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Health Economics and Market Failure - Food strategy calls for £3bn sugar and salt tax to improve UK’s diet

Graham Watson

15th July 2021

The UK National Food Strategy has outlined proposals for a levy on sugar and salt to tackle the perceived obesity crisis.

It seems as though the government have effectively accepted that education alone isn't going to change eating habits but that changes in prices will.

This is controversial for lots of reasons: some people see it as infringing people's rights, not least the suggestion that GPs might prescribe fruit and vegetables, and the fact that those consuming processed foods do so more on the basis of a lack of time to both shop and prepare food, rather than a lack of real income or real purchasing power.

What is clear is that there is persistent market failure here - the external costs of obesity run into tens of £billions each year in the UK.

However, it's also clear that resolving it through multiple policy interventions is going to take an awful lot of time and there's a high risk of government failure too.

The key aims of the National Food Strategy are as follows:

1. Escape the junk food cycle to protect the NHS.

2. Reduce diet-related inequality.

3. Make the best use of our land.

4. Create a long-term shift in our food culture.

"Education and willpower are not enough. We cannot escape this vicious cycle without rebalancing the financial incentives within the food system.”

Another interesting aspect of the National Food Strategy is the focus on meat consumption and production - with the report recommending that meat consumption be cut by 30% in the next decade.

It also highlights the extent to which land use for meat consumption looks like being highly inefficient.

However, it stops short of endorsing a meat tax, and instead argues that 'nudges' might be used to shift people towards a more vegetable-based diet.

Whether this will work or not is contentious, not least because of the cultural factors that feed into an economy's diet - full English, and roast dinner anyone?

Here is some further background on the issue drawing on newspaper articles and academic research published by the Economics Observatory.

Economics of Obesity | Head Start in A-Level Economics
Behavioural Economics and Obesity | Head Start in A-Level Economics

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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