Industry levy versus banning promotion on soft drinks in Scotland: A distributional analysis

Abstract

In 2018, Public Health England and the UK House of Parliament introduced a soft drinks industry levy to reduce the amount of sugar in sugar-sweetened beverages (SSBs). In addition to the positive results coming from the levy, in January 2019 the UK Government opened a consultation to consider regulating the use of price promotions on foods high in fat, sugar, and salt content. The levy and the banning of promotions could have similar effects (i.e., to potentially increase the product price); however, there is no study comparing their ex-ante effectiveness in reducing sugar consumption and even less their distributional impact. The purpose of the present study is to compare the effect and distributional impact of the measures. To achieve this, we estimated an EASI demand model using scanner panel data for Scotland for the period 2013 to 2017 (i.e., before the introduction of the levy). The results from the present study show that banning promotions on soft drinks would be more effective in reducing energy and sugar purchases than the soft drinks levy. The effectiveness of either policy varies by income, life stage, location, and degree of deprivation in Scotland. This argues for targeted policies instead of the usual ‘one-size-fits-all’ government policy. Specifically, banning promotions could reduce the annual quantity of beverage purchases by 35.8 per cent whereas the soft drinks levy results in only a 1.36 per cent reduction in annual beverage purchases Also, banning promotions reduces annual sugar purchases by 9 per cent compared to 3.9 per cent for the soft drinks levy. Translating this into changes in intake show that the average person will lose 0.85 kg and 0.36 kg per annum for the ban on promotions or soft drinks levy, respectively. The marginal changes in body weight suggest that other avenues such as a tax on and/or restricting promotions on dietary fat should be explored to achieve a larger impact.