Finance (No. 2) Bill

James Davies Excerpts

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[Dr James Davies (Vale of Clwyd) (Con)]

It is a pleasure to be called to speak in support of this Finance Bill. As a whole, it is a Bill that prioritises economic stability, and there is much to welcome in it. My constituents will be pleased at the further increase in income tax thresholds.

I want to talk about the soft drinks industry levy, which appears in part 3, clauses 71 to 107. This was announced in the Budget a year ago, and it was reconfirmed in the childhood obesity plan last summer. At this point, I should declare an interest in that I devoured a very large Easter egg in recent days, but leaving that aside, I will get back on track to welcome the levy wholeheartedly as one lever in tackling obesity.

There is no single silver bullet to tackle the obesity crisis in the UK and in the west in general, but the levy is a necessary part of a package of measures to begin to tackle it. I have reached that clear conclusion through membership of the Select Committee on Health. I admit that if I had been asked about a sugar tax a year or so ago, I might have been somewhat uncertain, and it is clear that there is some uncertainty among hon. Members here today. I hope to convince some of those with lingering doubts to ensure that the provisions pass without further amendment.

Obesity affects about a quarter of adults in the UK, and it is estimated that it may affect up to 70% of us by 2050. One startling fact is that obese children are five times more likely to become obese adults, so there is a clear need to tackle childhood obesity.

[Alison Thewliss (Glasgow Central) (SNP)]

I am glad to hear that the hon. Gentleman supports the sugar tax. Does he agree, though, that the obesity strategy really does not go far enough because it does not start until children are older than two? Bad habits could already have been formed by that stage. Does he support an increase in the scope of the policy?

[Dr Davies]

It is true that the Health Committee—myself included—has called for additional measures, but the plan as it stands is certainly a step in the right direction. I will come to further points in due course.

One in five children starting primary school is overweight. By the end of primary school, it is one in three—quite a striking figure. The inequality between communities is also striking. Some 60% of five to 11-year-olds in the poorest neighbourhoods are obese; the figure reduces to just 16% in the most affluent areas. That translates into regional variation.

[Kevin Foster]

My hon. Friend is making an important point about the fact that there is a higher growth in obesity rates among those from the most deprived backgrounds. People who live on one side of a particular hill in Torquay live for 13 years longer on average than those who live on the other side. Does he share my concern that those sorts of stats could get worse?

[Dr Davies]

Indeed. I strongly believe that the measures outlined in the Bill go some way to tackling that situation.

Perhaps the main health effect of obesity among children is tooth decay. It is the main source of hospital admissions for five to nine-year-olds, with some 26,000 admissions, probably in England alone, and 179,000 teeth—if not more—extracted among the age group each year. Some 25% of children in the age group have tooth decay, and 90% of those cases are estimated to be preventable. Of course, sugar is a key cause of the problem. As for older children, 46% of 15-year-olds have tooth decay, and £129 million was spent on the extraction of teeth in under-18s between 2012 and 2016.

The impact of obesity on adults is even more concerning with tooth decay and, in no particular order, type 2 diabetes mellitus, cardiovascular disease, gastro-oesophageal reflux disease, gallstones, osteoarthritis, sleep apnoea, infertility, pregnancy problems, mental health problems, liver and kidney disease, and—last but certainly not least—cancer. At least 13 types of cancer have been implicated with obesity. In fact, obesity is thought to be the biggest cause of preventable cancer after smoking. More than 18,100 cases of cancer in the UK per year are estimated to be thanks to obesity. Those types of cancer include some well-known ones such as breast, bowel, endometrial, oesophageal and pancreatic. There is an impact on the NHS of an estimated £5.1 billion per annum, and a cost to the economy in general—£27 billion a year down to lost productivity, unemployment, early retirement and welfare benefits.

It is vital that we recognise the extent of the problem posed to the health and wellbeing of ever-rising numbers of people by the obesity crisis. How should we target this? Well, it is believed that there is a genetic susceptibility to obesity. That is not to say that all obesity is down to genetics, but it is thought that the inheritance of several genes—polygenic susceptibility—leads some to an increased drive to eat. Much has been said over the past decades about personal responsibility, education and exercise. Education and exercise do have an important place, but the reality is that they have not succeeded as the main way to target the problem.

We have an issue with more sedentary lifestyles and an obesogenic environment, whereby unhealthy, high-calorie foods are so easily available around us. Calorie intake sadly overwhelms most people’s efforts to exercise those calories off. Personal responsibility certainly drives many—perhaps those with the intellectual and financial resources to follow the path to deal with the problems they face —but it is not easy. In any case, children cannot be expected to exercise personal responsibility, because they do not have their own freedom of choice. Various measures are important in tackling the crisis, including reformulation targets by Public Health England and others, which will reduce sugar, fat, calories and so on in the foods that children eat.

Advertising is also important. Advertising restrictions have recently been expanded from television to other media such as social media and advergames, but more could be done if necessary. Labelling is important, and Brexit offers an opportunity in more flexibility in labelling our products. Promotions and discounts in supermarkets and elsewhere are critical. The issue of local authorities’ planning powers for takeaways and so on has been mentioned on a number of occasions.

[Rishi Sunak (Richmond (Yorks)) (Con)]

My hon. Friend makes an excellent point about the freedom for better labelling after we leave the European Union. Does he agree that one sector that could benefit from that is the dairy sector and dairy farming? Those products could have better country of origin labelling, which would help British shoppers to choose British dairy products and support British farmers.

[Dr Davies]

That is a very good point. A point has also been made about the flexibility to include information on labels such as the number of teaspoons of sugar in a product, which we are currently unable to do. A wide range of benefits could arise, which is interesting.

The soft drinks industry levy has a key role. Soft drinks are the biggest source of dietary sugar for children, but they contain little, if any, dietary benefit. Five-year-olds are believed to consume their own weight in sugar per year, and four to 10-year-olds each consume half a bathtub of sugary drinks per year. That is food for thought. The Scientific Advisory Committee on Nutrition and the World Health Organisation advise that free sugars should comprise less than 5% of daily energy intake; yet the estimated intake among our children is two to three times that figure.

The proposed mechanisms of the levy relate to producers and importers of packaged soft drinks with added sugar. The levy is designed primarily to encourage reformulation, as has been mentioned. The implementation date of April next year gives manufacturers time to pursue reformulation, and many have been doing an excellent job in achieving that. The levy drives manufacturers to reduce portion sizes and to market their low-sugar alternatives. It will be tiered, whereby 18p per litre is levied when the total sugar content of the drink exceeds 5 grams per 100 ml, and 24p per litre is levied when the total sugar content exceeds 8 grams per 100 ml. According to my mathematics, that is about 6p to 8p per can of drink. The levy will apply to drinks as ready-prepared or diluted as directed on the packaging.

The hope is that the levy will be passed on to consumers in the same proportion as applied. In other words, there will be no cross-subsidy. One concern raised by the Health Committee was that low or zero-sugar drinks might end up picking up some of the extra costs levied on manufacturers by their sugary alternatives. If that were to take place, it would be a missed opportunity to maximise the positive impact of the levy.

[Mr Mak]

My hon. Friend is making an excellent speech based on his personal knowledge and work as a medical doctor. Will he join me in encouraging children’s charities, such as Magic Breakfast, that play an important role in educating children about health eating and the avoidance of too many sugary drinks to redouble their efforts, and to use the sugar levy as a catalyst to do more work in the area?

[Dr Davies]

I will indeed. I will come on to the positive impact that the potential introduction of the levy has had on the general debate on sugar and obesity.

Coming back to the idea of cross-subsidy in terms of the cost of drinks, we, as a Government, should keep an open mind as to whether that needs to be regulated. The levy excludes fruit, vegetables and milk as a form of added sugar. It also excludes baby formulas, drinks for medicinal and dietary purposes, drinks comprising 75% or more milk, and small producers of under 1 million litres of beverage per year. The revenue raised is due to double the funding for PE, sport and breakfast clubs. It is expected that £1 billion will pass to the Department for Education for this purpose, with, of course, equivalent sums being passed to the devolved nations as per the Barnett formula.

The important thing to note is that, with successful reformulation, companies will pay no additional tax. It has been a mark of the success of the progress made with this policy that reformulation is already taking place, and it is therefore expected that in fact £1 billion will not be raised. I praise the Chancellor of the Exchequer for confirming that he will nevertheless pass on the full £1 billion in this Parliament for the purposes identified. Reformulation is possible—companies are already showing that. There has been success in the past with reformulation of products as to the amount of salt they contain. I mentioned before that this whole debate is causing a discussion throughout our nation about obesity and sugar, and that has to be a good thing. I hope that even this debate will help to further that.

Will such a policy work? There is no direct comparison, but in Mexico when a tax of roughly 10% was levied, it led to a 12% reduction in sugar intake, and in Hungary a 40% tax led to manufacturers reducing sugar content. A 2016 modelling study suggested that thanks to the levy 144,000 adults and children would be saved from obesity each year; that 19,000 would be saved from diabetes mellitus; and that the number of decayed teeth—270,000—would be reduced. We have certainly seen some tentative support among the public. I truly believe that in view of the scale and consequences of the obesity crisis, we do not have the luxury of time to make excuses. We can lead the world in this area and create evidence that other countries can then use and follow.

[Matt Warman (Boston and Skegness) (Con)]

Does my hon. Friend agree that this is an example of measuring success in terms not of the revenue raised but the behaviour that we change, and that the evidence that he talks about will not only change behaviour but genuinely change people’s lives in all our constituencies?

[Dr Davies]

My hon. Friend makes a good point. This is about how people live their lives in the foods and drinks they choose to consume and the way they look at their diet in general.

I would like to address a couple of criticisms raised by some. First, is this policy an example of the nanny state? I would argue that we use the tax system to influence behaviour and always have done. The Government have a duty of care to address important public health issues, as we do with tobacco and alcohol. As I said, freedom of choice is limited with regard to children, because they are not in a position to exercise freedom of choice. We live in a world that is skewed against our health interests; choice over healthy options can be difficult to come by as we are continually surrounded by unhealthy products. I would go so far as to suggest that some reduction of choice in sugary drinks on our shelves is a price worth paying to deal with the crisis that we face. I support the use of the tax system to support public health endeavours such as this one.

The second criticism is, “Is this just an extra tax, is it an attack on jobs, and is it regressive?” The tax can be avoided if products are reformulated or if existing sugar-free options are promoted. I would therefore argue that jobs in our food and drink sector should be safe. In fact, our food and drink sector can thrive if it can show the world how to tackle this agenda successfully. It is not a regressive measure either. The health gains are the biggest for those on low incomes, and sugar-free options are available which, we hope, will cost no more than they currently cost.

I support the soft drinks industry levy as a small but necessary part of the fight against childhood obesity.

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

As a consultant paediatrician I have seen and treated a number of children with obesity and seen the health consequences of this growing problem. Does my hon. Friend agree that this tax is a useful part of the Government’s programme but only part of a much wider programme to tackle obesity, and that education will ultimately be the major part?

[Dr Davies]

Yes. The levy is a bold and brave move, but it is only a small part of the efforts we need to make to tackle this problem. Unless we tackle it from a multitude of directions with a number of different strategies, we will not make progress. There is no one silver bullet.

We need to monitor and evaluate the impact of a levy over the coming year and beyond. I understand that secondary legislation had been due this spring. I am not sure whether that has been slightly delayed following today’s announcement, but it will no doubt follow in time for the levy to be applied from April next year. As a GP, a member of the Health Committee and a father of two young children, I will be following this topic with great interest.