Government Intervention - Sugar Taxes | tutor2u Economics
Study notes

Government Intervention - Sugar Taxes

  • Levels: AS, A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

The UK government is introducing a tax on high-sugar drinks and may well expand the indirect tax to foods that have a high sugar content. Is this an effective and equitable form of government intervention in a market to achieve desired changes in consumer behaviour? This study note brings together some useful resources on the issue.

Arguments in favour of a sugar tax:

  • External costs of sugary drinks – a cause of market failure
  • Information failures – people under-estimate long term costs
  • Sugar tax raises revenue – ring-fenced for other projects
  • Tax encourages producers to re-formulate drinks - healthier
Jamie Oliver argues the case for a sugar tax
Sugary Drinks Kill 24,000 Mexicans Every Year

Points against the introduction of a sugar tax

  • Might be regressive on lower income families
  • Other policies might be more effective in cutting consumption
  • People might simply switch to other sugary products
  • Risk of lost jobs in pubs and shops that rely on drink sales
Share of action retailers and food companies should take to inform public of how much sugar is in food and drinks in the United Kingdom in 2016
Percentage change in average base price per litre of soft drinks after the sugar tax is applied in the United Kingdom (UK) in 2016, by brand
Sugar tax: should we have one?

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