Rachel Reeves is reportedly expected to introduce a ‘milkshake tax’ in next week’s Budget as she tries to plug the gap in the public finances.
The chancellor had been expected to breach a Labour’s manifesto promise by increasing income tax. But The Financial Times last week reported she has abandoned those plans over fears they could anger voters and Labour MPs.
Now, the chancellor could be expected to change a number of smaller taxes in an attempt to balance the books.
Among them could be a tax on milkshakes, as The Telegraph reports that Ms Reeves is preparing to end an exemption that milk-based drinks have from the levy on soft drinks.
The Soft Drinks Industry Levy currently applies to soft drinks with added sugar and it means that the producers pay at least 18p per litre on soft drinks containing 5g or more of sugar per 100ml.
The levy does not currently apply to dairy-based drinks, but Ms Reeves is planning to end that exemption, as well as reducing the threshold to 4g of sugar per 100ml, according to the Telegraph.
Conservative shadow chancellor Mel Stride criticised the reported move, saying: “If these reports are true, Labour’s new milkshake tax moves the goalposts yet again for an industry that’s already cut sugar and made changes responsibly.
“It will see businesses that played by the rules punished, with products suddenly dragged into the tax net – all to save Rachel Reeves’s skin.”
The Independent approached the Treasury for comment. A spokesperson declined to comment on Budget speculation.
It comes as speculation mounts regarding the forthcoming budget. The rumours are partly to blame for weaker-than-expected economic growth figures, according to the former top economist at the Bank of England.
Andy Haldane, who was chief economist at the Bank until 2021, told Sky News’s Mornings With Ridge And Frost that the build-up to the Budget has been a “circus” and called for the process to be overhauled to prevent leaks that can damage the economy.
It follows official figures last week that revealed economic growth slowed to 0.1 per cent in the third quarter, down from 0.3 per cent in the previous three months and worse than most economists predicted.
Ms Reeves blamed the weaker performance on the Jaguar Land Rover production shutdown in the wake of its cyber attack, with gross domestic product (GDP) declining by 0.1 per cent during September after the fallout hit activity in the manufacturing sector.
But Mr Haldane said the Budget rumours had “without any shadow of a doubt” had a direct impact on growth.
He told Sky News the upcoming Budget has been a “real circus that’s been in town for months and months now”.
He said: “It’s caused businesses and consumers to hunker down.
“One of the reasons we had a very weak growth number last week is because there’s that Budget speculation… (it’s) dampened people’s willingness to spend.
“And first and foremost, we need to stop that speculation.”
