Peter Franklin: Hey Sugar! How an addiction to ‘levers’ leads to bad government

Peter Franklin is an Associate Editor of UnHerd.

The Soft Drinks Industry Levy (SDIL) — also known as the sugar tax — was announced by George Osborne in 2016.

Almost a decade later, Labour wants to “strengthen” it.

If the consultation paper is any guide, those of us with a sweet tooth can look forward to some bitter pills in the upcoming budget. The standard rate of the tax — 18p per litre — has been frozen since 2018. Rachel Reeves is likely to unfreeze it. But that’s not all. The intention is to lower the threshold at which the tax is applied: from 5 grams of sugar per 100 ml of drink to 4 grams.

For many on the Right  — particularly those of a libertarian persuasion — this is an outrage: a further intrusion of the nanny state into our private lives.

But that’s not my problem with the SDIL extension. I’m not a libertarian, and, even if I was, the idea that all freedoms are born equal is untenable. For instance, freedom of speech is obviously vital — as is freedom of religion, freedom of assembly and freedom of association. But the freedom to guzzle sugar-water like a badly-parented toddler? Not so much.

I wouldn’t favour a blanket ban, but a Pigouvian tax seems entirely reasonable. With our public finances buckling under the strain of out-of-control healthcare spending, the least that our citizens can do is not eat and drink themselves into chronic morbidity. If a tax helps with that, then fine. Given the choice, I’d rather we penalise self-indulgence than productive activity. And, no, I don’t care if people feel “judged” as a result.

What I do care about, however, is competent policy design. And on that front the sugar tax is as deserving of scrutiny as any other.

As the name suggests, the Soft Drinks Industry Levy is directed more at manufacturers than consumers — and in that regard it’s clearly had an impact. Since it came into force, we’ve witnessed extensive product reformulation across the industry — with the government claiming a 46 per cent reductionin sugar in soft drinks. The effects can be seen on the supermarket shelves, where there’s a wider selection of low sugar drinks than there used to be.

Do they taste as good as full fat versions? Not really. But do diet drinks taste better than they did ten years ago? I’d say so.

Therefore, it’s not all downside for the consumer — and especially not at a time when more of us want to make healthier choices.

So if I don’t have a problem with the tax in principle, on what grounds can I object to a further tightening of the screw?

The answer is perversity (the government’s, not mine). Reformulating a product isn’t just a matter of twiddling a knob on a machine in some factory. Rather, the entire production process has to be overhauled — not to mention the packaging, marketing and all the rest of it. That requires investment and risk on the part of businesses already contending with inflationary pressures.

It’s also an issue of fairness.

The manufacturers who slashed the sugar content of their products did the right thing. But now their reward is to be forced through the reformulation hoop all over again. And for what? Is a few grams less sugar in an already reduced sugar drink really that important? What’s especially infuriating is that most of the sugar sold in soft drinks is in products with more than 8 grams of sugar per 100 ml — which won’t be affected by tinkering with the 5 gram threshold.

Then there’s the inconvenient fact that since the sugar tax was introduced we’ve become slightly fatter as a nation. That doesn’t mean that the tax hasn’t worked, but it does mean that there are many other factors ruining the nation’s health.

Indeed, the SDIL doesn’t even cover all the excess sugar that we consume in liquid form. For instance, milk-based drinks have been exempted so far. That’s about to be corrected, but alcoholic and “zero alcohol” drinks — many of them loaded with sugar — will continue to get off scot-free. Nor will the new and improved regime apply to fruit juices — whose sugar may be “natural”, but is nevertheless jam-packed with calories and glycaemic mayhem.

And therein lies my real objection to the sugar tax proposals. Unlike our overweight fellow citizens, they’re fundamentally half-arsed. Reiterating an old solution that isn’t relevant to most of the problem is typical of this country’s pathological approach to policy making.

Anyone who’s spent any time in a government department will have heard civil servants obsessing about “levers” and where to find them. Certainly, when I worked in Whitehall I wondered why they didn’t just call them “policies”. But then it hit me, a lever is a specific kind of policy — one that the machinery of government is already set up to deliver. For lazy politicians and unadventurous bureaucrats, the metaphorically mechanical quality of a policy lever has many advantages:

Firstly, you can just pull it in the expectation that something will happen at the other end. No need to think the problem through from first principles or go to the trouble of designing a purpose-built delivery mechanism. Secondly, the whole command-and-control vibe is pleasing to those who like their power centralised. It avoids the messily organic, bottom-up, grassroots change that the state can’t get a grip on. Finally and most importantly, if a lever exists then it’s probably been used before. If it doesn’t actually work, then it will fail in a familiar way — as opposed to a new and original screw-up for which one might be personally blamed.

All of this is what made the sugar tax lever so tempting to the current government. It had a measurable effect the first time round — so the default option is to give it another tug.

It’s a mentality one sees across multiple policy areas.

Take the example of liberal interventionism in foreign policy. In the 1990s and 2000s, the West intervened in various conflicts including the invasion of Kuwait, the Balkan wars of independence and the Liberian civil war. At first, the removal of the Taliban in Afghanistan appeared to be another success, but then came the invasion of Iraq. It turns out that relying on the same methods can blind you to crucial differences in context.

One also has to look out for diminishing returns. Throughout history, governments have sought to grow their revenues by repeatedly hiking tax rates. Eventually, they run into the wrong side of the Laffer Curve. Of course, the same can apply in the other direction with tax cuts that fail to pay for themselves. But how comforting for the ideologues of Left and Right to imagine that their go-to solutions have no natural limits.

Then there’s the narrow focus problem.

If you insist on pulling the same levers, then inevitably you’ll concentrate on the problems to which those policies have an effect, while neglecting other pressing concerns.

This is a particular pitfall of target-based policies, such as carbon targets in energy and climate policy. In the 2010s Britain was making good progress towards the 2050 target of reducing emissions by 80 per cent. In 2019, we gave that particular lever another yank, and raised the level of ambition to 100 per cent — or Net Zero as it’s better known. But even that wasn’t good enough for Labour, so Ed Miliband introduced yet another target, which is to fully decarbonize electricity generation by 2030. In pursuing that objective he’s neglecting the crucial issue of energy costs, while also diverting attention away from the slow progress on other parts of the energy challenge like domestic heating.

The more you look at the meltdown of our institutions, the more you’ll find evidence of lever-addiction. Our own party stands on the brink of extinction as a major political force, because despite all the evidence that the country is stretched beyond capacity, neither Boris Johnson, nor Liz Truss, nor Rishi Sunak could stop themselves from reaching for the lever labelled immigration. The possibility that one can have too much of a good thing doesn’t seem to have occurred to them.

There’s a quotation ascribed to Albert Einstein that “the definition of insanity is doing the same thing over and over again and expecting different results“.

There’s actually no evidence he ever said that — and, besides, it only tells half the story.

In fact, the bigger problem is that governments keep doing the same thing over and over again in the expectation of the same results.

Life, however, doesn’t always work that way.