Fiscal INCentives for Health improvement: repurposing consumption taxes on food (FINCH)

The central research question in FINCH is whether indirect taxes on food and non-alcoholic beverages (FNABs) can be repurposed and restructured to create incentives for healthy food consumption, without increasing the tax burden on households and without adverse distributional impacts relative to the current taxation system.

Successful international experiences with taxes applied to sugar-sweetened beverages and selected foods show that taxes can provide incentives for both consumers and food manufacturers in the direction of healthier food production and consumption. However, for taxes to have a meaningful impact on overall diet quality and health outcomes, a much wider range of FNABs need to be targeted and a more sophisticated design needs to be adopted to strengthen incentives and prevent unwarranted substitutions. Nutrient profiling models today can support the design of effective FNAB taxes and subsidies in line with dietary guidelines and improved health outcomes.

Building on a collaboration with PHE and leveraging inputs from a wide range of stakeholders, the FINCH project aims at:

• A. Developing a new research infrastructure for the ex-ante analysis of the impacts of FNAB fiscal policy scenarios, in the form of unique data and policy modelling resources that are made available for public use;
• B. Undertaking a systematic review of price elasticity data and new analysis of the relationship between food prices, consumer behaviour and diet quality, based on LCF data;
• C. Designing and estimating the impacts of alternative FNAB fiscal policy scenarios on: (i) household FNAB expenditure and disposable income; (ii) individual dietary intakes; (iii) diet-related morbidity, mortality and quality-adjusted life expectancy; and, (iv) indirect tax revenues, tax administration and compliance costs.

The project is structured into five Work Streams (WSs), including an overarching PPI, stakeholder engagement and dissemination WS, along with four research WSs closely reflecting individual objectives of the project. Over a period of three years, the researchers engage with relevant stakeholders, including the general public; consolidate the research infrastructure required to evaluate fiscal policy scenarios by statistically matching the Living Costs and Food survey (LCF) and the National Diet and Nutrition Survey (NDNS), and by enhancing and extending the policy simulation models UKMOD (Essex) and Health-GPS (Imperial), before making these resources available for wider use; systematically review and assess existing evidence of FNAB price elasticities in order to identify relevant price elasticity values for the design and simulation of a set of fiscal policy scenarios that would promote changes in consumer FNAB choices as well as FNAB reformulation by manufacturers; feed findings back to stakeholders and to the research community for validation and identification of potential implementation barriers.

The project delivers new resources and analyses that are expected to stimulate further research, inform the public debate on the use of fiscal measures to incentivise healthy food consumption and production, and contribute to a radical rethink of the objectives of indirect taxation in the FNAB sector, given the detrimental health and environmental impacts of current dietary patterns in the UK.