This piece is based on a presentation made at a debate hosted by the Government Economics Network and Chair in Public Finance: “Does New Zealand need a sugar tax to protect us from Christmas excesses?”
If Christmas were personified, it would take the form of Nigella Lawson. She exudes warmth, she actually enjoys playing dinner party host, and she’s not one to scrimp on the trimmings. For her, the very process of preparing, eating and sharing food with friends and family is a pure joy. Some may accuse her of being overly sensual, but those people are prudes. Who’s to judge? So what if she gets more pleasure from stirring a pot of chocolate sauce than most of us receive from, well, other bodily pursuits.
And that’s what Christmas is all about, right? Spending time with loved ones over good wine, good food, and a sense of occasion.
So with the spirit of Nigella in mind, I want you to consider an important question: does New Zealand need a sugar tax to protect us from Christmas excesses?
Sugar taxes have, after all, been the flavour of the year it seems. The UK’s decision to get on board the bandwagon gave long-suffering advocates in New Zealand some renewed energy. Christmas also epitomises a range of excesses that can cruelly result in our waistlines expanding just as we reach togs season. But despite the growing chorus of voices in favour of a sugar tax, the evidence that such a tax will work is murky – and the justification for whether it is even needed is murkier.
If Nigella is Christmas personified, is Jamie Oliver the Grinch? Some of you might know celebrity chef Jamie Oliver from his show The Naked Chef (a gross exaggeration: the only skin showing skin was the roast chicken) and Jamie’s 15 Minute Meals (don’t even try, unless you have at least triple the time). Jamie Oliver was also one of the UK’s – and possibly the Western world’s – most vocal advocates in favour of a sugar tax. By the way, it is telling that soon after a sugar tax was introduced in the UK, Jamie Oliver was quick to point out that this was only the first step in a range of initiatives to reduce obesity.
The thing is, I don’t think even Jamie Oliver would be in favour of a sugar tax over Christmas. Just check out his own 10,000 calorie-laden Christmas menu. It might not come as a surprise, but a sugar tax leaves Jamie’s recipe followers with even less money to spend on presents. To add insult to injury, it won’t even target all the calorie-laden foods.
Yes, sugar isn’t all that good for you. But if you look at the breakdown of calories, it is not just the sugary foods that are doing people harm. The turkey wrapped in bacon and sage butter, the crispy camembert parcels and meat stuffing have more calories than most of the dessert foods. Clocking in at 965 calories, perhaps there should be a separate toad-in-a-hole tax. For those who want to avoid the excesses of Christmas, it is not just sugar you should be dodging, but fat, salt and alcohol too.
But let’s assume for a moment that taxing sugar is still a desirable thing. Even if sugar is the enemy of choice for regulators, it does not follow that a sugar tax is justified.
Many of the justifications for a sugar tax just don’t stack up. Two of the main reasons for introducing a sugar tax involve costs to the individual and costs to the public purse. Both arguments are more fizz than substance.
Paternalistic regulations are recommended on the basis that people have limited self-control or suffer cognitive biases that lead them to make decisions that are not in their best interests. In other words, people need protecting from themselves.
A common example is a bias towards the present self over the future self. You might not think much about ordering another round of shots at the office Christmas party in the moment, but might come to begrudge that decision the next morning.
Or perhaps people suffer optimism bias, where they consistently believe they can eat whatever they want and still look good at the beach. I’ve seen those clips of Nigella sneaking down to the fridge in her pyjamas for another helping of dessert, even after consuming a lavish meal. She is the reason for my own optimism bias.
Susceptibility to advertising is another common flaw, where fast food adverts are so compelling people cannot help but surrender despite their best intentions. If that were the case, then why haven’t fruit and vege producers or other healthy food brands not taken a page out of the same playbook?
If cognitive biases and limited self-control are features of human behaviour that most people fall for, then it is unclear how a sugar tax will help. If anything, a sugar tax would punish people for factors outside their control.
In many ways, these flaws are human nature, and it is not self-evident that they need to be corrected. One telling sign would be stated versus revealed preferences. To tell whether a person wants to change their behaviour, they need to take some action to make that claim credible. Think New Years’ resolutions. If a person says they want to exercise every day, but they still haven’t made it to the gym by February, it is possible that they never really wanted change.
More to the point, if people are subconsciously stuck in their ways, then why would a sugar tax magically change their behaviour? If self-control is so fragile, is it really credible that they would switch their eating habits when there is an incremental increase in the price of their favourite foods? And if people cannot even explain or understand their ‘irrational’ behaviour themselves, could regulators do any better in changing people?
The same argument applies for those concerned about children suffering dental issues because of sugar and soda consumption. While it is deplorable that children are requiring serious and completely avoidable dental procedures, will a sugar tax really help change parents’ behaviour? Will an increase in price of sugary products really be more compelling for parents than the wellbeing of their own children? If it has come down to that, there are surely more serious issues going on.
Another justification – and perhaps a more compelling one, even for those who would normally be against paternalism – is that obesity costs the public health system. Like smoking, the argument goes that those who take risks that cost the taxpayer should shoulder the cost of that burden.
The problem is, while obesity, diabetes and other avoidable illnesses are tragic, we don’t know how much they actually cost in the scheme of things. Cost of Illness studies are typically poorly calculated and based on flawed assumptions. For example, studies making claims about productivity forget that not everyone in the workforce is productive in the first place, and that employees have an incentive to be productive when they are paid on that basis. We probably all know someone who knows someone whose greatest accomplishment is being able to nap at their desk and check Facebook surreptitiously. Yet there are few serious studies looking at the productivity costs of lazy people.
Further, few of Cost of Illness studies calculate net costs. That is the whole-of-life costs compared to other counterfactuals. After all, even being a kale eating teetotaller who has never smoked a cigarette in their life can still impose costs on the health system. They might even cost the public purse more in superannuation. Avoidable illnesses are tragic for their own sake. But without knowing reliable figures, pointing out the costs to taxpayers is misleading.
Besides, should regulators really be able to pick and choose what behaviours to tax? If eating unhealthy food is taxed, then other risky behaviours that happen around Christmas time should be too. How about unsafe sex? Or sitting in the sun too long? Or consuming carcinogenic barbequed meat? Given there are multiple causes of obesity, and bodies differ in their response to food and exercise, surely it might be more efficient to just tax obesity itself. Or give a tax credit to everyone with a healthy BMI.
The thing is, once you start calculating the real costs of activities, and start thinking about taxing and subsidising all behaviour accordingly, it begins to look a lot like a private insurance scheme. But that’s not what we have. We have a public system, and as long as resources are allocated from the healthy to the unhealthy, the system is actually just functioning as it should. After all, we wouldn’t call the welfare system a failure because it redistributes money from the rich to the poor.
Now, let’s assume for a moment that despite there being little justification for a sugar tax, society still believes that it is a good idea. Let’s assume that we all got together after our Christmas break and agreed that we all ate too much when we shouldn’t have, and would really like some help from government to constrain ourselves.
Even in this scenario, our best estimates say taxes would not shift consumption by very much, unless they were unpalatably high. To date, there has been very little real world evidence that the tax will achieve its purpose of reducing obesity (the much cited and applauded Mexico study in particular looks less convincing than others portray).
The effects on obesity have also been poorly analysed in many of the studies arguing for a sugar tax. Most studies look at how much people might spend on products in response to a tax, or how much people consume of that product, but these are not the best proxies for looking at effects on obesity.
For example, people with a preference for unhealthy foods can simply substitute taxed foods for similarly unhealthy untaxed foods. While it looks good on paper that their sugar intake has gone down, people might compensate to maintain a similar (or even higher) caloric intake. While bacon is not a traditional dessert food, it could become one. Stranger food trends have happened.
In response to a tax, people can also switch to cheaper products or brands within the same category. People might develop their palates to enjoy Homebrand, or stock up on goods when they’re on special. This was a point recently made by economics professor John Gibson of Waikato University. Gibson argues that many of the studies looking at health related taxes exaggerate how price sensitive people are because those studies do not adjust for quality. Once the quality of products is taken into account like Homebrand versus Coca Cola, people have a much lower price response (for the more technically inclined, check out Dr Eric Crampton’s write-up).
Of course, there are some sugar tax advocates who would argue that despite the lack of evidence, there is no harm in trying a sugar tax to test whether it works. A related argument is that the observable effects on obesity will be small at first, but that’s only because there are generations-worth of poor eating habits to overcome.
Well, there is harm in trying. Those with the greatest sugar consumption are also disproportionately poor. But just because people are poor, it doesn’t follow that they will behave in ways regulators assume. Consider the poorer households who still smoke. They obviously have not behaved in ways that excise tax advocates wanted, and are now paying an increasingly high contribution to the government’s coffers.
These poorer households might be price sensitive out of necessity, but heavy sugar consumers can also be inflexible in their demand for sugary foods. When the price of sugary foods goes up, they can switch to cheaper brands, or even reduce their spending in other areas to compensate. When the price of sugary foods goes up, these households might manage their budget by cutting their spending on other nutrients.
To add insult to injury, it is clear that some public health experts are only expecting incremental changes over generations. So not only are sugar tax advocates making poor households poorer, but the reductions in obesity might not even be enjoyed within that household’s lifetime.
If all of this is harshing your buzz worse than when the family starts talking politics over Christmas lunch (heads up: this year Trump will definitely come up) when all you want to do is get drunk, let’s bring it back to what matters: you.
While public health experts might talk about the costs of sugar consumption, we need to consider the benefits too. For those who enjoy the smell of fruit mince pies in the oven, decorating ginger bread houses with the kids, or cutting into a perfectly fluffy pavlova, those benefits matter.
You might choose to indulge in eggnog and trifle. Or you might choose to work on your beach bod. To those who care about the latter, you don’t need a sugar tax, and you don’t need government. There are a number of self-binding options to help you lose weight, from Weight Watchers, to sharing goals with friends, to diet and fitness apps.
Let’s put it this way: who would you rather have over for Christmas dinner? Nigella Lawson, who unashamedly enjoys food not just for sustenance, but for its own sake? Or Jamie Oliver, who advocates for a sugar tax, while failing to cut calories in his own recipes, and even admits that on its own the tax won’t reduce obesity?
To read more about the the flawed justifications for sugar taxes and the public health studies that support them, check out The Initiative’s report The Health of the State.