26 March 2015

Price policies can help promote healthier diets: the example of Europe

On 23 March, the Regional Office for Europe of the World Health Organization (WHO) published a report ‘‘Using price policies to promote healthier diets’’ that shows that price policies can indeed help promote healthier diets.

The report comes to this conclusion based on the review of examples of price policies in Denmark, Finland, France and Hungary, as well as of the European School Fruit Scheme. Out of the five policies reviewed, four consisted in applying special taxes on unhealthy foods to provide a disincentive to consumers:

1. •In Denmark, a tax on saturated fat applied on all foods containing saturated fat (for example, meat, dairy, edible oils and fats, margarine and blended spreads)
   

2. •In Finland, a tax on sweets, ice cream and soft drinks applied to a selection of products only
   

3. •In France, a tax on all non-alcoholic beverages with added sugar or sweeteners
   

4. •In Hungary, a tax on sugar-sweetened beverages, energy drinks, confectionery, salted snacks, condiments, flavoured alcohol and fruit jams
   

The fifth policy consisted in a subsidy scheme to provide free fruit and vegetables to children in schools. This scheme reaches more than 8 million children in over 54 000 schools across 25 participating countries in Europe.

In each of these cases, the policy was justified by the health cost involved in the consumption of unhealthy foods.

According to the report, ‘‘evidence shows with comfortable levels of confidence that both individual consumers and population groups respond as predicted, and that targeted taxes and subsidies have the potential to influence the decisions that consumers make and can be used to incentivize healthy eating at the population level … The size and nature of the effect varies significantly, however, depending on the size and target of the price change’’.

Evidence also indicates that the change in consumption induced by the taxes or subsidies may not be sustainable, i.e. they do not continue once the tax or subsidy has been removed.

One major area of concern mentioned by the study is that these taxes are regressive, i.e. impact relatively more the poor than the rich, given the different level of importance of the share of food in household budgets (higher for the poor than for the rich). This means that taxes cost relatively more to the poor than to the rich, but they also tend to have a greater impact on consumption of the poor than of the rich. So the regressive nature of the tax may be compensated, at least in part, by some progressive nature of health benefits accruing to consumers. 

The study draws a number of conclusions on the ‘optimal’ level of tax and the most efficient way to apply it.

Based on these positive findings regarding the application of taxes and subsidies on unhealthy/healthy foods, several suggestions could be made:

1. •To avoid or reduce to a minimum any regressive impact of the policies, it may be worth considering combining taxation of unhealthy foods with subsidies on healthy foods, the revenu collected from the former being used to finance the latter
   

2. •Thought should be given to applying in a similar way taxes on food items that are produced unsustainably and subsidies on those that are produced sustainably.
   

By combining these two sets of policies, there will be good chances to improve the ‘food, environment and health’ system which currently is in a very worrying state.

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To know more:

1. -WHO Regional Office for Europe, Using price policies to promote healthier diets, WHO, 2015
   

2. -Steinfeld, M., Fizzling Controversy: Soda Tax South of the Border, Foodtank 2015
   

3. -Food, Environment and Health, hungerexplained.org, 2014
   

4. -United Kingdom: a study demonstrates the failure of the British food system, hungerexplained.org, 2014
   

5. -A. MacMillan, Hasn’t the time come for some brave new thinking on food management?, hungerexplained.org, 2014
   

6. -7 principles for ending hunger: Recasting of policies and institutions, hungerexplained.org, 2013

Last update:    April 2015

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