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
    +2

    Comment number 874.

    Has anyone pointed out to them that they can now be accused of enabling those with wealth to eat hot food whilst those without will have to eat their pasties cold. All in this together???

    Its a small point but it does sum up this Government rather well!

  • rate this
    +5

    Comment number 873.

    "856.MikvV7

    To make out budget break even we must pull out of Europe(saves 12 bil), stop foreign aid(saves 6.1 bil), remove 17.4 bil from families and children, 29.3 bil from social exclusion, , cut all public salaries by 10%, cut education by 4 bil,cut health by 14 biletc."

    And what's you estimate of the cost of the social collapse that would ensue? Would money actually have any value anymore?

  • Comment number 872.

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

  • rate this
    -2

    Comment number 871.

    Fyi the cuts I proposed would save 104.2 billion after sacking 10% of the public sector – and thus in total they would save 8.63 billion/month. We need to save 13 billion/month, so we could cut welfare by 62 billion, which added to my previous cuts would save 13.73 billion/month. Those without a job would have 3 months of benefits, and then no help – like how benefits were set up after WW2.

  • rate this
    -1

    Comment number 870.

    Usual rubbish with this government.create news about small things that hides the wider bigger important picture,that their policies arent working & as i said over 2 years ago would be totally useless & poorly judged but hey lets all blame labour for the 10 years of great economy & final GLOBAL meltdown.this is the same as the supposed fuel strike thanks for that 2hr queue cameron! making newscover

  • rate this
    +5

    Comment number 869.

    Essential food has been exempt from VAT for years, and rightly so. While take-away food is a luxury for some people, for many, it is a staple, and they are punished financially. If you don't have to pay VAT on the ingredients, why should you have to pay it when food prepared for you by a more efficient system - the economy of scale makes chip shops quite environmentally friendly, if not so healthy

  • Comment number 868.

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

  • Comment number 867.

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

  • rate this
    +6

    Comment number 866.

    Why is there any tax on any takeaway food is the real question....or do people believe that we should pay a tax on what we eat ?

    Many people clearly have to eat away from home, in fact MPs have a substantial allowance to cover this situation.

  • Comment number 865.

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

  • rate this
    +2

    Comment number 864.

    I bet that nobody dreamt that we would have such high level and important decisions made about our lives when we joined the "UNION".

    Any body seen any accounts yet?

  • rate this
    +2

    Comment number 863.

    Tory boys - never hear you give credit where it is due - Gordon Brown was the main reason We are not in the Euro - He fought Blair and Co Tories and Lib Dems to keep us out.
    But you are quick to blame Him for the Bankers dirty handywork, non of those were Labour. How Labour have let the liars get a3way with this travesty is a mystery to Me.

  • rate this
    +3

    Comment number 862.

    Forget about the pasties what about all the other tax we pay and the silly tax app that doesn't really tell you the day to day tax being taken off us in petrol, food, clothes etc. Far too much is taken off us in one form or another and they wonder why high streets are disappearing and noone spending any money. Supposedly we have gone back at least 10 years perhaps the tax should follow suit

  • Comment number 861.

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

  • rate this
    +2

    Comment number 860.

    As per usual, the public led by the mass media (including the BBC) whips up mass hysteria about a tax on pasties which for many people like me couldn't care less about. No doubt if Osbourne hadn't had lowered the top rate of tax people wouldn't be using this as an excuse to 'clobber' the working classes but the REAL issue from the budget is the petrol tax increases due in August.

  • rate this
    +1

    Comment number 859.

    Successive governments do this again and again, they introduce a ridiculous policy and then roll it back after outrage from the public. Lets make babies pay to use ventilators in hospital, oh the public are outraged and hate us, maybe we now drop this new piece of legislation, egg on face once again.

  • rate this
    +3

    Comment number 858.

    840.Paul
    "This tells me that next ellection I'd vote for Greggs the bakers over what political mess we have due to the sole fact that they are alot more intouch with the people they serve"

    Hear hear! Lets ask Greggs chief executive Ken McMeikan if he would stand for parliament, perhaps he could create a new party the PPP (Peoples Pasty Party) or it could be known as the 3P's

  • rate this
    0

    Comment number 857.

    Oh come on, why are we worried about VAT on something as trivial as pasties? A U-turn on fuel taxation would be of more use to the economy and would provide just the boost to the economy to allow people to be able to afford the slightly more costly pasty.

    Those of you that actually want to buy one that is!

  • rate this
    +1

    Comment number 856.

    A pasty tax is insignificant. To make out budget break even we must pull out of Europe(saves 12 bil), stop foreign aid(saves 6.1 bil), remove 17.4 bil from families and children, 29.3 bil from social exclusion, remove 6.4 bil from transport, cut all public salaries by 10%, cut education by 4 bil,cut health by 14 biletc. People won’t like it, but we must run the budget like a household budget.

  • rate this
    +3

    Comment number 855.

    @ 854.Billygoatgruff

    "Living off the backs of the poor! Never thought I'd see the day loan sharks would run TV adds.
    Only in Tory britain, come on Milliband something worth the fight."

    GET REAL!! I do not condone these awful ads but they started advertising in the early days of Labour!

 

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