How might taxes and subsidies improve public health in New Zealand?

 A group of researchers have published a modelling study on the effect of food taxes and subsidies on population health in New Zealand.

They modelled:

• a 20% fruit and vegetable subsidy,
• taxes on saturated fat, sugar and salt set at a level that increased the food price by the same magnitude as the decrease in fruit and vegetable price from the subsidy, and
• an 8% junk food tax (on non-essential, energy dense foods).

The modelling calculated the effect of price changes on food purchases, the consequent changes in fruit and vegetable and sugar-sweetened beverage purchasing, nutrient risk factors and body mass index (BMI), and how these changes affect health status and health expenditure.

Health gains were measured in Health Adjusted Life Years (HALYs) per 1000 people. The modelling showed:

• a 20% fruit and vegetable subsidy could result in 212 HALYs,
• a saturated fat tax could result in up to 361 HALYs,
• a sugar tax could result in 581 HALYs,
• a salt tax could result in 375 HALYs,
• an 8% junk food tax could result in 127 HALYs.

Most health gains arose because of reductions in BMI. Interestingly, all the health gains from the food taxes and subsidies were greater than those that could be expected from a 10% per annum increase in tobacco tax (2011-2025) using similar modelling methods.

In terms of health expenditure, the modelling showed savings across the remaining lifespan per person were:

• US$502 for the 20% fruit and vegetable subsidy,
• US$1333 for the saturated fat tax,
• US$2164 for the sugar tax,
• US$1340 for the salt tax, and
• US$492 for the 8% junk food tax.

The authors suggested policy making around taxes and subsidies required multiple considerations such as political and social acceptability, food industry perspectives, deadweight* costs of any tax or subsidy, added complexity and bureaucracy in administering taxes and subsidies, and intervention options other than taxes or subsidies (e.g., mandatory reformulation of food). They conclude this study and others point to the probably large and positive health gains that could arise from changing the price signals, and taxes could prompt food industry product reformulation to avoid tax, further enhancing health gains.

*A ‘deadweight loss’ is an economic term describing the cost to society created by market inefficiency that occurs when supply and demand are out of balance caused by a tax or subsidy.

Publication: Blakely T, Cleghorn C, Mizdrak A et al. Effect of food taxes and subsidies on pop health and health costs. Lancet Pub Health 2020;5:e404-13