Fizzy drinks to go up in price as Labour ‘milkshake tax’ becomes the first money grab of

Lovers of Pepsi, Fanta, Lucozade and milkshakes face price hikes after Labour confirmed it is extending the ‘sugar tax’ today. 

In the first salvo of the Budget raid on Britons, Wes Streeting announced that the exemption for pre-packaged milk-based drinks is being scrapped.

He also declared that the threshold for the levy is being lowered from 5g of sugar per 100ml to 4.5g – potentially dragging in many more drinks. 

‘This government will not look away as children get unhealthier,’ the Health Secretary told the Commons. 

The move is being billed as part of a crackdown on obesity – but it could also raise £45million a year for the Treasury.

That will be welcome to Chancellor Rachel Reeves as she desperately tries to fill a yawning gap in the public finances tomorrow.  

The change, which follows a consultation, will affect packaged milkshakes and coffees, but not drinks made in cafes and restaurants.

The exemption for milk-based drinks will be replaced with a ‘lactose allowance’ to account for the natural sugars in the milk component of the drinks.

Wes Streeting announced that the exemption for pre-packaged milk-based drinks is being scrapped

Tory MP John Lamont was among those condemning the expansion of the ‘sugar tax’

Ministers are removing the exemption for milk substitute drinks, such as oat milk, which have ‘added sugars’ beyond those derived from the principal ingredient.

Currently the Soft Drinks Industry Levy sees companies pay a minimum of 18p per litre on soft drinks which contain 5g or more of sugar per 100ml.

However, that is being reduced to 4.5g per 100ml. The government said it had stepped back from cutting the level to 4g after companies complained they would not be able to reformulate and would simply pass the costs to consumers. 

The changes will now be subject to a ‘technical’ consultation, and are not expected to come into force until January 2028 – nine months later than previously billed.

Mr Streeting said: ‘Obesity robs children of the best possible start in life, hits the poorest hardest, sets them up for a lifetime of health problems and costs the NHS billions.

‘So, I can announce to the House, we’re expanding the soft drinks industry levy to include bottles and cartons of milkshakes, flavoured milk and milk substitute drinks.

‘We’re also reducing the threshold to 4.5 grams of sugar per 100 millilitres.’

The government’s response to the consultation acknowledged it would affect 11 per cent of soft drink sales.

‘The government recognises there will be technical challenges for industry in going further on reformulation below 5g total sugar by 100ml, and some soft drinks manufacturers who chose to reformulate following the initial introduction of may choose not to do so this time round,’ the document said. 

‘However, manufacturers will now need to reduce total sugar to just below 4.5g per 100ml, which is a smaller reduction in total sugar than was required compared to the original consultation proposal.’

The response argued that only 35 per cent of the drinks affected were likely to see price rises, as the others would reduce sugar content below the threshold.  

Introduced in April 2018, the Soft Drinks Industry Levy is a UK tax on added sugar soft drinks.

The aim of the legislation was to put pressure on producers to reformulate their products to reduce the sugar content – or reduce portion sizes.

The idea was that the levy would also encourage importers to import reformulated drinks with low added sugar to encourage consumers of soft drinks to move to healthier choices.

The Treasury says the levy has led to a 46 per cent average reduction in sugar between 2015 and 2020 for those soft drinks that were to be brought under the rules.

Health minister Karin Smyth told Times Radio on Tuesday that ‘obesity is the major challenge of our health service for this generation’.

The so-called ‘milkshake tax’ will axe the exemption that currently stops milk-based drinks from being eligible for the levy 

Asked whether tackling obesity was more important than raising revenue, she said any tax measures would be set out in the Budget but ‘the wider point is about tackling obesity, which we know is one of the biggest causes of ill health, and therefore demand on the health service’.

She added: ‘Measures we’ve already announced as part of the manifesto, to reduce junk food advertising, particularly to protect young people from becoming obese, because if you become obese at a young age, it does limit your life chances…

‘Obesity is the major challenge of our health service for this generation, and it is important that we make sure that we create the healthiest young generation of children coming forward.’