How the UK VAT system identifies vested interests costing us and the earth

Few realise the UK VAT system can precisely identify, at the point of sale, the major powerful global interests skewing our food system. Here’s how it is:

In 1940, Britain was at war, under siege. Dependent on imports (70% then in the case of food, currently ~40%), there were shortages everywhere.

So the Government introduced Purchase Tax on everything they considered ‘luxuries’. Essentials, such as food, were tax-free (zero-rated to be pernickety accurate). They still are. Purchase Tax become VAT in 1972 when the UK joined the Common Market. But not all food products then or now are tax-free.

Some still carry standard-rate VAT, products with low or no nutritional value. They include confectionery, savoury snacks such as crisps, most drinks (except nutritious drinks such as milk), ice-creams, many biscuits and other sweetened finger foods such as cereal bars.

All of these products are ‘drug-foods’; i.e. have sugar, cacao (chocolate to you or me), caffeine and/or alcohol or, as with crisps, designed to trigger a drug-like pleasure response. Consuming them in quantity harms us, thereby costing our society hard cash.

And we do consume them in quantity, our purchases fuelled by huge advertising spend, billions of dollars across the world. A quick look at this Investopedia analysis informs us of the direct correlation between advertising spend in the drinks industry and sales, and that Coca Cola and PepsiCo alone spent $6.36bn in 2017 alone.

Perhaps therefore we shouldn’t be surprised by an impact on us here in the UK. Defra produces annual statistics on our food spend, and they put downloadable spreadsheets on-line. Our analysis of their latest (2017) Family Food stats  shows over 50% of what we spend on household food supplies goes on ‘drug foods’, nearly all of which can be identified through the UK VAT system (see chart, left).

It’s interesting to recognise that the Forbes 2018 list of the biggest food and beverage companies (below) still includes tobacco companies. And of the Top 20 on this list all sell drug-food products, a majority make and promote drug foods only.

The CMO recommends in her Annual Report 2018 that those who shape the environment for health should be held to account. A useful starting point is with these companies on the Forbes List.

Given their impact on human health, should some food and drink companies, all those involved in the drug-food business, have constraints put on advertising and product placement, as we do already with tobacco and drink companies? Ban corporate sponsorship and partnerships with national and local government, nurseries, schools, colleges, universities, research bodies and the NHS?

And is the reason for this not just for the sake of human health, but also for planetary health too?

These companies also use up increasingly scarce natural resources necessary to feed the world’s population. PepsiCo, for example, uses 6% of the UK potato crop to make Walkers crisps. In 2012, it’s been calculated that Coca Cola’s water consumption was enough to meet the annual needs of over 2bn people.

Should limits on their use of land, soil, water and energy be put on these companies too?

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