Fat tax is a fat lot of use

Wednesday December 28, 2011

Brian Monteith warns of a new wave of lifestyle taxes, this time on food

One should never be surprised by the origins of the next assault on our lifestyles. Just as Ireland blazed the trail for the indoor smoking ban that eventually spread across the British Isles, the World’s first real Fat Tax has been introduced by Denmark, a country whose economy is dependent on the export of bacon and dairy products such as Lurpak butter and blue cheese.

As a world class producer of high quality dairy and animal fat foods it’s not as if the country has a world class obesity problem; its average obesity rate is 13.9%, lower than the European average of 15% and much lower than the USA’s 20.3%. Indeed the last time the USA had such a low obesity rate Elvis was still in the building and Apollo flights were still going to the moon.

So, Denmark? Well, Denmark is no virgin when it comes to using taxes to shape people’s lifestyles. Its government has taxed sweets and candies for ninety years and was the first to ban hydrogenated fats in 2003.

The Danish Fat Tax is applied to foods high in saturated fats – which includes margarine, cooking and salad oils, animal fats and dairy products – unless the processing of these foods can reduce the natural saturated fat content to below 2.3 percent, which is often a practical or economic impossibility. As all foods have a combination of saturated, unsaturated and polyunsaturated fats, the result is some food prices must go up; it is for the food producer to work out the saturated fat content, pay the tax, and recoup the cost by passing the burden on to the consumer.

Denmark’s health taxes are intended to raise a total revenue of 2.75 billion Kroner of which the Fat Tax, set at 16 Kroner (£1.85) per kilogram of saturated fat, accounts for over a third of this.

The outcomes are expected to be 8p on a standard packet of crisps, 30p on a regular burger and 48p on a pack of butter (lowest price usually about £2.00). The stated goal of these tax policies is to increase life expectancy that in Denmark is 78 years, the same as America’s, but lower than the UK’s (79) or Japan’s (82). It remains to be seen if this tax will make any difference to the behaviour of people in what they buy or reducing their weight and levels of fat.

For instance, the level of the tax is probably too low to alter radically peoples’ eating patterns while food processors can change recipes by packing more rusk into a burger and add more flavourings and seasonings so the percentage of saturated fat is reduced without loss of flavour. That the additional starch content could lead to a consumer’s body storing more fat than before if it is not burned-off and the additives can cause more trouble for the body has clearly not been thought of. It looks more like the all-too-familiar attempt to raise revenues while sending out the politician’s favourite message of “we’re looking after you’re best interests”.

It’s not as if the science blaming saturated fats is beyond challenge – there is a growing debate blaming the growth in carbohydrate intake from starches and sugars for the rise in average personal weight across western society – as well as concerns about the sedentary lifestyle of many young people. In other words the Fat Tax could be the wrong tax!

And just as Ireland was the Trojan Horse for a stampede of similar smoking bans across Britain and then Europe Denmark is being watched by other countries eager to find new ways to take our money and restrict our choices. In Hungary a small tax on sweets, salty snacks and caffeinated drinks has been introduced while in France tomato ketchup and mayonnaise have been banned in school meals except for one day a week. A French tax of only a few cents on cans of sugary carbonated drinks like Orangina and Coca-Cola is also planned to raise £98 million.

Ironically both France and Denmark are below the European average for obesity as published by the Organisation for Economic Co-operation and Development (OECD).

There is some good news. Iceland and Romania had some sin taxes on certain foods that have been dropped and the US Senate recently rejected a plan by the Obama Administration to limit the number of times potatoes can be served in school meals to no more than twice a week.

Where does that leave the UK? Well its should come as no surprise to readers of this website to know that rather than dismiss the idea as greater state intervention, David Cameron – the great disciple of the Big Society, where people are meant to take greater responsibility for their own lives and that of their communities – has said the idea is worthy of consideration to deal with Britain’s alleged obesity crisis. So much for nudge theory.

“I think it is something that we should look at,” Cameron told 5 News at the Tory conference in Manchester. “The problem in the past when people have looked at using the tax system in this way is the impact it can have on people on low incomes.”
“But frankly, do we have a problem with the growing level of obesity? Yes. Do we have a kind of warning in terms of – look at America, how bad things have got there – what happens if we don’t do anything? Yes, that should be a wake-up call. I am worried about the costs to the health service, [and] the fact that some people are going to have shorter lives than their parents.”
“Don’t rule anything out, but let’s look at the evidence and let’s look at the impact on families,” he added.

The OECD puts Britain’s obesity rate at 23 percent, higher than Denmark’s rate of 13.4 percent, and has said Britain should introduce a Fat Tax, while last year the Food Standards Agency denied it had decided to launch a consultation on a British Fat Tax.

What is often forgotten in the clamour to introduce sin taxes on certain foods is that they already exist; chocolate, crisps, carbonated drinks and sugary foods already carry 20 percent VAT in the UK as they are classed as “luxury foods” not “basic essentials” like fruit and vegetables. For instance, plain biscuits are not VAT-rated whereas chocolate biscuits are.

Not only are sin taxes a very clumsy way to change people’s behaviour, hitting people that are careful with they eat or drink, they also penalise the poor while the wealthy can easily afford them. Research by the Institute of Fiscal Studies in 2004 concluded that a tax similar to that now imposed in Denmark would cost the poorest 2 percent of the UK population 0.7 percent of their income, while for the richest 10 percent of the population the impact would be unnoticeable.

Of course the attempt to control what we eat will not end with fat taxes, sweet taxes or snack taxes. Marion Nestle, Professor of Nutrition, Food Studies, and Public Health at New York University, wrote in New Scientist, “governments seriously concerned about reducing rates of chronic disease should also consider ways to regulate production of unhealthy products, along with the ways they are marketed.”

A prescription for more advertising bans and limits of what can and cannot be sold? Will crisps and salted peanuts be put under the counter? Will proof of age be needed to by full fat mayonnaise?

Don’t laugh it off, that’s how the threats to tobacco and alcohol sales were dismissed ten years ago and look where we are now – cigarettes being hidden from view and a pensioner being refused a bottle of gin for not having proof of age (even the free bus pass was not accepted).

Oh, and one more thing, after extensive lobbying, milk was given a waiver from the fat tax; even for Denmark that would be going just too far.