Pasty tax: U-turn 'a shambles' says Labour

 

Treasury minister David Gauke: "We have still delivered a budget that is good for the public finances"

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Labour has condemned the way the government has dealt with planned VAT rises on Cornish pasties and static caravans as a "total shambles", following a reversal of the plans.

The U-turns from Chancellor George Osborne's Budget follow protests by bakers and caravanning enthusiasts.

The government said it showed it was listening, but Labour said the VAT rises had been "ill thought-out".

A 5% rate of VAT on static caravans will be delayed until April next year.

And the government has altered the definition of what is a "hot" pasty to allow the reversal of its plans.

Currently, VAT is not charged on most food and drink, or hot baked goods, but is payable on takeaway food sold to be eaten hot.

'Ill-thought through'

Shares in bakery firm Greggs rose 8% on the news but Labour's shadow chief secretary to the Treasury, Rachel Reeves, described the policy reversal as "a total and utter shambles".

She said: "These partial U-turns, just a few weeks after ministers were defending the pasty tax and caravan tax, show just how ill-thought through the Budget was and how out of touch David Cameron and George Osborne are."

Ms Reeves accused ministers of trying to avoid a Commons defeat on Labour's upcoming motion - especially after their support dropped over Parliament's last vote on the caravan tax.

After the amendment, food such as sausage rolls or pasties sold on shelves - that is, cooling down, rather than being kept hot in a special cabinet - will not be liable for VAT.

The definition of a "hot" pasty is being altered to allow the reversal, while a 20% charge due to be levied on static caravans will now drop to 5%.

The government said it had improved the policies after engaging with concerns.

It estimates the U-turns will cost £70m in total lost revenue in the financial year 2014/15.

'Addressing concerns'

During a parliamentary debate last week, MPs from all three main parties criticised Mr Osborne's proposals, arguing they were unenforceable and would have an adverse impact on jobs and businesses.

This is the price our politicians pay in order to try and persuade the Tory press to become Tory once again

However, hot savouries, including pasties and pies are exempt. The U-turn would effectively maintain this situation where they are left to return to "ambient temperatures" on shelves in bakeries and supermarkets.

Bakery firm Greggs, which was leading a campaign against the proposals, said it welcomed the government's change of heart.

"This is fantastic news for the customer more than anything," said the firm's chief executive Ken McMeikan.

"If we had to put up prices by 20% in the current marketplace when consumers are having a very difficult time we expected there would be an impact on sales but we don't know what it would have been. I think the government deserves to be applauded."

'Simple regime'

Static caravans do not currently incur VAT and The National Caravan Council had warned that levying VAT at 20% would threaten 7,000 manufacturing jobs and cost the tourism industry more than £100m in reduced business.

Several Conservative MPs rebelled when the issue was voted on in April, reducing the government's majority to 21, and Labour had been planning to force another vote on the issue when Parliament returns from its current recess.

Caravan Owners of static caravans will have to pay just 5% VAT, rather than 20%

Graham Stuart, Conservative MP for Beverley and Holderness, said the climbdown was "a victory for the campaign to persuade the government to think again".

Treasury Minister David Gauke said the government has listened to "representations" from the industries affected while still addressing some anomalies in the VAT system.

On the issue of VAT on takeaway food, he said "we have a simpler system than we previously had and we have improved the position".

The changes of policy are the latest in a series of rethinks on measures announced in March's Budget.

Ministers recently announced a £30m compensation package for churches to offset a proposed increase on VAT on alterations to listed buildings to 20%.

There have also been calls for a planned cap on tax relief on donations - of £50,000 or 25% of income a year - to be scrapped amid concerns it will hit philanthropy.

 

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  • rate this
    0

    Comment number 34.

    This will probably impact me to the tune of 2 pounds a year. Big deal. If it kept more public workers in jobs I'd pay it without a 2nd thought.

  • rate this
    +7

    Comment number 33.

    now we are getting to the crust of the matter,its good to see that the silly season is open and the quality of the fare is up to standard,for me it is great as I love pasties and eat them unlike the pretenders in the various political parties.

  • rate this
    +1

    Comment number 32.

    Another example of how press coverage damages this country. This bunch of politicians - the whole generation of 'em - is of course hopeless but what do we expect? The country needs clear leadership, not craven tea-leaf reading about what sort of hysteria the press will whip the masses into at every turn. Leadership qualities (I'm not saying Dave has them) = death-wish in this poisonous atmosphere.

  • rate this
    +2

    Comment number 31.

    Do this government really have any idea what they are doing.
    One day we have a pasty tax not the next
    One day we hace a caravan tax not the next
    One day we have a coalition government, not the next.....................well one can but hope

  • rate this
    +3

    Comment number 30.

    Pasty comes out of Greggs oven as I walk into shop - no VAT.

    Pasty comes out of Greggs oven 30 seconds before I walk into shop so when I buy it it comes out of the keep-warm bit - all it's heat still came from the oven and the keepy-warmy shelves did nothing - 20% VAT.

    Nice and complicated for the staff.

  • rate this
    +1

    Comment number 29.

    To think that Ed Millibland and Ed balls-up are the only alternative to what we have now is even more scary than the lack of guts or ability in the current mob of half-wits.

    Democracy in Britain is truely dead!

  • rate this
    +4

    Comment number 28.

    Shouldn't be taxing food of any kind, regardless of whether or not it is considered "healthy".

  • rate this
    +3

    Comment number 27.

    I'm sick to death of the stupid publicity about the pasty tax. The whole reason for the change in the first place was so that ALL food outlets operated on a level playing field, but pasty tax just made too good a headline.

    Next time your at the chip shop or take away café, ask them what they think of bakeries not having to charge VAT.

  • rate this
    +5

    Comment number 26.

    This is tinkering...the most unpopular and ridiculous decision in the budget was the removal of the 50% tax rate.

  • rate this
    +37

    Comment number 25.

    So it's true - you can have your pasty and heat it.


    David, just because you let me buy a warm pasty without VAT, I cannot forgive the many other bad decisions made by you.

  • rate this
    +1

    Comment number 24.

    LOL...

  • rate this
    +3

    Comment number 23.

    How the heck is this the main headline on the BBC? Annan going to Syria, Haig in Russia, riots in Egypt and yet the BBC chooses to lead with this trivial dross?
    And for the record - I'm Cornish. It's not even big news here.

  • rate this
    +17

    Comment number 22.

    "We listened to peoples views" Yes, of course you did, just like you listened to our views on the NHS reforms. The Coalition is giving the impression that it is making it up as it goes along. This is no way to run the Country, we cannot have a government that comes up with policy one minute and then does a u turn next, it isn`t called listening to people, it`s called "shambolic¬

  • rate this
    +1

    Comment number 21.

    Pasties, caravans, grannies, disabled, unemployed ... all hit by idiotic govt money-grabbing policies. They just don’t get it do they? Why haven’t they implemented a 30% reduction in govt salaries? Or is it more fun picking on or making us mere commoners suffer unnecessarily?

  • rate this
    +32

    Comment number 20.

    So they will listen to few middle England pie faces but not to the disabled and people having to survive on meagre benefits.What a useless shower.

  • rate this
    +3

    Comment number 19.

    What we need is a Government whose policies encourage growth and employment by reducing corporation tax rates, NIC levels and employment law bias towards employees. What we get is a pasty tax. You couldn't make this stuff up. The words 'rank' and 'amateurs' come to mind. If we are to stand any chance, we need experts in charge who know how to run businesses in tough times; not old Etonians.

  • rate this
    -1

    Comment number 18.

    Yet more news from the BBC on what "Labour Says".

    Labour said there was boom and bust no more and things were great, free money for all - just before bankrupting the country and ruining lives of British people fr generations to come.

    One only decent thing left to report would be that the Labour Party is being shut down.

  • rate this
    +2

    Comment number 17.

    Crumbs yet another u turn how much longer has this shambles carrying on !! lets appoint Mr Pastry before they cook up another scatter brain idea .

  • rate this
    +3

    Comment number 16.

    People should learn a lesson from this, and that is, if we keep the pressure one it may make them rethink the rest of there damaging policy's. A U turn on this is not as important as a U turn on taking benefits from the disabled.

  • rate this
    +2

    Comment number 15.

    Its not a complete U turn. Most people buy their pasties from the hot cabinet, which will still be VATable, only a few being fortunate enough to get them hot from the oven.

    Typical of this Goverment though, even their about turns are half baked.

 

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