Our Health Minister: sponsored by Coca Cola

The Government is currently looking at options for reducing child obesity. Over the weekend the Health Minister Jonathan Coleman again ruled out using taxes and regulation, claiming that a sugar tax in particular “wouldn’t work”. This is despite a major study from Mexico released two weeks ago, which shows exactly the opposite.

Tax and regulation worked for smoking, and would work for food
It is a basic rule of economics that increasing price reduces consumption. This is exactly what a tax does. It is ironic that a Government that claimed the top income tax needed to be lowered because it distorts behaviour now seems convinced the same doesn’t apply to junk food.

The idea that corrective taxes don’t work is plainly ridiculous. Taxes have without doubt been the biggest contributor to the reduction in smoking rates. Regulation around labeling, sales and smoke-free zones has also been important while education comes a distant third.

When it comes to food, the evidence we have (so far) is pretty similar. By far the most cost-effective interventions involve taxing junk food, subsidising good food or regulation – banning adverts to kids, compulsory labeling etc. Education alone has a small impact for kids, but none at all for adults.

While there’s concern that the introduction of a tax will just increase the money people spend on those certain taxed goods (in this instance unhealthy food) to the point that they will cut back consumption of healthy foods, this has never born out in practice, although of course it may be true for some highly addicted individuals.

Do junk food taxes work? ¡Sí Señor!
A year after the Mexican Government imposed a 10% tax on soft drinks, consumption has reduced by 12%. Reductions were bigger amongst poor people, and public health officials are certain this tax is having a positive impact on public health, though it will take a few years before that evidence comes through. Mexican officials are already calling for the tax to be increased, with the revenue used to provide more drinking fountains in schools and public places.

Claims that these sorts of taxes don’t work are usually based on one of two scraps of evidence. Firstly some United States studies have showed that soft drink taxes haven’t had an impact, but these were in states with very small taxes. Once we have a substantial tax – in the order of 10-20% – there is a clear impact on behaviour. Mexico is an example of that.

Secondly, some other studies have shown that soft drink taxes haven’t impacted on people’s weight. While they drank less soft drink, they switched their sugar consumption to other sources – like confectionary. This shows that any junk food tax needs to be comprehensive – encompassing junk food and soft drink – as they have done in Mexico. Soft drink taxes may be a good start, but they will not solve the problem alone – a comprehensive junk food tax will be needed if we are to curb the coming diabetes epidemic.

Government to focus on stuff that doesn’t work instead
Instead of doing stuff that works, the Government is promising to do a lot of stuff that doesn’t.

Top of the list is exercise, which studies have shown time and again won’t make any difference on its own. All exercise does is make people hungry – if they are eating junk food they will still get fat.

The Government has also promised to target portion size, though it is not clear how they will do that. We will look at the issues around targeting the diets of pregnant women in a forthcoming blog. Finally the Minister highlighted the Healthy Families NZ programme, which recently launched and is apparently working with “one million people across the country”. Those million people will probably be surprised to know that, as we doubt they are aware of it.

Apparently education is important to our Health Minister, but there is no mention of supporting schools to teach nutrition, nor even role model it in the school tuck shops. Currently half of Kiwis are confused on how to eat healthily. Surely if it is important to educate people about nutrition, that should start in schools?

Let’s be honest
We don’t mind the Minister opposing junk food taxes. But he should be honest about why he is doing that rather than suggest corrective taxes don’t work. Here are some possible alternative lines of argument for his position – and the appropriate responses:

People have a right to kill themselves if they want to. We should butt out of their lives, it’s none of our business. This is flaky when we the taxpayer have to fund their health bills and suffer the loss of tax revenue when they’re crook. Make them pay their own bills if you want them to act irresponsibly. And consider them filling their kids with crap food as a form of child abuse.

Why are we just picking on soft drinks? We should tax all junk food. Actually, yes that is correct – so do it.

I oppose taxing and regulating my mates. After all, who else will keep the advertising and media industries in business?  What can one say to the processed food lobby’s influence over National Party politicians?

Gareth Morgan is a New Zealand economist and commentator who in previous lives has been business as an investment manager. He is also a motor cycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment. This post first appeared on Gareth's World.