With a new food strategy in the works, former civil servant Mark Lloyd explores how this opportunity can drive food reformulation and discusses potential models for an industry levy on unhealthy foods.

The Recipe for Change campaign has been calling since 2023 for government to widen taxation on unhealthy food, building on the success of the Soft Drinks Industry Levy (SDIL).

The government’s intention to launch a renewed Food Strategy is a welcome signal that ministers want to address food security and health together - picking up the threads of the previous government’s 2022 food strategy, and the independent review into the food system by Henry Dimbleby that informed it.

Dimbleby’s National Food Strategy (NFS) report rightly highlighted rising obesity levels and related diseases as a problem that is driven by our unhealthy food system, and proposed a tax on all salt and sugar used in food manufacturing to address the problem.

It was, and remains, a credible proposal and one that could lead food manufacturers to reformulate their products.

Many health campaigners and experts got behind it, including the Recipe for Change campaign, and a salt and sugar tax was also amongst the key recommendations of the Lords’ Select Committee report on Food, Diet and Obesity in October 2024, which the Government will be responding to later this month.

However, all taxes have their downsides. If my years of working on tax policy in government have taught me anything it is that there is no perfect tax! The strengths of the Dimbleby proposal – that it is simple, broad and comprehensive - also underlie some of its downsides, and have arguably made it something of a political ‘hard sell’.

By proposing a flat tax for every gram of salt and sugar equally (at a price of £3 per kilo and £6 per kilo respectively) the NFS proposal is very wide-ranging – but it is a blunt tool. The primary aim would be to drive reformulation, but for some food types that are less able to be reformulated, price rises could be steep.  

Food sold in supermarkets, takeaways, and fancy restaurants would all face the same ‘price’ for adding salt, even though they operate vastly different commercial models, and charge vastly different prices.

This is a key challenge for designing a tax like this: the packaged food sold in supermarkets and the ‘out of home’ sector are different price systems. Both need to be addressed by producers changing their recipes - but it is challenging to provide effective incentives for all these systems with a single tax charge.

So, Labour’s proposed new Food Strategy provides an opportunity to look again at other potential models that could drive reformulation. Where should we look?

It’s a fact that foods for ‘in home’ consumption, purchased at supermarkets and the like make up most of the calories we eat, and a lot of this is pre-packaged. This is where most of the focus should be. An ‘unhealthy food’ levy on packaged foods might be able to drive wide-spread reformulation whilst leaving healthier foods untaxed.

How would this work?

The best way to imagine a tax like this would be as an “SDIL Plus” approach. The SDIL charges soft drinks that have added sugar and more than 5 grams of sugar per 100ml. It worked for the Treasury and HMRC because both things need to be clearly declared on the food packaging – a key advantage for the taxman. The SDIL creates different levels of reformulation incentives by charging drinks with more than 8g/100ml a higher rate of tax.

A similar approach could be applied for a wider levy on packaged foods high in sugar, salt and saturated fats – an “HFSS levy”. Levels of all three of these nutrients need to be declared as nutritional information for consumers.

Much like with the SDIL, the tax could be levied only on those products that are deemed ‘less healthy’ based on their nutritional profile, perhaps by reference to their ‘score’ for these nutrients on the Nutrient Profiling Model (NPM). The NPM has been used to underpin the government’s advertising restrictions for less healthy food and drink - whereby less healthy products will not be allowed to advertise before the 9pm ‘watershed’ or online at any time from October 1st 2025.

Again, much like the SDIL, the tax could be scaled, with foods highest in sugar, salt and saturated fats being taxed more to encourage reformulation of the least healthy products.

Fine-tuned taxation

One advantage of this kind of approach is that different categories of food might be charged different rates, based on an assessment of the scope for reformulation in each product category. Much work has been done on this over the years, and industry needs to be set some fresh targets to aim for. Rather than setting a single ‘price’ across many different products you could have a more fine-tuned incentive that taxed sugar levels in “treats” differently from those “hidden sugars” lurking in our main meals, like Bolognese sauces and cereals, for instance.

An HFSS levy that captures the full spectrum of ‘less healthy’ packaged foods – those with high sugar, salt and saturated fats - will be better from a public health perspective and will also be easier to design, and for the government to defend from legal challenges. This is important.

However, it is easy to understand why ministers might pause at the thought of taxing certain kinds of food, and so a potential advantage of this approach would be that ministers could choose to only apply the tax to certain categories of food – much as with the advertising restrictions. This would likely make the tax trickier to implement, and have less impact on public health, but might meet better with political constraints.

Reality check – what would this approach miss?

No tax is ever perfect(!), and all approaches will come with their upsides as well as their downsides.

This one would not address the ‘out of home’ (OOH) sector; to do so would need extra regulations and a separate tax regime. The Food Strategy should not ignore the growing contribution that the OOH sector makes to unhealthy eating, and industry action is sorely needed.  

From a technical design perspective, creating definitions of ‘added’ sugar, salt and sat fats in foods is not quite as straightforward as was for added sugar in soft drinks under the SDIL, because foods are much more complex products, with ‘natural’ levels of sugar, salt and fats in certain ingredients such as dairy products. However, this is not insurmountable – the key thing is that healthier products be exempt from the tax to help maintain public support and political acceptability, which is something that this approach can guarantee.

Break down those silos

Of course, for the government to move forward with an ‘HFSS levy’ key departments need to recognise the impetus for, and advantages of, the approach.

With economic growth stalling, millions having dropped out of the workforce due to long-term illness, and a tough set of choices facing the Chancellor at the forthcoming Spending Review, the Treasury should not ignore the option of funding more preventative NHS care through a levy like this. A healthier nation is also a more prosperous one.

The PM and Health Secretary have made stabilising the NHS and reducing obesity-related illnesses key planks of the government’s ‘health mission’, and both will require bold action. The NHS ten-year plan will be underpowered without a game-changing focus on prevention.

An HFSS levy, then, would be a major boost to the NHS 10-year plan, increase the funds available to spend at the Spending Review, and show that the new government is serious about delivering an ambitious ‘Healthy’ Food Strategy that improves our health, environment and food security. It would be wise to put this option on the table.