The impact of fiscal food policies on the macro-economy: the case of the UK Soft Drinks Industry Levy

The UK government announced the ‘Soft Drinks Industry Levy’ (SDIL), a tiered tax on sugar-sweetened beverages (SSBs), in 2016 and implemented the tax in 2018. Traditional economic assessments of SSB tax interventions focus on assessing healthcare cost implications using the standard Cost-of-Illness methodology. No studies have so far attempted to apply macroeconomic assessment methods to assess net macroeconomic impacts of SSB taxes, including anticipated standard tax-efficiency losses and macroeconomic gains from reduced health externalities, or to assess trade-offs between macroeconomic and health outcomes. We established a novel framework consisting of a dynamically-recursive sectoral macroeconomic Computable General Equilibrium (CGE) model of the UK economy linked to the nutrition-focused multi-state lifetable PRIMEtime epidemiological model, and applied this framework to estimate the future macroeconomic impacts of the SDIL, and trade-offs with future health gains, over 2018-2040. Overall, the SDIL is estimated to lead to future health gains of 86,951 Disability-Adjusted Life Years (DALYs) saved, and health-related macroeconomic gains of £2.49bn, including £1.33bn due to shifting consumer demand exposures, and £1.15bn due to SSB product reformulation. Due to additional tax-efficiency losses, the SDIL is estimated to result in a limited overall cumulative real GDP cost of £2.01bn (0.004%), and in an SDIL cost-effectiveness ratio of £23,116 per DALY saved, which suggests that the SDIL is cost-effective. Since product reformulation accounts for 46% of macroeconomic gains and makes up for >25% of overall tax-efficiency losses, this demonstrates the importance of SSB tax schemes to incentivize product reformulation to ensure that they maximize health impacts and cost-effectiveness.