Milkshakes and lattes could be subject to sugar tax under new government proposals

The UK government is considering extending the sugar tax, formally known as the Soft Drinks Industry Levy (SDIL), to include pre-packaged milkshakes and lattes. This move would end the current exemption for milk-based drinks and non-dairy substitutes like oat or rice milk.

Chancellor Rachel Reeves, in her autumn budget last year, revealed that the government was exploring ways to widen the scope of the sugar tax, which was first introduced in 2018 to help tackle obesity. This announcement has sparked debate, with critics accusing the government of unfairly burdening households.

The SDIL currently applies to manufacturers of sugary soft drinks, including pre-packaged beverages sold in supermarkets, and has raised £1.9 billion since its inception. However, the Treasury has indicated that it plans to lower the sugar threshold for drinks subject to the levy from 5g to 4g per 100ml. Government analysis suggests that around 203 milk-based drinks, which account for 93% of the market share in this category, would be hit by the tax unless their sugar content is reduced.

Home Secretary Yvette Cooper defended the move, stating that the government was consulting on further extending the levy after evidence suggested the tax had positively impacted children’s health. She added that the tax would provide manufacturers with an incentive to reduce sugar content in their drinks. The government’s analysis shows that young people consume only 3.5% of their calcium intake from milk-based drinks, undermining the health benefits of such beverages and justifying the need for sugar reduction.

The SDIL has already led to widespread reformulation by manufacturers, with 89% of soft drinks now exempt from the tax. However, critics claim that the levy’s threshold has inadvertently encouraged manufacturers to keep sugar content just below 5g, without making substantial reductions in the overall sugar levels of drinks.

The government's consultation on the proposed changes will run until 21 July. If implemented, the extended tax could affect a wide range of milk-based and milk substitute beverages, prompting concerns among businesses, particularly in the food and drink sectors. The industry has already faced inflationary pressures, with some arguing that the levy disproportionately impacts lower-income families without making a significant dent in obesity rates.

Shadow Chancellor Mel Stride described the government's move as a "sucker punch" to families who are already grappling with rising living costs. In contrast, Conservative leader Kemi Badenoch, who was initially critical of the levy, expressed concerns that the government was focusing on taxes rather than providing long-term plans for public health.

On the other hand, Tam Fry, chairman of the National Obesity Forum, welcomed the proposal, calling it "high-time" to extend the levy. He acknowledged that while the tax alone might not solve the obesity crisis, it was a necessary step in the right direction.

The Food and Drink Federation, which represents the industry, highlighted the progress made in reducing sugar content over recent years, citing a 46% reduction in sugar levels in soft drinks and a 30% reduction in milk-based drinks. The group urged the government to ensure that any new measures supported innovation and business growth, while also considering the long-term goals of public health.

The proposed extension of the sugar tax is part of the government’s broader efforts to improve public health, but it remains a point of contention among industry stakeholders and political figures alike.