Osborne stands by sugar tax, tells drinks companies to 'bring it on'

When questioned about reports that some drinks makers were planning a legal challenge against the new policy, Osborne told the Treasury Select Committee the government would defend it "robustly".

Osborne said: "I would say, if they want to have an argument about the sugar tax, bring it on.

"We are going to introduce a sugar tax, it's not a threat or a promise, it's the way it's going to be."

The new tax – which was announced in the Budget last week and is expected to raise around £520m in its first year – will add 24p a litre to soft drinks with the highest sugar content, a cost that may be passed on to consumers through higher prices.

Osborne said on Thursday that the drinks companies would do better to use their time and money reformulating their products ahead of the implementation of the tax in 2018, rather than launch a legal challenge.

Shares in drinks companies such as Britvic, AG Barr and Nichols fell sharply in the wake of the announcement and it emerged a few days later that some drinks makers were planning to sue the government over the tax.

It is understood they will make a legal challenge through the European courts to argue the policy is discriminatory because beverages with a higher sugar content such as fruit juices and milk shakes are exempt.

Osborne told the Treasury Select Committee the tax was the right thing to do and would help to combat childhood obesity.