Oxford Economics report: NMP 2018 Impact Assessment review
Topics
The Government has consulted on a proposal to apply the 2018 Nutrient Profile Model (NPM 2018) to existing regulations that restrict the promotion and advertising of “less healthy” food and drink products. If implemented, this would significantly increase the number of products in scope, with wide-ranging implications for both public health and the UK economy.
In this context, the Food and Drink Federation (FDF) commissioned Oxford Economics to conduct an independent review of the Government's Impact Assessment (IA).
The report examines the IA’s methodology and assumptions, drawing on new survey evidence and industry insight to assess the potential impacts on manufacturers, consumers, and the wider economy.
Read the full report - exclusive to FDF members
Key findings
The increase in restricted products may be substantially higher than estimated. Our survey suggests there could be a 40% increase in restricted products if NPM 2018 is implemented—almost double the IA’s 22% estimate. This implies substantially higher costs to the food and drink sector than estimated in the IA.
The impact on calorie consumption is unclear. The IA assumes reductions in checkout sales for in-scope products range between 16% and 90%, while the compensation rate (the extent to which consumers offset reduced purchases by making alternative food and drink purchases) ranges from 0% to 100%. The breadth of these ranges indicates that there is considerable uncertainty regarding the policy’s impact on calorie consumption.
One-off costs to manufacturers are systematically underestimated. Our survey indicates that the average one-off costs per newly affected product are around 50 times higher for manufacturers than those assumed in the IA. In the IA, one-off manufacturer costs are estimated at just £53 per product, whereas our survey suggests average one-off costs of around £2,800 per product.
The IA assumes that neither one-off nor ongoing compliance costs are passed on to consumers. However, empirical evidence suggests that cost pass-through is both likely and significant. In many cases, industry-wide cost increases are, at least partially, and sometimes fully, reflected in consumer prices.
Shifting to NPM 2018 will have a detrimental impact on investment—and there are signs this is already materialising. Surveyed manufacturers indicate that the change would lead to a 6% fall in investment, with some firms already delaying investment in anticipation of the change.
Consumer choice will be hit. Over one in 10 products from surveyed manufacturers are expected to be withdrawn, reflecting the difficulty of reformulating to meet NPM 2018. This risks a “two-extremes” outcome, where products are either fully compliant or remain clearly non-compliant, which may have adverse health outcomes for those shifting from relatively healthier withdrawn products to less healthy alternatives.
The sizeable health benefits in the IA are based on a series of highly uncertain assumptions, which are based on limited empirical evidence. As highlighted above, the impact on food and drink consumption—and therefore on health outcomes—is highly uncertain. This uncertainty is further compounded by a lack of robust evidence on whether reductions in calorie intake would be sustained over the long term.
The evidence base underpinning the IA is limited, with material uncertainties and evidence gaps that have important implications for the overall cost-benefit assessment. This results in a material gap in the overall cost-benefit assessment. The absence of post-implementation evaluation evidence on the effectiveness of the current regulatory regime reflects a gap in the policy cycle and limits the evidence base that can be used to inform the IA. This reinforces the importance of robust ex-post evaluation in narrowing these uncertainties and providing an empirical basis for refining assumptions in future assessments.
