Nutrition and a Fat Tax

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The relevance of a ‘fat tax’to reduce obesity
 
 
Introduction: 

The purpose here is to suggest that taxes could be increased on goods which society generally does not want such as fat.  Taxes could be reduced on items which society does want such as income.  The proposal in March’s 2012 budget to increase VAT on savoury food was criticised.  However, increased food prices could be justified if they were part of a ‘Fat Tax’.


The 2012 Budget

 

Food businesses criticised the Chancellor’s decision to impose value added tax (VAT) on savoury products such as sausage rolls and Cornish pasties.  VAT was increased to increase revenue for the Exchequer. It was also imposed partly as a tax harmonisation measure to reduce anomalies with other hot food sold.  Arguably, the rules needed changing because there have been campaigns over differences in VAT.  In the past, hot takeaway food was standard-rated while cold takeaway food was zero-rated.  The budget changes which were initially introduced meant that VAT would be applied at the standard rate to all takeaway food sold.  This was for all food sold above the ambient air temperature, except for baked bread. 

 

Reasons for a ‘fat tax’

 

There has been a concern over an increase in the rise of obesity in the United Kingdom and the United States.  The aim would be to reduce the consumption of unwholesome foods by raising their price.  Fatty foods can lead to obesity, heart disease and Type 2 Diabetes.  There is a precedent for a ‘Fat Tax’ as it has been introduced in Hungary

 

Food Business have criticised a policy to increase taxes on fatty food.  But voluntary measures have not been sufficient.  The justification for a fat tax is that it is a hard policy; in contrast to soft approaches (nudges) to food policy which have been criticised. It is argued that ‘soft policies’, such as advertising approaches, which encourage people to eat fewer calories are insufficient to deal with obesity.  

 

A food tax would have to be introduced carefully as a “fat tax”.  It could though be like a tax on petrol.  Petrol tax can have the purpose of trying to reduce car-use and so reduce some of the external effects of motoring; such as air pollution, road congestion and road traffic accidents.

 

In response, to the concerns of consumers who would be made worse off  by such a tax, then other measures would be needed.  Unemployment benefits, tax credits and (regional) pay would have to rise to compensate for such a ‘fat tax’.  In response to fears over the loss of employment, then the food industry needs to be aiming to produce healthier products which better meet societal needs.  If it does not then, it is in a similar position that the cigarette industry was in 1960. Tobacco companies frequently ignored their health impact on society in the 1960’s.  Food businesses may be unwise to criticise taxes on food where there could be health benefits.  The food industry needs to offer more to society than its vital role as an employer.  Foodstuffs such as sausage rolls are not foods which should be frequently consumed due to concerns over fat.

Food businesses who oppose the movement towards healthier food could be more proactive.  They could follow the example of the Wetherspoons pub chain who designed smoke-free pubs in anticipation of the 2007 ban on smoking public places.

 

The situation could be positive, as stated in the introduction.  Taxes on food businesses could be reduced, such as employer national insurance contributions, in exchange for a ‘fat tax’.  Levies on businesses could be reduced if food businesses improved the nutritional value of their products.  A fat tax offers an imperfect signal to consumers to avoid eating fatty food.  This would re-balance food or nutrition policy away from soft measures.

 

Problems over the implementation of a fat tax


A tax could be ineffective if demand was inelastic.  That is, if demand remained relatively unchanged.  It could be unresponsive, in reaction to an increase in the price of the fatty food.  Also, the tax is irrelevant in the context of hormones.  Obesity may be affected by human behaviour; that people can want to eat a great deal.


An alternative to a fat tax


An alternative policy to a fat tax could be to reduce the price of healthy foods.  This is better than offering people financial incentives, such as chances of small lottery wins, to encourage healthier behaviour.


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