Higher Taxation of Unhealthy Food.

The core idea

Manifesto 1.1 proposes that foods classified as Red or, where appropriate, Amber under the national traffic-light system should attract either a higher rate of VAT or a supplementary food tax.

The tax would be calibrated according to the nutritional characteristics of each qualifying product. Its purpose would not simply be to raise revenue, but to change the relative price of food so that healthier choices become more economically attractive.

What could attract stronger taxation

Ultra-processed foods and products particularly high in the following characteristics could face the strongest taxation where they meet the relevant criteria:

• Saturated fat.
• Trans fats.
• Sugar.
• Salt.
• Ultra-processing, where a workable and evidence-based legal definition applies.

Classification as Red or Amber would not, by itself, automatically determine the final tax treatment. Government would need to publish clear qualifying criteria, thresholds and category rules.

Two possible tax routes

A higher rate of VAT

The existing VAT framework could be used to apply a higher rate to qualifying products. Government would still need to define the tax rate, product scope, classification rules and treatment across retail, hospitality, online sales and imports.

A supplementary food tax

A targeted levy could instead be introduced and calibrated according to nutritional characteristics. Government would need to decide who pays, where liability arises, how rates are calculated and how the system would be inspected and enforced.

Design choices government must resolve

• Product scope: Which Red products qualify and when, if ever, Amber products should be included.
• Thresholds and bands: The nutritional criteria, calculations and category-specific adjustments.
• Tax rates: Rates capable of changing relative prices without causing disproportionate household hardship.
• Point of liability: Whether taxation arises at production, import, wholesale, retail or another point.
• Exemptions: Any justified treatment for staple, medical or specialist foods and smaller producers.
• Review and appeal: Transparent decisions, correction routes, enforcement and scheduled policy reviews.

Protecting households and avoiding distortion

A food tax can create incentives, but poor design could increase household costs, reward technical loopholes or shift consumption towards other unhealthy products.

Distributional and market effects must therefore sit at the centre of the final model.

• Publish the expected effects on low-income households, families and people with restricted diets.
• Test whether affordable and healthier substitutes are genuinely available.
• Assess whether manufacturers are encouraged to reduce harmful ingredients.
• Compare like products fairly and address portion sizes, staples and specialist products.
• Keep compliance proportionate while preventing avoidance and deliberate misclassification.
• Establish consistent rules for imported goods, online sales, restaurants and takeaways.

Measuring whether it works

• Changes in the relative prices of healthier and less healthy products.
• Changes in purchasing and consumption, including substitution between product categories.
• Manufacturer reformulation and movement between traffic-light classifications.
• Effects on health inequalities, household budgets and access to affordable alternatives.
• Revenue raised compared with administration, enforcement and compliance costs.
• Evidence of avoidance, market distortion or other unintended consequences.

Questions for scrutiny

• Which Red products should qualify, and when—if ever—should Amber foods be taxed?
• Should government use higher VAT, a supplementary food tax or a carefully defined combination?
• How should nutritional characteristics be weighted and thresholds set across product categories?
• How should ultra-processed food be defined clearly enough for taxation and enforcement?
• What rates would change behaviour without placing disproportionate pressure on household budgets?
• How should low-income households and people with restricted or specialist diets be protected?
• Which exemptions, if any, are justified for staples, medical foods or small producers?
• At what point in the supply chain should the tax arise, and who should be legally liable?
• How should imports, online sales, hospitality, restaurants and takeaways be treated?
• How can reformulation be encouraged while preventing gaming, substitution or misleading claims?
• What inspection, reporting, appeals and penalties would make the system credible?
• Which outcomes should trigger revision, expansion, suspension or withdrawal of the policy?

The proposed direction

Proposal 37 would apply either a higher rate of VAT or a supplementary food tax to qualifying Red and, where appropriate, Amber foods under the national traffic-light system.

The strongest treatment could apply to ultra-processed foods and products particularly high in saturated fat, trans fats, sugar or salt where they meet the relevant criteria.

Before implementation, government must publish the proposed mechanism, product scope, thresholds, rates, exemptions, distributional and equality assessment, administrative model, enforcement plan and review criteria.

Source basis: Manifesto 1.1, Part XXII, Policy 41, “Higher Taxation of Unhealthy Food”. The source does not specify rates, thresholds, exemptions, the liable point, implementation dates or a final tax mechanism. These remain open for modelling and scrutiny.

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