Just months after the government ruled out a sugar tax, Osborne said the planned levy, which would be imposed on companies and based on the sugar content in drinks, would raise 520 million pounds.

"Of course, some may choose to pass the price onto consumers and that will be their decision, and this would have an impact on consumption too," Osborne told parliament during his annual budget speech.

"We understand that tax affects behaviour. So let's tax the things we want to reduce, not the things we want to encourage."

We understand that tax affects behaviour. So let's tax the things we want to reduce, not the things we want to encourage

Shares in drinks and sugar groups fell on the news, with Britvic and AG Barr, which makes Irn Bru, down between 3 percent and 5 percent. Sugar group Tate & Lyle was down 2 percent.

Last November, MPs called for a tax on sugary drinks as a means of tackling childhood obesity but the idea was ruled out by the government which said it was not the right course of action.

Scandinavian countries have imposed similar taxes, with varying degrees of success, for many years, and in 2012, France and Hungary joined that list, followed by Mexico in 2014.

Facing a growing obesity epidemic that has fuelled rates of heart disease, diabetes and other illnesses, supporters say a tax will raise the cost of high-calorie products and lead to a decline in consumption, in the same way that tobacco taxes have helped reduce smoking.

Opponents say taxes provide no health benefits, unfairly target certain types of product, hurt jobs and burden the poor.