Subscribe to read:

Boris Johnson is wrong to call ‘sin taxes’ regressive

Upgrade your account to read:

Boris Johnson is wrong to call ‘sin taxes’ regressive

Digital or Premium Digital

You can also subscribe to the FT Digital or Premium Digital with Google

Innovation

Boris Johnson is wrong to call ‘sin taxes’ regressive

He argues they hit the poor harder than the rich — but so does obesity

There is evidence from almost 40 countries that sugary drinks taxes are helping address a mounting global health crisis © Getty

Boris Johnson’s instincts are surely right when he rails against the iniquities of “sin taxes” and fussy interventions by the “nanny state”. Which bureaucrat has the right to deprive a liberty-loving politician — or any of the rest of us — of the sugary sustenance needed to fuel a hard day’s blathering for Britain?

The impulse to resist needless government intervention is commendable. The default position of all liberal politicians should be to calm the twitchy fingers of overeager apparatchiks and give free rein to freethinking individuals to exercise their own judgment.

But instincts are one thing, evidence is quite another. The cynical refrain in journalistic circles, once frequented by the Conservative prime ministerial contender, is: don’t let the facts get in the way of a good story. But in the case of sugar taxes, facts tell a more compelling story than the one Mr Johnson narrates.

The short version is that sugar taxes work. As Susan Jebb, professor of diet and population health at the University of Oxford, explained to the BBC, there is evidence from almost 40 countries that sugary drinks taxes are helping address a mounting global health crisis. “The World Health Organization recommends this as one of the ‘best buys’ for obesity prevention,” she said.

First, such taxes increase awareness of the dangers of eating too much sugar, encouraging consumers to think twice before glugging gallons of Coca-Cola. Second, they have forced manufacturers to innovate, cutting the amount of sugar in their drinks by about 20 per cent. Third, making sugary drinks more expensive has indeed cut consumption.

Mr Johnson argues that sugar taxes are regressive, hitting the poor harder than the rich. Then again, so is obesity. Helping reduce obesity among the poor would be a progressive, rather than a regressive, step.

Increasing taxes on public “bads”, such as sugar and pollution, and cutting them on public “goods”, such as employment and energy-saving insulation, is one of the most powerful weapons governments can wield to shape market behaviour. Nudging companies and consumers in the right direction with economic incentives can be effective. The key determinant, as in so many fields, is smart design.

This challenge is likely to become increasingly acute online, where social media companies are the dominant nudgers, competing to capture our attention and predict our behaviour, not always for our own good. Here, supercomputers trained on huge data sets encourage us to carry on clicking purely for commercial gain. As one Silicon Valley entrepreneur put it to me, we may all believe we are autonomous agents online but our “free will is up for sale”.

Daniel Dennett, an American philosopher fond of thought experiments, has compared the pervasive influence of tech companies to the arrival of Martians. What would we think if a bunch of extraterrestrial aliens descended on earth, kidnapped our children, and surreptitiously taught them different cultural values to our own? That is, in effect, what has happened with social media and online gaming companies. If the profit motive is the only thing these companies respond to voluntarily, how can we redesign the market to incentivise greater responsibility?

As with sugar taxes, the primary goal should be to coax companies to do the right thing and stimulate fiercer competition to improve the public good. That does not rule out more coercive intervention should such efforts fail.

A recent discussion paper on online harms from the Behavioural Insights Team, a social purpose company spun out of the British government, suggests some ways of redressing the imbalance of information between huge corporations and consumers.

David Halpern, chief executive of the BIT, says that a good start would be to help “de-shroud” markets, enabling consumers to make better choices themselves. One move would be to encourage companies to simplify impenetrable terms and conditions of use — Paypal’s T&Cs are longer than Shakespeare’s Hamlet. Another would be to encourage independent intermediaries to monitor and rank these companies’ practices.

Mr Halpern suggests that governments should also use more innovative tools to study market behaviour and test small-scale interventions rapidly and iteratively, just as the tech companies do. “Regulators should be more canny about market design,” he says. “One of the most important and exciting frontiers is to use these new technologies — such as behavioural science, experimentation and machine learning — to make markets work better.”

john.thornhill@ft.com

Copyright The Financial Times Limited . All rights reserved. Please don't copy articles from FT.com and redistribute by email or post to the web.

Content not loading? Subscribers can also read Boris Johnson is wrong to call ‘sin taxes’ regressive on ft.com