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 554.

    Oh, and pasties are not just cornish pasties. Pasties, by any other name, and in many different forms, were available in many parts of the country as long ago as the cornish pasty was available in cornwaall. And all were meant to be eaten cold, so they should not be sold warm. Then they're not vattable.

  • rate this
    +7

    Comment number 553.

    Would Labour also have condemned the government if they'd U-turned on the much-maligned NHS reforms?

    If anything, governments in general should be U-turning more regularly.

  • rate this
    +5

    Comment number 552.

    If politicians actualy consulted with their voter base on policies there wouldn't be a need for U-turns.

    Unfortunately we have democracy every 5 years and in the meantime, politicians can speculate on 'what the people demand' [sic], usualy in harmony with the biggest lobbies in the world.

    Real democracy?

  • rate this
    +2

    Comment number 551.

    Opposition parties attack governments over U turns as it is a sign of lack of thought and preparation of the budget. This was one policy that a more competent government would have avoided. However its only a minor issue compared to the bad policies announced in the budget. For example how about taxing elderly more at the same time taxing the rich less. Now there are two changes to do a U turn on

  • rate this
    +3

    Comment number 550.

    Why don't the Tory's think before they decide, it's not to difficult. It's makes them look bigger fools, if that's possible.

  • rate this
    0

    Comment number 549.

    Pasties aren't exactly a healthy option; they should have kept the tax on them.

  • rate this
    +2

    Comment number 548.

    @andyb67: The BBC showed the figures last night. The gov loses three times more, btw, with this U-turn, than it would have made.

    @James Hodgson: Normally, I'd absolutely agree. But this was a shambles clear from the outset. That the gov. couldn't see it would be shows just how clueless they are. They've become a joke.

  • rate this
    +3

    Comment number 547.

    505 Couldn't agree more, Boris nailed it, sick of handing over billions so Labour get free support.

    Laughable drivel from the simple. How incredibly paranoid can the right wing get? Clearly, anyone who doesn't agree with the hard right or toes their line is biased. Jo McCarthy would've been proud of you!

    Remember, the majority didn't vote for your right wing shower.

  • rate this
    +2

    Comment number 546.

    A non story in the budget.
    A non story on the u turn.

    I this some sort of exercise in mass distraction. The value to the exchequer from a tax on pasties and caravans must be tiny. I notice no figures have been published on how much the treasury was going to gain from these taxes

    - Because it's only 5% of the money they are giving away in millionaire tax cuts
    Remember we are all in this together

  • rate this
    +1

    Comment number 545.

    @531.Sydney
    "Also, in politics the whole point of an Opposition in a democracy is to oppose "

    Just for once I wish the opposition would hold their hands up and say "that's fair, I can agree on that". To argue against something both ways is hypocritical surely?

  • Comment number 544.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +2

    Comment number 543.

    491.James Hodgson- I hate it when opposition parties attack government U-turns. If a government is 'big' enough to admit it made a mistake and needs to change course, why do we all suddenly attack it?

    Because it usually shows the gov hasn't thought things through; is faffing around desperate to firefight but without strategy. And - Osborne doesn't know what he's doing. We all know that.

  • rate this
    +2

    Comment number 542.

    When I read daft things like this, I remember why I love being British. We are a crazy nation, and having tepid pasties as headline news is sort of reassuring and Dad's Army-ish.

  • Comment number 541.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +6

    Comment number 540.

    I believe that when VAT was first introduced that it was stated that it would not be put on food !!!. It was allowed on served meals in cafes and restaurants where people sat down to eat. !!!! Yet another turn around by governments they seem to say things to please the people then do other things.

  • rate this
    +4

    Comment number 539.

    @503 Wakeupthesheeple

    You might be happy paying the NHS and Social Services for the medical care of thousands of 20 stone diabetic, mobidly obese teenageers with their stair lifts, specially made beds and huge medical needs. However, I am most certainly not. It took £40,000 - two fire engines and a demolition team to remove a 60 stone teenager from her house last week.. We get the bill.

  • rate this
    -3

    Comment number 538.

    Rachel Reeves "a total and utter shambles". Was she referring to this policy or the Labour Party at the moment?

    Labour should focus on themselves rather than sitting at the back of the class sniping, it is becoming very tiresome and a tad embarrassing.

  • rate this
    +29

    Comment number 537.

    I agree that this seems daft but creating laws dependent on 'measuring ambient temperature' is worse.

    The inconsistency isn't the fault of pasties & sausage rolls though, it's that VAT was ever only applied to hot food in the first place.

    VAT rules have often been both bizarre & unpopular, usually because it is a favoured method of 'Stealth Taxation' by governments that are a bit short of cash!

  • rate this
    0

    Comment number 536.

    521. Oysterman
    100s die in Syria yet the BBC leads on Cornish Pasties..says it all doesn't it!

    It says that the BBC (as its name kind of implies) is a British news organization, concerned mainly with British news. I doubt if the Syrian equivalent of the BBC even mentions what happens in this country.

  • rate this
    0

    Comment number 535.

    502.coram-populo-2010

    Companys claim back all the VAT they incure so the VAT on fuel is claimed back and should not affect the cost of the goods carried.

 

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