Finance Minister Michael Noonan has confirmed he will not set aside funding from the new tax for any specific purpose because he is opposed to the principle of ringfencing any tax revenue.
His stance sets him up for a clash with Health Minister Simon Harris, whose department had called for the proceeds of the tax to be reinvested towards health promotion and early intervention activities.
Mr Noonan confirmed he will introduce a tax on sugar-sweetened drinks next April to coincide with the introduction of a similar tax in the UK.
The British government has signalled that income from the tax will be ringfenced for school sports up to 2020, as well as being used to expand the number of breakfast clubs and fund some schools in the most disadvantaged areas to extend their school day.
Mr Noonan said that he does not support ringfencing of any tax revenue in general.
“It reduces the flexibility of the Government to prioritise and allocate funds as necessary at a particular time,” said Mr Noonan.
“This constrains expenditure decisions and can distort the allocation of resources, resulting in reduced value for money and sub- optimal outcomes.”
While welcoming the introduction of the tax, the Irish Heart Foundation (IHF) said its impact could have been magnified by using its revenue to combat obesity, particularly among children in disadvantaged areas.
“It is important to remember that the sugar-sweetened drinks levy is a public health measure, not a revenue raiser to increase the tax take,” said Chris Macey, the IHF’s head of advocacy.
“If the Government is really serious about tackling the obesity problem that is gripping our nation, they should use the proceeds from the tax to establish a children’s future health fund.”
Mr Noonan admitted earlier this year that revenue from the new tax is likely to be considerably lower than original estimates.
Despite predictions that revenue will be around 17% below initial targets, Mr Noonan said the benefits of the tax were already being felt as drinks manufacturers had already begun to lower the sugar content of their products.
The Department of Finance originally estimated that 60% of all soft drinks would be liable for the tax.
Mr Noonan said that this figure was subsequently revised to around 50% as it is now believed almost half of the 685.4m litres of soft drinks consumed annually in the Republic will escape the tax.
Department of Finance figures show a 5c increase on a 330ml can of a soft drink liable for the tax would raise €42.2m per annum.
Drinks manufacturers and suppliers, who engaged in a strong lobbying campaign opposing the tax, claim it will have little or no effect on tackling obesity.
Meanwhile, the latest HSE weight study of primary pupils shows at least one in five in fourth and sixth classes are overweight or obese.
It found just over one in six (16.9%) first-class pupils, typically aged six or seven, are overweight or obese. The equivalent figures for those aged nine or 10 (fourth class) and 11 or 12 (sixth class) are 20.2% and 20.6%, respectively.
In line with international trends, the figures mask significant differences between pupils at schools in the Department of Education’s Deis disadvantage support programme and those in other schools.
The proportions of overweight and obese children at Deis and other schools, respectively, are:
- First class: 21.7% and 16.5%;
- Fourth class: 30.8% and 18.6%;
- Sixth class: 32.2% and 18.4%.