Nutrition, Obesity and Policy Tools (Financial Incentives and Taxation)

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The Possible use of Financial Incentives to Promote Health in the United Kingdom

In 2011, the government does not lecture to the public on their health. Instead it encourages a sense of personal responsibility. It wants to assist the public to change, or ‘nudge’ their behaviour in a positive direction. ‘Nudging’ may help to alter public behaviour but such changes have not been measured over the long term.

One way of nudging behaviour is to use “financial incentives to encourage people to undertake healthy activities”. Arguably, even small amounts of financial incentive “can influence individuals' health-related behaviours”.

However, there have been criticisms of the use of financial incentives. Some criticism has centred on the use of “offers of payment to patients for adherence to antipsychotic drugs”. Such schemes have been seen as “undermining of patients’ autonomy and personal responsibility, as well as damaging the trust inherent in the doctor-patient relationship”.

Other critics of financial incentives have argued that they could reward bad behaviour and reduce an individual’s intrinsic motivation or “undermine the agency of the person”. Financial incentives could also be seen as 'bribing’ and coercive or paternalistic.

However, accusations of coercion and paternalism could also be levelled at 'harder' policy measures. In terms of food policy, 'harder' policy measures, such as taxes, regulations or bans are an alternative to 'softer' measures such as financial incentives.

If financial incentives are going to be used then they should be viewed as a tool to help promote healthy behaviour such as eating nutritious food. Such a tool should be used as “part of a broader package of activities, rather than being implemented in isolation”. Perhaps a food voucher, to reduce the cost of healthy food, could be given to people to encourage the consumption of fresh fruit and vegetables.

Finally, the relevance of ‘upstream interventions’ will need to be considered given that financial incentives are unlikely to work on their own. These interventions include changes to the public’s wider circumstances; such as people’s environment and their employment status. If a financial incentive, such as a money-off voucher, were to be offered to encourage healthy food consumption, then it would only work if people had adequate access to nutritious food.

The Significance of Poor Nutrition and its Relevance to Health

Poor nutrition can lead to reduced life expectancy and lower health status. Inadequate nutrition can lead to increased rates of heart disease, stroke and diabetes (type 2). There is also concern over the rise in obesity rates in the United Kingdom and the United States which can also damage health.

It is significant that heart disease can lead to a seriously reduced lifestyle where it is more difficult to breathe. Also, diabetes can eventually lead to amputations and blindness.

To improve diet then the public needs to reduce their calorie intake and reduce the consumption of added sugar such as through fruit juices and soft drinks. Also consumption of fruit and vegetables needs to be increased together with fibre which can be derived from pulses.

Increased levels of exercise will not fully offset the effects of a poor diet. Therefore, poor diet is the main challenge to be addressed particularly a diet with high levels of sugar.

The Value of Economics in Addressing Nutritional Problems: The relevance of a ‘fat tax’ to reduce obesity


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.

The Men Who Made Us Fat: This is a BBC Documentary

There is a Guardian Article by Jacques Peretti (the documentary presenter); there are television reviews from the Guardian and the Telegraph with a comment on the programme from Health Matters. This is a contrasting blog which is more critical of the food industry. This is another BBC documentary on nutrition and obesity on the BBC Horizon programme (from 2012) - Eat, Fast and Live Longer.

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