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No fat, no VAT

12 January 2006

Tax unhealthy food more heavily and we'll have a happier, healthier nation, says Tom Allchurch, founder of healthy fast-food chain Fresh Italy.

Why is most fast food so unhealthy? Because of the marketing genius of big US corporations? Because of our food culture? Because, despite Jamie Oliver and Morgan Spurlock, we all still love burger and chips? Probably all of these.

But there is another factor making us fat: VAT.

This is only partly true, because VAT causes a major distortion in the way that hot fast-food companies operate - compared with, say, a sandwich chain. They both have the same customers, inhabit similar stretches of the street, draw their employees from the same pool and pay them similar sums. They also both charge about the same per gram of food (about 1p). They both make a profit.

Financially, they're very similar - except that one pays a 17.5% tax and the other doesn't.

The 17.5% has to come from somewhere, and if it's not from the profit, and not the property cost, and not the people costs, where? Of course, it comes out of the food cost. Food costs of maybe 35% in some sandwich chains are reduced to 20% in most fast-food chains. Why are salt, sugar and fat levels so high in this food? Well, you try to buy food that has any taste with 20p in the pound to work with.

Most food eaten away from home - snacks, confectionery, fizzy drinks and fast food - is basically unhealthy, and the availability of healthier options is sparse. There are no incentives to make, sell or buy healthier options. Buy a bottle of water or a can of Coke - pay 17.5% on both. Buy a bag of fries or a bag of apple segments to eat in at McDonald's - pay 17.5% on both. Buy a cheeseburger or a fresh soup - pay 17.5% on both.

However, the answer could lie in how VAT is set. If VAT rates were set in line with the healthiness of the food, it would create significant relative price advantages for healthier food, dramatically changing its popularity. If major companies could reduce or eliminate VAT by modifying recipes or by introducing new products, imagine what would happen in R&D labs (sorry, development kitchens) up and down the land.

How could it work? All these major players already have all the health and nutrition data. The Food Standards Agency has just published the criteria for its latest traffic-light labelling proposal. It took our company less than an hour, the same day, to work out what traffic lights would apply to each of our main courses.

We should charge 0% VAT on green traffic lights, 8.75% on orange, and 17.5% on red.

Simple. No fat, no VAT.

Over To You

How would you make the nation eat healthily?

John Torode, operations director, Smiths of Smithfield
"Buy food for today and tomorrow only, so it doesn't sit in the fridge. Fresh is best. And if you can buy locally, then brilliant! Healthy food is perceived to be more expensive, but maybe we should just be eating a little bit less. People eat huge portions, then diet and spend their time at the gym. If they ate less, they wouldn't need to exercise."

Martin Dewey, managing director, Square Pie Company
"By making things they want to eat more healthy for them. For example, we make pies, which people think are bad for them. But we use free-range food and a variety of quality ingredients. Better-quality ingredients are the key. Most of the problem is with mass production. We need a balanced diet and to use fresh, quality ingredients."

Rajesh Suri, chief executive, Tamarind
"People need to be a bit more focused when shopping for their food. They should try to buy fresh produce that has travelled less. Fast food plays a major role - you don't know what you're putting in your body. Nothing is labelled. Investing now in food for children is extremely important to create a healthy generation."

Robin Rowland, chief executive, Yo! Sushi
"Eat more fresh fish. Make sure you buy food from restaurants that supply fresh produce, not refrigerated or frozen food. You've only got one life. People should be detoxing after abusing themselves at Christmas. Everyone owes it to themselves to get their bodies back into shape."

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Jacobs Media Group is honoured to be the recipient of the 2020 Queen's Award for Enterprise.

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