Fat tax or thin subsidy?

Our health depends on what we eat and persistently high levels of obesity, increasing prevalence of diabetes and other non-communicable diseases such as cardiovascular diseases, suggest that we need to improve our diets. This does not only mean reducing the amount of unhealthy foods and beverages consumed but also increasing the amount of healthy foods eaten (such as vegetables, fruits, or wholegrain cereals).

In our recent paper “Fat tax or thin subsidy? How price increases and decreases affect the energy and nutrient content of food and beverage purchases in Great Britain” published in Social Science & Medicine,  we looked at how energy and nutrient content of the foods purchased and brought to home change if price of less healthier foods increased by 20% and the price of healthier foods decreased by 20%. The main message from the analysis is that such price changes, depending on healthiness of foods can have a positive net effect on the diet without costing more to the consumer. We found, for example, that energy content fell by 68kcal (3%) per capita per day on average, sugar content fell by nearly a teaspoon (6.3g/5%), while fibre content increased (0.9g/5%). Looking across socio-eocnomic status (SES) we found that increasing the price of unhealthy foods reduced purchases (and energy, sugar, salt and saturated fat content) most for low-SES households but price decreases increased the fibre content of purchases most for mid-SES households.

With such price changes, weekly expenditure on healthier foods increased on average by £5.9 while expenditure on unhealthy foods dropped by £7.3, making an average saving of £1.4. While savings were made across all socio-economic groups, this was also greatest among the mid-SES households.

When we looked at individual food groups, the largest decrease in energy content was seen from increasing the price of sweet snacks (46kcal per capita/day), desserts and puddings (39kcal) and fats and oils (29kcal). Largest increase in energy content from healthier foods was seen from decreasing the price of healthier breads (35kcal), vegetables (26kcal) and fresh and frozen white meat, and eggs (20kcal).


What is interesting to note, is that because the energy and nutrient content of daily purchases is already very near or above the recommended daily intake, then decreasing the price of healthy foods alone, is not going to help as it would lead to an overall increase in the energy purchased (albeit from healthier foods). Reductions in purchases of other foods that people may give up instead (i.e. the cross-price effects) were not large enough to counterbalance this. Likewise, only increasing the price of unhealthy foods, there is a risk of reducing purchases of good nutrients such as fibre. Therefore, improving diets should come through adjustment of relative prices of both healthier and less healthy foods – or in other words from both fat tax and thin subsidy.

Our analysis used data from Kantar Worldpanel with more than 36mn individual records of purchases by more than 26,000 British households between 2012 and 2013. Using these data, we estimated how responsive is the demand to price increases and decreases is across 26 healthier and less healthy food groups. Whether foods were healthier or less healthy was calculated based on the Nutrient Profile Model used by the UK Department of Health. Knowing the amount of energy and nutrients the purchased foods and beverages contain we were then able to calculate average change in the daily purchases given the responsiveness of the demand to price changes. One of the main limitations of our analysis is that we were not able to include foods purchased and eaten outside of homes.

L Cornelsen, M Mazzocchi, R D Smith, Fat tax or thin subsidy? How price increases and decreases affect the energy and nutrient content of food and beverage purchases in Great Britain,
Social Science & Medicine, 2019, https://doi.org/10.1016/j.socscimed.2019.04.003.