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 674.

    Why can't we discuss the increase in child poverty in the UK BBC? The cooked pasties are creating a smoke-screen for the coalitions unrivalled incompetence - the UK on it's way to a depression.....when the coalition got in the economy was recovering.....

  • rate this
    -2

    Comment number 673.

    Actually Stoketom (#661) not cutting the top rate of tax would be a u-turn from when Labour were in power. It was only planned to be a temporary measure.

  • rate this
    +1

    Comment number 672.

    Oh why did someone have to go and mention the Eurozone crisis and the awful situation in Syria.
    How can we have time to save the world when the Pasty debate is so vital and politicians on all sides are making such names for themselves !!
    It's a good job that they are all so close to Murdoch (not the A Team one) that they will get good press exposure.
    Politics and Politians; Rotten to the core!

  • rate this
    +4

    Comment number 671.

    622. Dave

    "I wonder if they will listen to "The public concerns and views" about fuel tax?."

    Sorry Dave, that just won't happen. Piling tax onto fuel is a smokescreen painted green - keep money rolling in so that tax cuts at the top (which the country can barely afford!) won't get put in jeopardy!

  • rate this
    -5

    Comment number 670.

    U-turn shows weakness. There is a strong case for all food to be VATed - surely our problem is not that food is too expensive, but it is too cheap and the NHS is having to pick up the pieces.

  • rate this
    -4

    Comment number 669.

    This is just sad. They're PASTIES, for God's sake. Who really cares?

  • rate this
    +1

    Comment number 668.

    In Salmond's Scotland, pasties will be a banned substance so will have to be smuggled as contraband over the border where we will eat them at illegal parties, where behind closed curtains we watch EastEnders and Coronation St.
    Hardcore Unionists will even bring old Richard Briars DVD's.

  • rate this
    -2

    Comment number 667.

    So your savings haven't been decimated. You still have them. Only the rate in interest you earn.

  • rate this
    -17

    Comment number 666.

    What a mountain out of a mole hill.
    The simple fact is that hot take-away food attracts 20% VAT. So you pay 20% on fish & chips. If a pasty is heated or kept hot especially it is only fair that it too should be subject to 20% VAT.
    Poorly presented but, frankly, not in the slightest bit important in the greater scheme of things given the awful mess that Balls, Millipede Junior et al left behind.

  • rate this
    +1

    Comment number 665.

    I will repeat myself again, if you work, live and take advice Westminster, you will only ever know Westminster. That's why MP's of all parties are so out of touch and blinkered to the outside world. No tax on fatty sausage rolls but there is on Corn flakes! Mmm!

  • rate this
    +1

    Comment number 664.

    637.AndyC555
    So one in ten of your savings has been killed?
    That being the literal meaning of decimate.


    Precisely that , I am receiving 1/10th or 10% (if you don't comprehend fractions) of the interest I was receiving. ...as I said earlier "Hi Central Officers " you must try harder.

  • rate this
    +4

    Comment number 663.

    "649.PEJHA46

    have a bloated public sector etc etc etc."

    So just what is the public sector? Any company involved in rail, except heritage lines, and any company supplying the defence sector, etc etc are in the public sector - without public funding they would not exist. Just because the pay cheque says "Scroggins & Co." and not HMG does not mean they are not public sector.

  • rate this
    -2

    Comment number 662.

    So the people have spoken via the media......the next general election will be won or lost because of a pasty, says it all really.
    I would be more interested in this story if Labour would publish it's policies for moving forward instead of blah blah blah!

  • rate this
    +6

    Comment number 661.

    This is a non-story for all. I notice there is no U-turn on cutting the top rate of tax in which more people are unhappy about. Shows how important the peopel of the UK are to this government.

  • rate this
    -1

    Comment number 660.

    The is just another U-turn from a government that is more concerned about reacting to headlines than policy.

    I disagree with the charities tax, but the pasty tax and the caravan tax were necessary tough spending decision that needed to be made. That's why people voted Conservative at the last election because they wanted a government that takes difficult decisions, not avoids responsibility.

  • rate this
    +1

    Comment number 659.

    640. Tio Terry
    630.Shift That Paradigm
    I think the key is in VAT.
    Value Added Tax.
    Does heating the food add value to it? It seems the answer to that was "Yes" so the decision was made to tax it.

    Cold food like caviar has no added value so could not be subject to VAT.
    ~
    Indeed. VAT should be removed from food. I see no reason on earth to tax food. Tax on food is just wrong. How dare they?

  • rate this
    +2

    Comment number 658.

    of course we could stop stealth taxes and raise income tax but for the tories, (and I suspect labour too) this cannot be done as they are so macho about it.

  • rate this
    -9

    Comment number 657.

    Shambles ? Nonsense !

    The government have been lobbied hard since announcing the tax and have now decided to clarrify / alter the application of the tax.

    Surely this is sensible Government. Labour supporters need to remember ... it was your spendaholic party which left the present Government with the near impossible task of balancing the books.

  • rate this
    +5

    Comment number 656.

    What we have folks is clearly a coalition of imbeciles running the country.

  • rate this
    -5

    Comment number 655.

    The real shambles is the state of the UK's finances. Crash Gordon has so heavily indebted the country that it will be decades before we recover. In the meantime, selfish public sector unions continue to blackmail the rest of us into paying taxes to subsidise their pensions.

    Pasties? Not really a topic for discussion!

 

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