There’s been a lot of talk recently about Plaid Cymru’s Pop Tax, the Party’s plan to add a 20p per litre levy on sugary drinks.
Since announcing the policy a number of high profile and leading experts have come to a similar conclusion.
Politics being what it is, opposition parties have dismissed the idea, whether or not it’s a good idea!
Government has already stepped in to nudge people’s behaviour in certain ways. There’s a huge tax on tobacco, for instance; certain food stuffs are banned.
“In order for profits to be high, corporations organize workers, raw materials, capital equipment and rents so that their costs are as low as possible. Let’s take the hypothetical example of McDonald’s, and follow the route it takes to calculate those costs. As an institution with a mission to return profits, it’s keen to squeeze down what it pays for the things that go into making hamburgers, everything from beef to labor to rent to safety testing. The more it can drive down costs below those of its competitors, the more money it stands to make. If McDonald’s is able to cause the emission of pollutants like CO2 without having to pay for it, then the costs of the firm are not the same as the broader social costs. In modern economics, the term used for these social costs is “externalities”. These are the costs that somehow slip through the net of prices. It was the early twentieth-century English economist Arthur Pigou who coined the idea tat markets often miss the wider implications of their behaviour because of a flaw in their very fabric – a fault that affects what is internal to prices and what is external.
“To see externalities in action, let’s return to the Big Mac’s carbon footprint, to pick just one environmental impact among many. According to one estimate, the energy cost of the 550 million Big Macs sold in the United States every year is $297 million, producing a greenhouse gas footprint of 2.66 billion pounds of CO2 equivalent. In addition to the carbon in the footprint, we might want to add the broader environmental impact in terms of both water use and soil degradation, together with the hidden health costs of treating diet related illness such as diabetes and heart disease.
“While none of these costs are reflected in the drive-thru price of a Big Mac, they still have to be paid for by someone. It’s just that they are paid not by the McDonald’s Corporation but by society as a whole, wen we pay the costs of environmental disasters, climate-change-related migration and higher health care costs. According to a report by the Centre for Science and the Environment in India, a burger grown from beef raised on clear-cut forest should really cost about two hundred dollars.
“That particular number may seem exorbitant, but when examined on a grand scale, the full costs of a four-dollar Big Mac may be even higher because, in addition to not paying their externalized costs, corporations often get a range of subsidies. Consumers in the United States are paying for cheap hamburgers directly through their tax dollars. The meat in McDonald’s hamburgers is fattened on corn, the most highly subsidized drop in America. A report from Tufts University claims that the American beef industry saves some $562 million a year, on average, by fattening cattle on subsidized corn. Total subsidies to corn topped $4.6 billion in 2006.”
It goes on to explain about the costs of low wage and the effective subsidies Government gives companies that pay low wages through the benefits system.
So while I would rather see the manufacturers of these sugary drinks pay the actual value of their product, within the limited powers at our disposal it makes perfect sense that the individual who chooses to consume the product pays a greater part of the actual cost of the drink.