Since 2010 the Chancellor has adopted the independent economic and public finance forecasts produced by the Office for Budget Responsibility (OBR) as the UK’s official forecasts. The OBR is required to take into account the effect of government policies in its analysis. The OBR sets out its forecasts in its Economic and Fiscal Outlook (EFO), which includes a full breakdown of how the forecast is composed and any explanations.
The OBR’s Economic and Fiscal Outlook document, published at Budget 2016, summarised the OBR’s views. The document noted that the OBR expect the levy to be passed onto the price paid by consumers. On this basis the OBR expected it to add around a quarter of a percentage point to CPI and RPI inflation in 2018-19.
The government maintains that it is up to soft drinks companies how they respond to the levy. If companies reformulate their drinks to contain less sugar – as many are already doing – then they will not have to pay the levy. Companies two years to continue working on this before the levy begins. They do not need to pass the levy onto consumers.