Hello and welcome to this edition of the IFS Zooms In with me Paul Johnson. And joining me today I’m delighted to say that we have my colleague and associate director here Kate Smith, and also Henry Dimbleby, author of the report for government on the National Food Strategy. And we’re moving into slightly unusual territory for the IFS today as we look at that food strategy and really ask the question of what it is the government should and could be doing to influence our diets and what role economic instruments among others might play in doing that.
But perhaps we can start, if I come to you Henry, just by asking this kind of very broad question, what’s it got to do with government? It’s a question I think quite a lot of people ask when it comes to our food, we can go out and buy what we want from the shops, we can make decisions about whether we buy healthy things or unhealthy things, and I’m sure you’ve been asked this a million times, what are you doing, what’s government doing telling us what we should be eating?
Well, I think that there are two questions there, I mean the word “involved” is very interesting, but what we started, I started in the report by talking about what is the role of governments at all? You know what should government be doing? And obviously the free market has created a food system that brings us an abundance of food at a cost that would be unimaginable, cheap, to previous generations. And I quoted an interview, a recent interview with journalist Andrew Marr who said, who had, he had been explaining why he’d gone from being a Marxist to believing in free markets and he said, you know, he’d come to realise that free markets were the most extraordinary, powerful things in delivering us all what we want, and he realised that controlled economies were clearly madness and could never achieve what free markets do.
But the problem with markets is that they do two things, they create dirt, and they increase inequality. And his view was that therefore the role of governments, in addition to free markets was to clean up dirt, or make sure it doesn’t get emitted in the first place, and to reduce inequality. And if you look at the food system, and if you think about dirt or externalities as you guys would call it, when it comes to the environment the food system is the biggest cause of the lack of fresh water, of the pollution of fresh water, of the drop in biodiversity and deforestation, of over-fishing, and with energy it’s one of the two biggest causes of climate change worldwide.
And then if you look at the health side, and there is a question of whether you call these externalities or internalities, but the health, but the food system’s making us sick and by 2035 it is estimated that the cost of treating type two diabetes alone is going to exceed the cost of treating all cancers. So, and all, and both of those things interesting are, both of those problems visit themselves most acutely on the poorest in society. So, there’s also, it exacerbates inequalities.
So, the reason that government should have an interest in, in my view, in getting involved in some way, and I’m sure we’ll come on to talk about what ways in the food system, is that the food system creates a lot of dirt and exacerbates inequality.
I much prefer that word “dirt” to externality, I think we can definitely learn it, how we communicate by starting to talk about externalities as dirt. And that’s a, you know, that was an answer that any aspiring economist here could have given in terms of talking about what the, as you say, the externality effects of the current system are.
I mean what’s your sort of underlying diagnosis as to why we have a system like that? I mean it’s not as if it has to provide us with unhealthy food, and it’s not as if we have to buy that unhealthy food. What is the actual, what is the market failure here, to use that economics term? Why aren’t we doing what is good for us?
So, the, I think there are two feedback loops in the system that have gone wrong. On the health side, there’s a very clear toxic relationship between our evolved appetite and the commercial incentives of companies. So we evolved to seek out food that was calorie dense and you know high in sugar and fat and salt, and food companies, not because they want to kill our children, not because they’re evil, but they have found that it is, you know, there are twenty-eight types of KitKat that you can buy in the UK, and there aren’t twenty-eight kinds of broccoli, and the reason that is because it’s just easier to sell that stuff. There’s a bigger market, we seek it out. And so, you can see it over time, what’s happened is they have invested more resources in researching and developing and selling that to us, we’ve eaten more, they’ve sold more, and you have this kind of vicious re-enforcing circle that’s kind of led to a problem where we’re now swamped with foods that are killing us.
On the environmental side, its actually the lack of a feedback loop. So Partha Dasgupta, the economist, Cambridge economist, in his report for the treasury, the economics of biodiversity, points out that not only do we not bill the cost of nature into our economic system, in particular our food system, we actually subsidise, globally, the destruction of the environment by about $500 billion which he estimates causes about three and seven trillion dollars of environmental damage. So, we’re actually not, not only not recognising the externality, we’re giving nature a negative cost. And actually, those two things, those two failures, health and the environment, while there are some areas where they interlock, they’re actually separate problems. Which means that the levers that government, or that we recommend the government uses to solve them are different.
Yeah, they’re clearly, as you say, two different things, although sometimes they’re related, presumably it’s better for the environment and for us, potentially, if we eat more vegetables rather than animal-based product?
Yeah, there are areas such as eating vegetables, in particular is one area, but also in terms of what the government might want to do on food standards, on certain forms of regulation, you’d want to see some kind of coordination between the department of health and social care and the department of the environment.
Now your number one recommendation in your plan, and obviously the one that got quite a lot of coverage and interest was the introduction of a tax on sugar and salt. You’ve got a whole range of recommendations we should sort of come to some of those other ones, but how important for you in the whole system of changing the way that we eat, is the use of a tax to reduce sugar and salt consumption?
So, when - I first did some work for government in, with my business partner John Vincent in Leon, way back in 2013 and that was on school food, and that was commissioned by Michael Gove who was then the education secretary. And he said to us quite early, he said, “basically I can do, there are only four things I can do as government, I can tax things, I can subsidise things, I can compel people to do things, and I can ban things.” And then he added, “I can also make a speech, but I’ve found that the other four tend to be more effective than speech making.” And when we looked at this, we call it ‘the junk food cycle,’ this interaction between our appetite, our evolved appetite, and the profit incentives of companies. It was clear to us, and actually all of the CEOs of the food companies pretty much all of them said, “we can’t do this on our own, because if we, what we find is whenever we do something, the competition just move into the space, and rather than solving the problem, rather than us selling less salty pizzas, people just go and buy them from someone else.”
So, the first thing was we felt that is needed some kind of government intervention. And then the question is, what kind of government intervention do you put into place? And if you look at, and the answer is actually quite a lot of things. So, we have a kind of smorgasbord of things that cover tax and subsidies, compelling and banning. But if you look at, some people will say well it’s about making them label things the right way, you know changing where you can advertise, just regulations, compelling and banning. And those things tend to be quite complicated, they are gameable, so for example at the moment, one of the bans is advertising, that’s coming in in April, is aisle-end advertising of unhealthy products. And already the cereal companies are working on mid-aisle aisle-ends, so they’re going to create displays that pop up with the same impact mid-aisle. So, a lot of that’s gameable.
Subsidies, so people say, “why don’t you, rather than tax, why don’t you subsidise fruit and veg?” Problem that is you’d be subsidising me and you and Kate, you’d be subsidising all our veg, so that’s incredibly inefficient use of funds, it would be very expensive. And therefore, we settled on a tax as both the cleanest, most ungameable measure, but also one that could create significant change. And there is quite a lot of evidence from in particular sugary drinks taxes, that you can shift the system in that area. So that’s why in the end, we kind of looked at all the various ways that you could intervene and decided actually the only thing we thought would be, would actually shift the system you know, needed to sit in the middle of all the recommendations, was the tax.
So, let me turn to Kate at this point and ask Kate, what do we know about the evidence of how impactful taxes can be on what we consume? I mean you might want to draw something from what we know about alcohol taxation for example as well as food. But of course, we’ve got the example of the fizzy-drinks tax in the UK and all sorts of examples internationally.
Yeah, I mean as Henry said, you know I think tax has actually a number of appealing features, in terms of trying to change people’s behaviours. So, the fact that it gets around his kind of coordination failure that kind of exist, you know, and sort of try and get others to do things just off their own back.
It also means that it does have sort of a nice tie to the idea that actually if there are these externalities then actually by setting a tax kind of, equal to these externalities, and that’s a good way of improving outcomes. And actually, one of the, again one of the benefits relative to say banning things, is that actually it means that for those people who actually you know consume a relatively small amount of chocolate every now and then, they’re still able to do that without it being sort of completely restricted.
In terms of the evidence that we have on the impact on these, so the taxes of the scale that Henry has kind of been talking about, which are much larger than really what we’ve seen really world-wide, I think it’s quite exciting to think about the possibilities that they might have for improving diet more widely. But most of the taxes that we’ve seen to date are sort of focused on those soft drinks, or sugary drinks, which are now sort of quite commonly taxed actually by a lot of countries and cities and states in the US as well. There are also taxes on things like confectionary has been introduced in some European counties, and another sort of smaller taxes.
But in terms of the effects, so one of the things that you’d like to see is that if you introduce a tax, that actually it does translate into higher prices for consumers to create this incentive to choose healthier options, and this is something we do see in practice. So, if you tax you know, Coca-Cola, then Coke becomes more expressive relative to Diet Coke. It also does look like it has an impact on the amount that people buy as well. So, we do see that purchases are responsive to taxes that are introduced. The extent to which they’re responsive does depend on a sort of, lots of different features about how the tax is introduced. It also depends on you know how widely applied it is. So, some US cities, for example, have introduced these taxes on sugary drinks and then you can get problems of sort of cross boarder shopping where people will just go outside the city boarder, but at a sort of national level, that’s less of a concern.
I think one of the things that’s actually very interesting and has been a bit less well studied, at least in sort of what we know so far, is the incentives that these taxes create for firms and manufactures to actually change the nutritional content of their products. So, the incentives to do this depend quite a lot on how you design the tax. So, the UK tax on soft drinks is a good example of this, where because there were two bans where more sugary drinks, so those with sugar greater than 8gs per 100mls, were taxed at a higher rate than those that had between 5 and 8gs of sugar per 100mls. What this has actually done has actually really encouraged quite a lot of manufactures to reduce the sugar content of the drinks that they’re providing. And so this suggests that actually it’s important to think about almost the nitty gritty of these policy details, because actually that can sort of relate these effects that on the one hand might be positive because actually we’re sort of getting this potential benefit from the policy that we might not have thought about, but also if we don’t think though all the incentives that the policy are creating, you can also get unintended consequences in the other direction as well.
So, one of the impacts of the way that I understand it the fizzy-drinks tax was created is that there has been a big incentive for firms to get down to say 7gs per 100mls but not much incentive to go below seven and so we’ve had a sort of positive effect down tot here but then we’re a bit stuck and there’s not much else happening. Is that fair?
Precisely so because there is a current tax basically creates an incentive for you to jump just below the 8g threshold or just below the 5g threshold, but not to go any further. That’s not a requirement of the way that we tax, you know there are ways to design these taxes that would encourage you to reduce the content of you know, sugar content, salt content in other cases, you know, continuously. So, sort of encouraging that across the range of nutrients in the product which you know, would be actually a more effective way at encouraging the provision of healthier products on our shelves.
So, Henry, as I said that was your number one recommendation, first recommendation that appeared in the part of your plan that is entitled, ‘Escape the Junk Food Cycle and Protect the NHS,’ (where have I heard ‘protect the NHS’ before?). What else in terms of that you know getting away from the consumption of poor-quality food? What else is it that you’re thinking that government and indeed the rest of us should be doing?
If I can I just want to add one thing on the tax and a couple of points which quite for this audience might be quite interesting about the tax. One is the idea of, as you will know, the idea of hypothecated taxes is generally thought to be a nonsense by fiscal experts, but we actually hypothecate, we suggest the hypothecation of some of the 2.9-3.5 billion of this tax towards schemes which directly subsides healthy food in the poorer segments of society, which apparently, according to tax experts we consulted, is the one area where you are allowed to hypothecate, because you’re basically tipping the incentives. So, you’re both making the reformulation at the top end less attractive, and then putting in a subsidy on the bottom end.
The other things is a political observation that I had about the general government policy versus how you operate in a business. So, in a business you’re constantly testing what your proposition looks like, what your pricing looks like, and because it’s a complex system, you don’t really know that’s going to stick and what’s not going to stick. And in the tax world you spend all this capital, you know George Osborne with sugary drinks levy, was to-ing and fro-ing with treasury trying to create the perfect thing, Camilla Cavendish did a lot of work in Number 10, and then they, rather than doing a right-around on it they put it on the budget, which means you didn’t have to sign it off across governments, so they avoided all of that, of that problem. And it kind of collapsed over the line and we’ve still got the same sugary-drinks levy which as you say, has done some things. There are quite, there is a kind of backing up of drinks against the various areas. And it’s almost impossible to do what you should do which is, which is tweak it, but I don’t know what you do about that, I think it’s quite an interesting – obviously, having more governments world-wide to learn about, other people doing your experiments helps, but I think it seems to be one of the fundamental problems with trying to introduce taxes of this nature.
But the other, to answer your question, the other areas in the, in the environment, we actually think that you can do it, you don’t need tax, you can achieve the, you basically have to do three things in the environment. You have to restore biodiversity, you have to produce enough food, and you actually have to get the land to negative, net-zero’s not enough on land because there is still industries, such as travel, steel manufacture that are going to need the land to mop up carbon emissions. And we think you can get that three things net-negative, biodiverse-positive and enough food by using as the government is planning to do, the CAP money for paying public money for public goods, and doing that with intelligent regulation. But it only works if you get your trade policy right. Because if you, you could create a kind of perfect system here and then just import very cheap beef from Brazil which basically you’re exporting you r carbon emissions and your environmental harms abroad.
And we’re in a very interesting position at the moment. Because we had a secretary of state, Liz Truss, in trade who really just wanted to get the free-trade deals done, and it was a kind of Brexit as – the objective of Brexit as being free-trading. We’ve now got a secretary of state, Anne-Marie Travelyan, who has been involved in carp and has a farming constituency, who I think sees Brexit as, “what is that we value?” and achieving what we value. And depending on those two things, I think you might begin to see a very different attitude towards the trade deals coming out of – I hope so anyway – coming out of the department for international trade.
In terms of the role of government in getting us to eat more healthily, we’re looking at taxation, how effective can public bodies be in persuasion? I think you used the term in your report, nudging us to better behaviour as well. And do you see a role for additional regulation? You said, you made the, in the sense the classic economist case for tax as opposed to banning and compulsion. Do you see a role for banning certain things, compelling certain things?
Not so much in banning. So, I think there are two things that need to happen. We live in a country where we, more than 50% of the food we eat is kind of ultra-processed. That’s way higher than Italy or France or countries with a hold onto their food culture, and part of what we need to do is we need to change our food culture. We need to encourage more cooking from scratch, more eating vegetables, fresh ingredients. But at the same time that is a very long transition, and the tax, as I see it, makes the processed stuff less bad for you. But on that cultural transition, I think there’s a huge role of education, and there’s a big package that we recommend with education; and interestingly, education is, if you go, if you ask a libertarian on what the libertarian might call a nanny-stater, they all say education is important, and yet it is never because of the way government is structured, having good food in schools, a good food education is never on the top ten of the to-do list for the secretary of state. So that is something I’m trying to kind of un-pick at the moment in government. So, I think there is a huge role there in equipping the next generation with the skills to enable them to look after their bodies and to feed their families well.
And the other area is the government, about 5% of all of the calories that we eat in this country are bought by the government. And that, if you look at government changing, that could significantly change the supply chain. And the example I always thing of there is McDonalds and free-range eggs. So the EU had set a target for when countries in the EU should be having more than 60 or 70% free-range eggs, I can’t remember the exact target, and we were moving quite slowly, and then McDonalds decided to make all its eggs free-range in its supply chain, and England, and they did it in England first, and England massively accelerated, we had that title because suddenly all the farmers were making free-range eggs, we worked out how to do it cheaper, so I think the government’s 5% spending can actually, if they changed it, just changed what’s available to other people in the supply chain, enable us to accelerate the transition.
Kate, you’ve looked not just at the impact of taxes, but you’ve looked at some other regulations, haven’t you? And for example, the impact of adjusting, or regulation when and how firms can advertise, and indeed the impact of things like the five-a-day target for fruit and veg, how effective can those sorts of policies be?
Yeah, so actually l just as Henry was saying that it was making me think about this, again this coordination idea and the fact that actually, a small number of firms can really have quite large impacts on the food consumption of the population. So, actually we looked at something a few years ago that was about governments aim or strategy to reduce the amount of salt that we eat. And this was kind of a two-pronged approach. So, on the one hand, they worked with industries to introduce a series of targets essentially to reduce the amount of salt that’s in the products that contain the highest salt. So, bread, a lot of sauces and cooking ingredients, these kinds of things, a range of targes across different foods.
And then at the same time they also had an information campaign that was emphasising to people the dangers of eating too much salt, where it comes from and so on. And we did an exercise to essentially try and disentangle these two different effects. Because what you see is that over this period there was a big decline in the average saltiness of the foods that people were buying from supermarkets, but actually that was entirely driven by what firms were doing to reduce the salt content of their products. And actually, the sort of switching from consumers really didn’t have a big impact. So that’s not to say, of course, that information, and I think education is hugely important, especially for children and sort of teaching them how to cook and what a healthy diet is. In that case we didn’t find that it was particularly influential. Whereas this sort of targeting industry was quite important and actually again, kind of touching on the inequality point, was particularly good at reducing the salt content of the groceries bought by the poorest households. Again, so the people who may be a bit less receptive to some of the information campaigns.
In terms of advertising that’s obviously a huge, hugely sort of important part of a lot of the promotional activity that food manufactures and retailers do, so we’ve had, for quite a few number of years now, the advertising of junk foods on children’s television has been banned. And actually Henry’s comment about things being gameable, I think this was another good example of this where you had things like there were cuts of as to how healthy the food could be in order to be advertised to children. And you saw that for example, so McDonalds did a lot of ads that featured only carrots in their adverts. And there was also things like Kellogg’s created this cereal called, well I say created, they happened to have a new cereal product called Kellogg’s Coco-Rocks that were somewhat similar to another chocolate-y Kellogg’s cereal, but happened to just fall below the threshold or whether or not they could be advertised to children. And so, firms do respond to incentives.
Actually, you know the evidence on the effectiveness of that particular advertising ban is it didn’t, it’s not really changed the amount of advertising that children are exposed to, because a lot of the times they’re watching television at, you know, on non-children’s television, I think that particular policy hasn’t sort of dramatically changed the adverts they’ve seen. I mean if we were to move to something much stronger, you know banning junk food advertising pre the watershed is sort of one possibility, that obviously is likely to have a bigger impact, at least on the adverts that people see. Now of course, the big question is does that translate into a reduction in purchases of unhealthy stuff, and I think again, the evidence here is a little, it’s a little unclear. It probably will have some effect, but one confounding factor is that firms can also chose to change their prices. So, when you restrict how much they can advertise, they also might respond by changing how expensive their products are. And potentially if they make them cheaper, then that can actually off-set the impact of advertising on the amount that people chose to buy.
I think that, I mean both what you said there and what Henry said earlier on I think is a very important reminder to us all that it can often be very complicated making effective policies in some of these areas because you may think you’ve banned something that, or regulated something, or even taxed something and a different behaviour than you expect pops out the other side. Henry, I mean you produced your fantastic report and it’s a big and detailed one with plenty of recommendations and it’s got quite a lot of positive things to say in there about how the food industry is keen on change but it, in a sense, doesn’t feel like it’s got the correct structure or system to work in to give it the incentives to do that. There’s a sense from everyone that we do need change and as you say in the report, perhaps particularly post COVID and the knowledge that, particularly if you were unhealthy or over-weight to start with you were more at risk. So, there’s quite a lot in there that suggested you were somewhat optimistic at least. I mean how optimistic are you now about how we’re doing on this? Whether the government is taking this forward, whether we are in fact on route to a more sustainable, healthier, more environmentally friendly food system?
On the environmental side, I am very optimistic, I think all of the, all of the policy levers are in place now with the environmental land management scheme, the repurposing of CAP and the proposed new regulation. The question is that will be a big transition for farmers, for the land, and obviously if there’s a big transition, there’ll be winners and losers and therefore there is always the risk that the ambition overtime gets reduced. But it’s in place.
I think I have sensed a, since the prime Minister went into hospital with COIVD there has been a fundamental change, and I’ve been working in this space for a long time now, but there’s a real fundamental change across government. I think that the junk food cycle, this idea that there is a link between the profit incentives of companies and the health outcomes, and that that needs to be tackled directly is now pretty much omnipresent. The question is it’s very frightening then and you know, if you’re not going to - tax looks, you know what happens if companies can’t reformulate, what happens if it puts prices up, all that is worrying for a government. And then if you can’t, if you don’t do that, what is, how are you going to break that cycle? And I think that we are miles ahead of where we are five years ago. So I am, you know, I’m pretty optimistic to be honest on all of these things.
I think, it’s very interesting that the, you need, your job as someone who does a review, you need to create a narrative, and you need to try and change the way that people think about the system, and then you need to make sure that everyone inside and outside understands that, but then when specific polices get implemented, there’s a kind of strange, you know there’s a combination of various different things and it could - I think, with the, with the kind of taxation of sugar in particular I think that will happen, the question is when and by which government. But it is clearly going to happen at some point because there’s really, you know there are no downsides from it, so the question is when.
What would be your number one message to government at the moment? What’s the next thing? What would you like to see them do within the next year that would really give you, you know even more optimism and confidence about things going in the right direction?
Actually, the single most important, the biggest problem that has been over time is that you’ve had, in trying to get this solved, is that you’ve had different government departments pulling in different directions. And the food system itself has had – different government departments have had different objectives. And I actually think the slightly wonkish but there’s a series of legislative things, similar to climate change committee, where the government needs to build in in law a set of targets on the food system and a regular process for reviewing them. Because that really has worked well for the, for climate change, and what has happened it the past with these kind of reports is that you’ve had someone do it, and then a few things have happened but nothing kind of systemic, and I really think you need that legislative backbone to keep the momentum up and stop it you know, someone else having to come back and do the same thing again in five years’ time.
That’s actually a really interesting perspective, actually we are recording this on the day that the government has just introduced its net-zero strategy which came in part as a response to a request to the climate change committee that Henry’s just referred to and indeed I think was rather importantly led from the treasury and actually getting that central coordination within government for something which as you say is very much a cross-departmental, cross-government issue. And which is often not, you know, often people think is important but is often not right at the top of their agenda in any individual bit of government is I think you’re right, absolutely crucial, it’s something that’s very difficult to measure in the way that we economists normally measure things in terms of prices and polices and all of these kind of things, but I think that certainly rings true.
It’s probably time to bring this to a close, so thank you Henry, thank you Kate for a fantastic, and absolutely fascinating discussion and conversation about where we are with food and what government needs to do and how important that is. So, thank you everyone for listening and please do join us again for the next edition of the IFS Zooms In.
To see all of our work, please visit www.ifs.org.uk and to further support our work, consider becoming a supporter of the IFS for just £5 a month. You can find a link with further information in the episode description.
Thank you for listening and stay well.
The food we eat and the way it is produced impacts not only our health and lifestyles, but also our carbon footprints.
The recent National Food Strategy report commissioned by the government and published this summer proposes measures to improve our health, reduce strain on the NHS and make our food culture healthier and more sustainable. What role should the government play in influencing what we eat? And how can taxes and policy be designed to get us to eat more healthily?