The market mechanism, market failure and government intervention

Extract A: In 2018 the UK introduced the Soft Drinks Industry Levy, a tax paid by manufacturers on drinks with more than 5 g of sugar per 100 ml (18p per litre) and a higher rate above 8 g (24p per litre). Sales of drinks liable for the levy fell from 2.20 billion litres in 2015 to 1.54 billion litres in 2019, while sales of low- and no-sugar drinks rose by over 30%. Extract B: Many manufacturers cut the sugar content of their drinks before the levy started so they would not have to pay it. Critics argue that the levy is regressive and that people simply buy sugar from other foods instead. Supporters point to falling sugar intake among children and say that the revenue (about £300 million a year) funds school sport. Extract C: Obesity costs the NHS an estimated £6.5 billion a year. Economists argue that consumers underestimate the long-term health costs of sugary drinks, that advertising targets children and that information failure is widespread. Alternatives to taxation include advertising bans, minimum unit pricing, regulation of sugar content and education campaigns.

Extract G: In 2024 median weekly full-time earnings were £850 in London and £610 in the North East. Output per hour worked in London is about 30% above the UK average, while in Wales and the North East it is around 15% below. The UK has some of the largest regional inequalities of any developed economy. Extract H: Successive governments have promised to 'level up'. Policies have included investment zones with tax breaks, devolution of powers to metro mayors, transport projects and moving civil service jobs out of London. Critics say funding has been small relative to the scale of the gap and spread across too many competing schemes. Extract I: Economists disagree on the causes. Some stress agglomeration economies in big cities, which attract skilled workers and high-productivity firms. Others emphasise weak transport links in the North, lower levels of educational attainment and decades of under-investment. Housing costs in London limit the mobility of workers from poorer regions.