Chancellor of the Exchequer George Osborne faces yet another budget headache as his plans for a sugar tax look set to face a legal challenge being considered by soft drinks manufacturers.
Already facing a politically damaging and financially costly U-turn over cuts to disability benefits, the government’s budget continues to unravel as the sugar tax the Chancellor announced in last week’s speech has come under fire.
It was hoped the planned sugar tax would add 24 pence a litre to those products with the highest sugar content. Ostensibly an anti-obesity measure, the government predicts it will raise £520 million in its first year, albeit at a projected cost of £1 billion to implement.
Now, however, companies such as Britvic and Coca-Cola are planning a challenge in the European courts on the grounds the levy is discriminatory, reports the Daily Mail.
The companies argue that were the sugar tax to be introduced as planned in two years time, they would suffer unfair discrimination. This is because although soft drinks will be hit, other beverages with an even higher sugar content — like fruit juices, smoothies and milk-based drinks — will be exempt and enjoy an anti-competitive advantage.
The National Obesity Forum has called on the government to close any loopholes in the planned sugar tax, so that all sugary drinks are hit.
Successful challenges have already been mounted against similar taxes in Finland and Denmark, so government officials are understood to be talking to the drinks industry to try to head off any legal proceedings.
Were the British sugar tax to be challenged by drinks companies, it is likely the wider food industry would support the move because of the assumption that it would eventually cover sugar in foods.
With some describing the sugar tax as an unconservative assault on free markets and consumer choice, there is also the assumption that the successful implementation of such a levy would become just the first of a range of ‘sin’ taxes which health lobbyists want the government to introduce on fat, salt and alcohol.