Sugar tax to be extended to milkshakes and dairy substitute drinks

The sugar tax applied to fizzy drinks is set to be extended to milkshakes and similar treats under Government proposals.

Plans to end the exemption from the levy for dairy-based drinks, as well as non-dairy substitutes such as oats or rice, were put out for consultation on Monday.

Chancellor Rachel Reeves had said in her autumn budget last year that the Government would consider broadening the tax to include such drinks.

The Treasury confirmed plans to press ahead with the changes on Monday, as well as a proposal to reduce the maximum amount of sugar allowed in drinks before they become subject to the levy from 5g to 4g per 100ml.

As a result of widespread reformulation after the initial announcement of the so-called soft drinks industry levy (SDIL), 89% of fizzy drinks sold in the UK do not pay the tax, the Treasury said.

Some 203 pre-packed milk-based drinks on the market, which make up 93% of sales within the category, will be hit with the tax unless their sugar content is reduced under the new proposals, according to Government analysis.

The SDIL was introduced by the previous Tory government in April 2018 as part of its anti-obesity drive.

The exemption for milk-based drinks was included because of concerns about calcium consumption, particularly among children.

However, the Treasury said young people only get 3.5% of their calcium intake from such drinks, meaning “it is also likely that the health benefits do not justify the harms from excess sugar”.

“By bringing milk-based drinks and milk substitute drinks into the SDIL, the Government would introduce a tax incentive for manufacturers of these drinks to build on existing progress and further reduce sugar in their recipes,” it said.

The Institute for Economic Affairs, a right-wing free-market think tank, expressed concerns about the cost to consumers of the proposed changes.

“The sugar tax has been such a dramatic failure that it should be repealed, not expanded,” said Christopher Snowdon, head of lifestyle economics at the institute.

“Sugar taxes have never worked anywhere. What happened to Starmer’s promise to not raise taxes on working people?”

The Government consultation on the plans will run from Monday until July 21.