Posted by: lidcblog | June 11, 2014

Will Fat Taxes Make Us Thin?

Overweight_waistline

Source: Wikimedia Commons

2.1 billion of us are obese and overweight, according to new figures. Not only are the waistlines expanding in the usual suspects – wealthy countries such as the UK and USA – but also in countries we typically think of as having problems with under-nutrition; India, China, Brazil, Pakistan and Indonesia are among the top 10 countries that are home to obese individuals. As economic growth in these countries expands, so do the waistlines of their people.

The figures are revealed in the same month that Dr Margaret Chan, WHO Director-General, called for action to end childhood obesity in her opening address to the World Health Assembly. On the same day the UN Special Rapporteur on the right to food, Olivier De Schutter, called for a new global agreement to regulate unhealthy diets, saying junk food is just as bad for global health as tobacco.

So why are economists like me worried about global obesity too? Aside from the human sufferings that come from diseases associated with obesity, we are worried because it’s costly.

It costs a great deal of money each year for governments – not to mention to the obese people themselves – to treat the chronic, non-communicable diseases associated with obesity, including diabetes, high blood pressure, cholesterol, and cancers of the bowel, pancreas, kidney and breast. Plus there’s the associated sick days and, of course, earlier death.

In the UK the government estimates that health problems due to obesity cost the National Health Service (NHS) £5bn per year. Some of this money could surely be better spent elsewhere if we could only manage to control our diets and exercise a bit more. No wonder there is a desperate need for measures that will do this.

Health related food and beverage taxes, often referred to as fat taxes, have been hotly debated in recent years. In some countries such as Denmark where they taxed food high in saturated fats, this policy measure has already failed. Countries including Hungary, Finland, and recently Mexico, have fat taxes in place, but it’s too early to tell if changes in consumption patterns have followed through to changes in health outcomes.

Numerous academic research papers predict how 20% taxes on sugar-sweetened beverages could slash obesity rates. But when you look closely, the predicted health effects of such taxes are marginal.

Say a half litre bottle of sugary drink costs £1. A 20% tax would make it £1.20. How many people would not buy it because it’s suddenly too expensive? And those who will not buy it because it is 20p more expensive might now opt to buy a cheaper, unbranded, version but still essentially consume the same thing.

A recent article, by myself and colleagues at the London School of Hygiene & Tropical Medicine and Leverhulme Centre for Integrative Research on Agriculture and Health, published last week in the Journal of Public Health, analyses the possible unintended and unknown consequences of taxes on unhealthy foods and beverages.

The question consumers will ask themselves is crucial: “If we reduce consumption due to taxes, what will we consume instead?” Unfortunately this is an area we don’t know too much about, particularly across sub-sections of consumers, but above all the obese and overweight. The last thing we’d want is a tax on sugary drinks to drive up the demand for chocolate or croissants.

Also, we don’t know much about how the supply side will react to such taxes. Will they pass on the tax to the consumer or will they try to absorb some of it to stop the demand from falling too much? This depends how sensitive consumers are to such a price increase and whether there are untaxed substitutes easily available.

Taxes may also have a positive effect by causing industry to reformulate foods to make them healthier so that they would not be covered by tax. For example, if sugar is taxed there might be an incentive to substitute sugar with untaxed natural low-calorie sweeteners like stevia.

Certainly, the food industry is not keen on such taxes and wants to show voluntary steps to help fight the obesity crisis. Just a few days ago, Tesco announced it would remove confectionery near its check-out counters.

So what are we left with? Some mildly encouraging evidence on the effectiveness of potential taxes and a huge list of unknown effects. Will fat taxes make us thin? We need to work harder to understand the potential response from consumers and producers. We need solutions that consider price alongside other drivers of consumption such as taste preference, time constraints, packaging or just habits. And we need to work towards a combination of policy measures that may, potentially, include some taxes on unhealthy foods.

Contributed by dr. Laura Cornelsen, Research Fellow in agri-health economics at the London School of Hygiene and Tropical Medicine.

This blog was originally posted on Huffington Post.


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