The next sweet spot: lessons from the sugar tax

The ongoing policy debate about sugar tax is an interesting case study for many sectors. Governments are short of cash and are looking for victims.  How do you ensure you escape their clutches?

The soft drinks industry is probably losing the debate on sugar tax in Europe: after the decision to introduce the new tax in France, the idea is being taken up in a number of other countries.

Two important trends in Europe are causing problems for the commercial sector. First, obesity, alcohol abuse, and other issues that place a burden on the health system have not been sufficiently addressed by legislation because politicians have been frightened of a public backlash. Second, governments are short of cash.

When these two trends converge, then any wizzo idea that can generate money for the Finance Ministry is given more air time than it would otherwise get. In come ‘windfall taxes’ and Sin taxes.

Politicians in France came up with the idea of taxing soft drinks to raise revenue, using the excuse of obesity. (We omit here the case of artificial sweeteners, another excellent case study).  The industry was buoyed by previous success in New York State, and went into opposition mode.  This did more than the Government could have wished to build a coalition of interests pro-tax. The more that doctors and other ‘white coats’ were pushed into the arms of the pro-tax camp, the less risk of the Government’s ‘fig leaf’ argument being exposed.

Here’s the first error: you should ensure that you split your opponents, not unite them.
This should be engraved on the heart of everyone with responsibilities for ‘license to operate’.
In most cases, if you are less than impressed with the efforts of politicians, the strategy to follow is to create a better solution. You may feel this is not your job, but the alternative is defeat.

There’s the second error: you need to align with the premise, in this case that obesity is a problem. Yes, this is a critical public policy issue, solutions are important. We want to be part of that. This cannot be achieved if your communication is focused on saying ‘no’ to change (for a classic example regarding alcohol, see link).
So, Step 1: propose a best-in-class policy process to find solutions.

What would politicians do on their best day?  Put in place a process to find the three most effective policy measures, teaming up with doctors, economic experts, and others most credible on the debate.
You can be sure that sugar tax won’t come in the top three most effective policy measures. Why?  Because the level of tax needed to impact consumer demand and therefore be useful, would be so high as to be politically impossible.

Step 2, get economists to do the work on plasticity / elasticity of demand to work out the minimum price hike on a can of soda that would make a difference. Then go the extra step of testing the best messaging for mass media, and collecting opinion poll data on public reaction to that price hike. Showing the opinion polling to wavering Parliamentarians in 20 minutes is worth more than hours of the scientific case, which they ignore.

Step 3, defeat the Government’s only remaining argument, ‘something is better than nothing’.  It’s not, at least not for obesity; the only benefit is to the Finance Ministry. Get experts to join you in saying this.

Make sure the debate focuses on honesty not legitimacy: here the Government is far more vulnerable, and hence may back down earlier.

Here’s your perfect question by a TV interviewer:

“Minister, you claimed that this proposal is beneficial to health. The experts tell us that your proposal will have no health impact whatsoever, unless the cost of a soda can goes up to 2 Euros. They say there is no truth to the argument that ‘something is better than nothing’. Are you being honest with the French people, or is this just an excuse to raise money?”

This is the debate the politicians are nervous about; this is what they are message-testing in private. But on sugar-tax they haven’t yet needed to use it..

There will be other debates which follow sugar tax, as Governments look everywhere for revenue. It is worth other industries continuing to watch the lessons of this case.

June 15th, 2012