Fizzy drinks to go up in price as Labour ‘milkshake tax’ becomes the first money grab of the Budget

Pepsi, Fanta, Lucozade and milkshake lovers are faced with price increases after Labor confirmed today it will extend the ‘sugar tax’.

In the first salvo of his budget raid on Britons, Wes Streeting announced the removal of exemptions for pre-packaged milk-based drinks.

He also announced that the tax threshold had been reduced from 5 grams of sugar per 100ml to 4.5 grams, which would potentially drag in more drinks.

“This government will not look away as children become unhealthy,” the Health Secretary told the House of Commons.

The move is being billed as part of the fight against obesity – but could also raise £45 million a year for the Treasury.

This will be welcomed tomorrow by Chancellor Rachel Reeves, who is desperately trying to fill a widening gap in public finances.

The change, made after consultation, will affect packaged milkshakes and coffees, but not drinks made in cafes and restaurants.

The exemption for milk-based drinks will be replaced by a ‘lactose deduction’, which will take into account the natural sugars in the milk component of drinks.

Conservative MP John Lamont was among those to condemn expansion of ‘sugar tax’

Ministers are removing exemptions for milk replacer drinks such as oat milk, which contain ‘added sugar’ beyond that derived from the main ingredient.

Currently the Soft Drinks Industry Levy sees companies pay at least 18p per liter for soft drinks containing 5g or more of sugar per 100ml.

However, this rate is reduced to 4.5 grams per 100 ml. The government said it backed down from lowering the level to 4g after companies complained they could not reformulate and pass the costs on to consumers.

The changes will now be subject to a ‘technical’ consultation and are not expected to come into force until January 2028 (nine months after the previously billed date).

Mr Streeting said: ‘Obesity is depriving children of the best possible start in life, hitting the poorest hardest, leaving them with lifelong health problems and costing the NHS billions of dollars.

‘Therefore, I can tell the House that we are extending the levy on the soft drinks industry to include bottled and carton milkshakes, flavored milk and milk substitutes.

‘We are also lowering the threshold to 4.5 grams of sugar per 100 millilitres.’

The government’s response to the consultation acknowledged this would affect 11 per cent of soft drinks sales.

“The government recognizes that reformulating will face technical challenges for the industry to reduce 5g total sugar to less than 100ml, and some soft drink manufacturers who chose to reformulate following the initial introduction may choose not to do so this time,” the document said.

‘But manufacturers will now need to reduce total sugar to just under 4.5 grams per 100ml; ‘This represents a smaller than necessary reduction in total sugar compared to the original consultation proposal.’

The response suggested that only 35 percent of affected drinks would see a price increase, while others would see their sugar content drop below the threshold.

Introduced in April 2018, the Soft Drinks Industry Levy is a tax on soft drinks with added sugar in the UK.

The aim of the legislation was to put pressure on manufacturers to reformulate their products to reduce sugar content or reduce portion sizes.

The idea was that the tax would also encourage importers to import low-sugar reformulated drinks to encourage soft drink consumers to switch to healthier choices.

The Treasury says the tax has led to an average 46 per cent drop in sugar between 2015 and 2020 in soft drinks that must comply with the rules.

‘Obesity is the biggest problem in our health service for this generation,’ health minister Karin Smyth told Times Radio on Tuesday.

So-called ‘milkshake tax’ will remove exemption that currently prevents milk-based drinks from being tax-eligible

Asked whether tackling obesity was more important than raising revenue, he said any tax measures would be set out in the Budget but ‘the broader point is to tackle obesity, which we know is one of the biggest causes of poor health, and therefore the demand for healthcare services’.

He added: ‘Measures we have already announced as part of the manifesto to reduce junk food advertising, particularly to protect young people from becoming obese; Because if you become obese at a young age, it limits your life chances…

‘Obesity is the biggest challenge in our healthcare for this generation and it is important that we make sure we create the healthiest generation of young children going forward.’