Public Health Strategies Part 4B: Subsidies, Steven Hamley
In an earlier blog post I discussed taxation as a public health strategy, particularly related to the proposed tax on sugar sweetened beverages (SSBs) in Australia. In this post I’m going to look at the opposite of taxation: subsidies.
Putting a tax on unhealthy foods would generate extra tax revenue and so the question becomes whether the government should reduce taxes in other areas (or use it to help pay off national debt) or put that extra revenue into something, and if so, what? Generally I have seen calls to tax unhealthy foods being coupled to calls to subsidise health foods, like fruit and vegetables (F&V). There are a few rationales for subsidising healthy foods like fruit and vegetables:
- Reducing the cost of fruit and vegetables would increase the consumption of them and displace unhealthy foods, which will ultimately improve population health and reduce healthcare costs
- Coupling a fruit and vegetable subsidy to a tax on unhealthy foods (like sugar sweetened beverages) is also a means to reduce the increase to cost of living as a result of the tax, provided people purchase fruit and vegetables
However, there may be a few problems if a health food subsidy was put in practice
- A recently published Australian modelling study estimated that a F&V subsidy ($0.14 per 100g of fresh and preserved F&V*) would increase F&V consumption by 42g (a serving of fruit and vegetables is considered 150g and 75g respectively). However, it was estimated that the subsidy would also increase sodium consumption by 48mg and energy consumption by 236kJ (56.6 calories), because “however, using price subsidies or discounts as an incentive to purchase more fruits and vegetables may have the effect of increasing real income available to buy food, including unhealthy products, and could therefore lead to an overall increase in dietary measures such as saturated fat, sodium, or total energy intake”**. As a result, their model predicted that a F&V subsidy would actually have adverse health outcomes . The major benefit of food taxes is that they generate revenue . This revenue should go towards initiatives that are at least cost effective, but with a F&V subsidy there’s this study says there’s a 89% chance that it wouldn’t be. Not a great policy
- A subsidy on F&V isn’t likely to offset the increase in cost of living from a tax on unhealthy foods such as SSBs. The estimates show that there isn’t going to be much change in behaviour. So the people who are already low SSB consumers and high F&V consumers are the ones who will benefit. This got me thinking if the promotion of taxes + subsidies in some people (not all) is at least partly driven by financial self-interest, but you can defend this motivation in countries with socialised healthcare. (By the way, my diet is very rich in F&V, with no SSBs and low added sugar, so I would benefit a lot from such policies)
In my opinion as a stingy student currently on an unflattering income, many F&V are already very cheap as there’s a lot you purchase for < $4-5 per kg or even less. I think the reason why so many people don’t consume the recommended intake of F&V  is because other foods simply taste better, the structure of their habitual meals is not conducive to eating many F&V (cereal for breakfast, sandwiches for lunch, etc), and they don’t value/are empowered about their health enough to change. When people say cost is important, they are comparing apples with apples, and not apples with muffins. The apple wins easily on cost, but the café bought muffin wins on palatability and reward, and because most Australians have that money to spend, that’s what most people choose
A tax on unhealthy foods should be coupled with a subsidy or health initiative that is actually cost effective in itself. An idea circulating around AHSNZ is that a tax on SSBs could be coupled to subsidy on dental health or free dental for children. This would disproportionately benefit lower income families who are less likely to have private health insurance, see the dentist less often and more likely to have worse diets. It is also likely to be more cost effective as healthcare spent in younger people has a greater return on investment, and dental health is one of the major health issues for children, and one (rampant tooth decay) that is potentially not reversible unlike obesity and type 2 diabetes. Some people may be against the government using taxes and subsidies to save people from themselves, but may concede that something should be done as tooth decay is so common in children . I would still like to see an estimate of the cost effectiveness of any policy, as good intentions do not necessarily create good policies
* For example, if a fruit or vegetable was priced at $4 per kg, this subsidy would cover 35% of the costs. This method of subsidising has a greater effect on cheaper F&Vs such that it wouldn’t be practical as very cheap F&Vs like carrots would be almost free. In fact, at the time of writing this Coles has a special on carrots at $1.20 per kg, so they would be paying the customer to purchase them, pretty crazy! (but don’t forget that F&V are expensive and cost of healthy foods is a limiting factor in population health…)
** I think this point is debatable. Paying less for F&V would result in consuming more F&V and this may have the opposite effect on calorie intake as F&V are more satiating than most foods per calorie. In addition, the sodium > blood pressure data they used was based on a large effect from observational studies  rather than the small effect in RCTs , although sodium could be a surrogate marker for highly processed foods and such foods are unhealthy for other reasons besides sodium. That being said, if the estimates on calorie and sodium intake were ignored, increasing F&V intake by 42g alone isn’t going to have that impact on population health
*** The study also modelled the effect of taxes on SSBs, sugar, saturated fat and sodium. The study estimated that all these taxes combined, plus the F&V subsidy, would reduce 470,000 disability adjusted life years (DALYs, or years with chronic disease) and would reduce health healthcare expenditure by $3.4 billion. These figures seem impressive, but need to be put in context. The study used a population of 22 million, so this works out to average reduction of 0.0214 DALYs per person (7.8 days) and average reduction in healthcare costs of $155.55 per person across their lifetime (or a few dollars per year, depending on how long you think the average person will live for (e.g. 40 years = $3.86 per person per year)). This magnitude of response is consistent with another Australian study I discussed previously. Modest taxes on unhealthy foods are somewhat useful at generating revenue for the diseases they increase the risk of, and will very marginally improve population health, but they won’t come close to solving the obesity/chronic disease epidemic.