The Equity Impact of the Soft Drinks Industry Levy (SDIL) in the UK

Background: The Soft Drinks Industry Levy (SDIL), announced in the UK in 2016, aimed to reduce SSB consumption. A criticism is its economic regressivity as those with lower incomes pay a greater proportion compared to higher incomes. We use the Extended Cost-Effectiveness Analysis methodology to analyze the equity impact of the SDIL. Methods We computed overall change in SSB consumption from the SDIL by income group and levy charges as a proportion of SSB expenditure per group. We considered averted cases of obesity and diabetes prevalence across income groups. We analysed averted direct and indirect costs due to reduction in health costs across income groups. Results After introduction of the SDIL, additional SSB costs were £42,334,968 for the lowest income tertile, £26,238,564 for the middle tertile and £35,474,062 for the highest tertile. 87,500 overweight cases and 59,900 obesity cases were averted in the highest income tertile; 82,300 overweight cases and 47,700 obesity cases in middle tertile; and 145,300 overweight cases and 97,300 obesity cases in lowest tertile. Direct diabetes cost savings due to cases averted annually is £18.52 million with greatest savings of £8.18 million in the lowest income tertile, £6.29 million in the middle tertile and £4.1 million in the highest tertile. The indirect savings saved include the savings of reduced absenteeism is £24.16 million overall, with greatest savings in the lowest income tertile of £10.66 million, £8.2 million in the middle tertile and £5.3 million in the highest tertile. Pension savings were calculated to be £23.5 million, £18.1 million, and £11.7 million across income tertiles lowest to highest respectively. Savings due to reduced expenditure on social welfare were £8.4 million saved overall, with £3.75 million saved in the lowest income tertile, £2.88 million in the middle tertile and £1.86 million in the highest income tertile. Conclusion We found that the distributional impact of these factors across income tertiles demonstrates that the SDIL is not regressive as is assumed with many SSB taxes. The net savings are greatest in those of the lowest income tertile, and the net costs are greatest in those of highest income tertile.