The levy, which will be introduced in two years, is aimed at ensuring producers of soft drinks reduce the sugar content of their products and combat childhood obesity.
Speaking in parliament, the Chancellor said: “I am not prepared to look back at my time here in this parliament, doing this job and say to my children’s generation ‘I’m sorry, we knew there was a problem with sugary drinks - we knew it caused disease - but we ducked the difficult decisions and we did nothing’.”
The sugar levy will be assessed on the volume of sugar-sweetened drinks that companies produce or import and it will fall into two bands: one for drinks with total sugar content above 5g per 100ml and a second, higher band for drinks with more than 8g per 100ml.
According to the Office for Budget Responsibility, the levy will raise approximately £520m, which Osborne said would be used to double the amount of funding for sports in the UK’s primary schools.
Two years' warning gave companies ‘plenty of space’ to adapt their products, he added.
Milk-based drinks – including coffee – and pure fruit juices will be excluded from the new levy.
Osborne said: “We’re introducing the levy on the industry which means they can reduce the sugar content of their products – as many already do. It means they can promote low-sugar or no-sugar brands, as many already are.
“They can take these perfectly reasonable steps to help with children’s health.”
Earlier this month Christopher Snowdon, director of the Institute of Economic Affairs, said discussions about how the government could tackle the UK’s growing obesity crisis were taking place against a backdrop of ‘collective madness ’.
He told delegates at a discussion on the Conservatives’ food and health policy it was a delusion that one ingredient – sugar - was the cause of obesity and that it would not be possible for the food and drink industry to remove calories without affecting the way products taste.
“It feels like an easy win to say if we raise the price of fizzy drinks by a couple of pence and get the food industry to reformulate meals then, without any kind of personal responsibility or self-restraint, we will become less fat,” he said.