club Links (PESSCL) Strategy, launched in 2002. They were described in a 2011 Ofsted report as “a family of secondary, primary and special schools working together to increase the quality and quantity of PE and sports opportunities for young people.”

In a letter to the Chair of the Youth Sport Trust in October 2010, the then Education Secretary, Michael Gove, announced that the Coalition Government was lifting the requirements of the previous Government’s PE and Sport Strategy and would end ring-fenced funding for School Sport Partnerships.

The letter also clarified that schools could continue to use School Sport Partnerships if they wished:

I should also clarify that the Department is not closing down school sport partnerships. Rather, they are being entrusted to schools, who can decide whether and how to use them in the future.

Information on the numbers of School Sport Partnerships or similar arrangements still in place is not collected centrally.

Breakfast clubs

Schools are not required to provide breakfast clubs, although many do so.

Magic Breakfast deliver breakfasts under a contract with the Department for Education to set up breakfast clubs in schools where over 35% of pupils are eligible for free school meals and there was no previously existing breakfast provision. 

In November 2016, the Institute for Fiscal Studies and the National Children’s Bureau published the results of a study into the impact of breakfast clubs, with largely positive findings about their impact.

The study found that children in year 2, where schools had been offered support to open a breakfast club made the equivalent of two months’ additional progress in reading, writing and maths over the course of a year. Pupils in year 6 had similar gains in English, with smaller positive effects reported on maths and science attainment.[22]

The report also found that:

  • Gains were likely to be the result of the content or context of the school breakfasts, rather than of increasing overall breakfast consumption;
  • Pupil absences declined as a result of breakfast club provision;
  • Behaviour and concentration in the classroom improved substantially.

The report stated that these gains had been achieved at relatively low cost, albeit with fairly low take-up rates. It also noted that attainment levels rose more amongst children from less disadvantaged (non-FSM) backgrounds, rather than for those eligible for FSM.

Extended school services

In addition to increasing funding for the Primary PE and Sport Premium, the Government have said that revenue from the soft drinks industry levy will also be invested in giving schools the opportunity to extend the school day to provide activities for pupils, including sport.

In December 2016, the Minister, Edward Timpson, stated that the Department for Education was “currently determining the details of how the funding will be allocated.” He additionally stated that the Department will “provide further details in due course so that schools have sufficient time to apply for the funding and implement their plans.”[23]

Since April 2011 extended services funding has formed part of the overall schools revenue funding.  As a result, there has been no specific amount earmarked for extended services. It is up to school leaders and their partners locally to decide what services and activities should be offered. As part of their wider strategies to raise standards for the most disadvantaged children, schools can also use Pupil Premium funding on extended services.

Schools may accommodate extended and community services, such as after-school clubs, out-of-school childcare (including breakfast clubs and holiday care), and sport and youth clubs. They may not use their schools funding to provide non-educational activities, and may charge for their facilities to be used.

Section 88 of the Children and Families Act 2014 removed previously existing duties on school governing bodies in England to consult local authorities, parents and staff, and have regard to advice and guidance given by the local authority or the Secretary of State, before offering facilities or services (such as school-based childcare) to the community.

[1]     HC Deb 16 March 2016 c964

[2]     WHO, WHO calls on countries to reduce sugars intake among adults and children, March 2015

[3]     SACN, Expert nutritionists recommend halving sugar in diet, July 2015

[4]     Free Sugars is a term used by the World Health Organisation to describe “all monosaccharides and disaccharides added to foods by the manufacturer, cook, or consumer, plus sugars naturally present in honey, syrups, and fruit juices.”

[5]     PHE, Sugar Reduction: The evidence for action, October 2015

[6]     BMA, Doctors’ leaders call for 20 per cent sugar tax amid warnings over impact of poor diet on nation’s health, 13 July 2015

[7]     WHO, WHO urges global action to curtail consumption and health impacts of sugary drinks, 11 October 2016

[8]     FPH, FPH welcomes publication of PHE’s sugar report, October 2015

[9]     HM Treasury, Budget 2016 Policy Costings, March 2016 p12

[10]    Office of Budget Responsibility, Economic & Fiscal Outlook Cm 9212, March 2016 par 4.76

[11]    The Times, Lucozade promises ‘game-changing’ reformulation with less sugar, November 2016

[12]    Tesco, Tesco reduces sugar content in all own brand soft drinks, November 2016

[13]    RCPCH, George Osborne unveils sugar tax on soft drinks, 16 March 2016

[14]    Faculty of Public Health, FPH warmly welcomes new sugar tax, 16 March 2016

[15]    Sport and Recreation Alliance, Budget 2016 – Primary PE and school sport premium to get sugar tax funding, 17 March 2017

[16]    British Soft Drinks Association, BSDA’s response to the Soft Drinks Tax Consultation and the Childhood Obesity Strategy, October 2016

[17]    The Lancet, Health impact assessment of the UK soft drinks industry levy: a comparative risk assessment modelling study, December 2016

[18]    National Child Measurement Programme – England, 2015-16, November 2016

[19]    Budget 2016, HC 901 March 2016 para 1.90-96

[20]    OBR, Budget 2016: policy costings, March 2016

[21]    OBR, Budget 2016: policy costings, March 2016

[22]    IFS, Breakfast clubs work their magic in disadvantaged English schools, November 2016

[23]    PQ55271, 1 December 2016.

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