Shortfall in soft drinks levy attributed to ‘aggressive’ reformulation

By Will Chu

- Last updated on GMT

Income earned from the impending soft drinks levy will be less than half that announced by the UK government after drinks makers moved to cut sugar content in their products sooner than expected.

In a report by The Office for Budget Responsibility (OBR) the levy is expected to raise just €271m (£240m) in 2018-19 – some way off the predictions made by the Government back in 2016.

“At the time of announcement, this Budget 2016 measure was expected to raise €587m (£520m) in 2018-19 and progressively lower amounts in later years, as producers responded by lowering the sugar content in their drinks in order to reduce their liability,”​ the UK’s fiscal watchdog said.

“We first revised the forecast down in March 2017 to reflect producers reformulating their drinks sooner and more aggressively than originally assumed.”

The reformulation response by the drinks industry has taken the Government by surprise, who had originally earmarked the funds to “pay for school sport”.

However, in its economic and fiscal outlook report published alongside the Spring Statement, the OBR raised concerns to this commitment as forecast changes made this spending increasingly unlikely.

Treasury: ‘Nothing has changed’ on spending plans

In response, the Treasury praised manufacturers’ efforts in cutting the sugar content of their products adding, “nothing had changed”​ in reference to its spending commitments.

“This levy is about changing behaviour. It’s about making people healthier overall,”​ a Treasury spokesperson said to the Press Association​.

“It’s really positive that the industry has recognised this and engaged so much on this.”

While pre-emptive action from manufacturers such as AG Barr has saved the makers of Irn Bru a hefty tax bill, its fan base expressed their displeasure to the changes made to the popular soft drink.

AG Barr ceased production of its original full-sugar version of Irn Bru at the start of the year with sugar per 100 millilitres (ml) reduced from 10.3 grams (g) to 4.7g.

This sugar was replaced with aspartame and acesulfame K, reducing the calorie count to 20 calories per 100ml (66 calories per 330ml can).

Come April, the Scottish drinks manufacturer expects 99% of its drinks range to be low sugar – containing less than 5g per 100ml.

Collective industry action

Meanwhile Lucozade Ribena Suntory has made moves to reformulate one of its best-selling brands - Lucozade Energy, which now contains 50% less sugar.

The firm has also reformulated products across its portfolio​​ with all its drinks now containing less than 5g of sugar per 100ml.

Coca-Cola Great Britain expects around 60% of its portfolio​​ will be exempt from the sugar tax while Britvic quoted a figure of 72%.

The levy – which comes into force on April 6 – will see a tax imposed on most sugary soft drinks with products containing more than 8g of sugar per 100ml taxed at 24 pence (p) per litre.

Drinks containing 5g of sugar per 100ml will be taxed at 18p.

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