Will a sugary drink levy pay for 1,000 doctors?

One thing that I welcome about Plaid Cymru's approach to this year's conference has been an increased emphasis on policy. However I'm not sure we have quite worked out how to present it.

A perfect example of this is the announcement of a 20p/litre sugary drinks levy to fund 1,000 doctors.

It's a very clever idea, and on the face of it the sums appear to add up; but what is lacking is an actual set of figures to show how they add up. It isn't sufficient for Adam Price to say, as he does here, that the levy will raise between £50m and £60m.

What is needed is a simple, one-page calculation showing what is to be taxed, how much is consumed, and how much will be raised ... balanced against the cost of employing more doctors. This should be sent out in a press release on the day of the policy announcement, and downloadable from the Plaid website.

Hopefully this oversight will be corrected first thing Monday morning.


I can do some of the calculations here. The British Soft Drinks Association report for 2011 is here. On average, each person in the UK consumes 235 litres of soft drinks a year.

The question is how much of this can be described as sugary. Their breakdown is that 62% are "low calorie" or "no added sugar". But it should be noted that drinks such as pure fruit juices are naturally sugary, and that consumption of too much of what we tend to think of as "healthy drinks" also poses health risks in the form of obesity and diabetes. There are reports about it here and here.

Therefore I think it is reasonable to take the 38% of "regular" sugary drinks (89.3 litres per person per year) but add to it the figure for fruit juices and smoothies (19.0 litres per person per year) to give a minimum sugary drink consumption of 108.3 litres per person per year, or 330m litres total for Wales. At 20p a litre, this would raise £66m a year. The actual figure may well be higher than this, because we consume 23.4 litres per person per year of nectars and juice drinks, and a proportion of these will be naturally sugary.

In other words, it looks as if Adam Price was underestimating rather than overestimating the money that would be raised. I think it's safe to say that the policy would raise over £70m, based on current levels of consumption. My guess is that Adam was taking reduced consumption into account.


The second part of the question is how much it costs to employ a doctor. There's a brief report on doctor's salaries here. More specifically, the Welsh figures are here. Without doing an exact breakdown, it would appear that an "average salary" is less than £40,000.

Of course there are additional employment costs in addition to salary, such as employer's NI and pensions contributions. It might well be that the figure of £83,000 quoted here is right, but it seems high and would therefore appear to cover other fixed costs which are probably already being paid for, even though the positions are vacant.

We should also remember that some of the current shortages in permanent doctors are being made up by expensive temporary and agency staff, and that there are significant costs in cancelling or postponing treatment because of lack of available staff. Both these costs would be saved, and these savings would therefore be added to the amount raised by the levy to fund the additional doctors.


All in all, the figures stack up according to the rough calculations I have just done. All that is necessary now is for Plaid to officially publish a similar document. Quickly.

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Welsh not British said...

What about cake and other VAT free items? If they were to put the equivalent tax on these things it would no doubt raise more cash.

And also how about adding a loophole where by you don't pay tax on these sugary items if the are made in Wales. Surely that would be a massive incentive for companies such as coca cola to come to Wales.

Welsh not British said...

I notice the Black one has posted about this topic and he reckons ALL doctors earn 100K. I guess he hasn't done his research
Peter Blacks factually incorrect blog

Readers, please click on the link so it shows up on his page stats as it will ensure he is able to view a properly researched analysis of this subject!

MH said...

What Peter Black wrote was just the standard political knee-jerk reaction of rubbishing something first and thinking about it later, Stu. It's clear that he assumed it only applied to fizzy drinks, too.

But the point is that Plaid could have completely avoided reactions such as his and those of Labour and the Tories as reported in Wales Online IF we had taken the trouble to justify our figures in a press release. We need to learn the lesson and do it for every policy announcement we make. It's so simple.

I would agree that if we do this for sugary drinks, it might also make sense to think about a similar levy on fatty or sugary foods. It would be good in principle, however I think it might be harder to frame such legislation.

I don't think it would be possible to charge different levies or taxes dependent upon where the product comes from. I'm sure it would break EU rules, and even if the UK was outside the EU, it would break whatever agreements the UK might have with the EU in order to gain access to the single market. The case for water-intensive industries relocating to Wales from the drier parts of England needs to be based on a higher cost of water that properly reflects whatever shortages they have.

Anonymous said...

"I notice the Black one has posted about this topic and he reckons ALL doctors earn 100K"

No he doesn't.. He says that's what they COST

Anonymous said...

MH, what do you make of Peter Black's comment about not having the power to impose this tax?

"as ... the Welsh Government does not yet have the power to levy the tax, the plan collapses under the weight of its own inadequacy."

Anonymous said...

There is no power to levy this tax, it is recommended by the Silk Commission that it should be allowed. You would expect that to be in place by 2016 when PC wants to form a Government.

MH said...

The idea of "levying a tax" is, in this specific context, rather muddle-headed, 02:49 and 10:18. As discussed in detail in section 4.6 of the Silk Commission's Part I Report the Welsh Assembly already has powers to legislate for a compulsory levy in Wales, as was shown by introducing the levy on single-use bags. Silk specifically mentions a levy on sugary drinks as an example of how this existing competence could be used in future.

The problem is that the money from the charge for bags is not handed over to the WG, but distributed to environmental charities. It is therefore, in this specific context, a "levy" rather than a "tax". It would require a certain amount of ingenuity to reach a similar agreement that the money raised by a sugary drinks levy would go towards employing doctors (or offsetting another NHS cost, therefore freeing money to be spent on employing doctors) but it should be possible.

However, if Silk's recommendations are accepted by the UK Government, then the Assembly would have the power to legislate for a sugary drinks tax, meaning that the money raised from it would go (either directly or indirectly) to the Welsh Consolidated Fund at the UK Treasury. This would make things a lot easier. Although the UKG is dragging its feet over Silk, it is still perfectly possible for legislation to be passed before the next Westminster election in May 2015, ready to come into force for the Fifth Assembly elected in May 2016.

MH said...

Moving to a slightly different topic, in the Wales Online report Labour said:

"Linking the promotion of an unhealthy lifestyle in order to pay for improved medical services is a not sensible way forward."

This is silly. Imposing a levy on sugary drinks is not really any different from the taxes we impose on tobacco and alcohol. However there is a difference between the tax on tobacco and the tax on alcohol.

There is almost universal acceptance that smoking is dangerous and unhealthy; and therefore punitive, ever-rising taxes are imposed on tobacco products as part of a concerted attempt to stamp out smoking. Although this tax money is not hypothecated (i.e. specifically ring-fenced) to the health service, the link to health service spending has often been made as a justification for high tobacco duties.

It is very different for alcohol taxes. Drinking alcohol is not in itself dangerous or unhealthy; the problem is drinking too much of it. The tax is therefore relatively low rather than punitive, and it is used as a tool to moderate people's consumption of alcohol, not to stamp out drinking altogether. I see a levy on sugary drinks in the same way. Nobody wants to stamp out the consumption of sugary drinks; the intention is to moderate people's behaviour so that we keep our intake of sugar within healthy limits. This means that it is a viable, long-term measure.


It might also be worth remaking a point from the thread on disaggregated tax reciepts. These are the the figures for how much is raised from tobacco and alchohol taxes in Wales:

Tobacco Duties ... £451m
Spirits Duty ... £143m
Beer Duty ... £183m
Wine Duties ... £139m
Cider Duties ... £27m

So raising somewhere in the region of £50m, £60m or £70m from sugary drinks is really quite a modest proposal. However all these taxes relate closely to heath, therefore I think there is a very strong case for devolving all of them to Wales. We could then use these tax tools as levers not so much of the economy as a whole, but to improve our health as a nation. This is more urgent in Wales than anywhere else, because we have a bigger obesity problem than all other nations except for the USA.

Neilyn said...

This proposal, presumably, is broadly similar to that enacted in New York recently if memory serves, so there is at least a precedent. I don't know how the 'sugary drink' manufacturers reacted to the levy/legislation there but I wonder what industry, retail and bodies such as CBI Cymru will have to say about the matter? The usual response about margins being squeezed, jobs being threatened, unnecessary interference from government in the free market and it's best resolved as a matter of personal responsibility by consumers etc? Personally however, I think it's a good idea.

Anonymous said...

The idea that markets should just decide everything when we live in a complex society is bonkers. We need the Government (Welsh in this example) to influence prices. I see a 20p levy as being a useful tool to raise cash. I think the other parties reactions to Plaid's idea have been poor and that they're failing to trash it, though trying desperately. I also think the public will understand why these kind of measures are necessary. I'd like Plaid to take consistently strong views on public health issues. We desperately need a healthier population and to raise revenue wherever possible. I don't see how Wales can't go ahead with this tax.

MH said...

I've come across another document which, having read it, I suspect might lie behind this policy announcement. It is A Children's Future Fund from Sustain, available on this page. You can download the PDF for free, but you have to give an email address. Use a disposable one. The report will help answer Neilyn's question about what happens in other countries.

If Plaid have lifted their policy directly from this document, the one thing that concerns me is that Sustain are not proposing to tax drinks with natural sugar content, such as 100% fruit juices.

If this is so, then the amount that would be raised at present consumption levels would be about £54m. This accords with Adam Price's figure of between £50m and £60m, but it would fail to take into account the fact that a levy of this sort would reduce consumption and therefore reduce the amount raised. This means that the levy would certainly not be enough to fund 1,000 doctors.

I find it hard to believe that Plaid would have made so basic a mistake, but in the back of my mind I worry that this is exactly what they have done. So to those who are reading this in Plaid, I would urge you to look again at the calculations. The figures simply do not stack up if naturally sugary drinks such as 100% fruit juices and smoothies are excluded from the levy. On top of that, there is no logical reason for treating drinks comtaining naturally occuring sugars differently from sweetened drinks.

Please read the reports I linked to again, here and here, especially the first.

It is the amount of sugar in these drinks that is the problem, and it is the sugar content that we should look to raise a levy (or tax) on ... irrespective of whether that sugar is a natural part of the product or something added to it.

Anonymous said...

It'a good to see Plaid thinking about using our potential tax capacity in creative ways: it shows people that tax raising powers used judiciously can be a positive for Wales.

Having said that,I think this could have been presented more effectively: it is open to be dismissed as gimmickry in the sense that most people will find it very difficult to believe that an additional 1,000 doctors can be funded (and sustained over time) by a levy on sugary drinks alone.

I would have preferred to see a more nuanced attempt to link the promotion of good health in Wales and resources to promote such good health with the need to tax ill-health inducing factors, such as fatty foods, alcohol, smoking as well as sugary drinks.

A "healthy living" taxation policy, which could be imposed on companies who sell such products, as well as implicitly targeting the users of such products, with the proceeds channelled to promote good health in Wales could be very popular.

It would further show the public that the Silk Commission's recommendation on new taxation powers is not a dry constitutional issue: but a real, live issue which could help improve health and well-being in Wales.


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