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 934.

    797.mofro
    No U-turn on the tax cut for the wealthy then? Far more important, really."

    The 50% tax limit did not work. People simply cut their income to just under the limit, which I did, and increased their expenses (wonder where I learnt that from?) or pensions. Thats why it was changed.

  • rate this
    +1

    Comment number 933.

    What a waste of time and effort. VAT rules on food are riduclous. If I drink my coffee in the shop it is VAT rated, takeaway then there is no tax. What 'VALUE' has been added ? Frankly the name 'value added tax' is silly too, it is a purchase tax pure and simple

  • rate this
    0

    Comment number 932.

    "All this fuss...". no. it isnt 'all this fuss'. this 'silly pasty tax' is the tip of a much, much bigger iceberg. it just happened that the fuss over the pasty tax, happened to be an example, of whats happening deeper down.

  • rate this
    -1

    Comment number 931.

    "912.Ex Tory Voter

    If you read up on your history"

    I think history will ercord those that rioted having no political aims whatsoever.

    It's just wishfull thinking on a typical lazy armchair socialist warrior to think the riots will have any political outcomes.

  • rate this
    +1

    Comment number 930.

    I reckon this was always intended to divert from the total injustice of the proposals around child benefit. That is the real scandal that needs a full U-turn not the mickey-mouse swerve.

  • rate this
    -1

    Comment number 929.

    Absolute shambles, no wonder our fin aces are in such a mess, do the treasury and Gideon know their elbow from their apex. How many "U" turns now from these "two arrogant posh boys" with "no passion to want to understand the lives of others".

    Sorry to quote Nadine!

  • rate this
    0

    Comment number 928.

    923.FRED..If it was a "Lefty Party" in power and in the news then you would have a valid point.But you do not because I think you will find that on every Tory PR Faux Pas, it is in fact the Tory and UKIP voters who seem to have on here, the amazing talent of managing to end up blaming Labour to the point of ad nauseam.

  • rate this
    -2

    Comment number 927.

    "914.Ben
    I am happy with the more straightforeward way of taxing pasties that have been kept warm on purpose".

    No its not. 'cos cold pasties are still not taxed. Either Tax pasties or not full stop. Then its straight forward.

  • rate this
    +1

    Comment number 926.

    922.TheTakeleySocialist

    Thank you so much for that. It's an image I try not to visualise too often but you nearly made me spill my tea and rupture myself laughing. Humour is a better weapon and I loved the idea of Rebecca as Buffet the Vampire Slayer chasing the Boys from Bullingdon with lukewarm pasties. Mmm delicious untaxed pasties.

  • rate this
    0

    Comment number 925.

    I want a better opposition to the Government than this. This is pathetic from Millibland and his crew. With so much that is going on all they can moan about is junk food. Once more playing to the tabloid press. They must think that if they say the word shambles/omnishambles often enough it will stick to the coalition. A flimsy plan from patronising twits.

  • rate this
    +3

    Comment number 924.

    Our coalition government is weak and gutless, and lacks any leadership. Just because The Sun, and other pressure groups whinge about this increase, Osbourne backs down. He is pathetic. The country currently needs strong leadership, and unpopular decisions have to be made, if our children are to have a secure economic future. Instead our politicians are only interested in focus groups. Pathetic.

  • Comment number 923.

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

  • rate this
    +2

    Comment number 922.

    You can just picture some kind of dormitory akin to that in the "Boys from Brazil", and every morning a fat woman comes in and wakes up all the Tory Keyboard warriors.A quick breakfast, then heads down on the PC to take on the Guardian and BBC HYS websites to thumb up and down comments and indulge in Labour Whataboutery as a way of tackling the latest TORY P.R ABORTION.

  • rate this
    +3

    Comment number 921.

    A Pasty tax or
    A structural deficit which costs the nation £100m+ every day, on the interest alone.
    I know which one I would consider to be a shambles.

  • rate this
    +5

    Comment number 920.

    914.Ben

    Thanks for the clarification, I thought I understood it, but now, after your post, I'm quite sure I don't.

  • rate this
    0

    Comment number 919.

    comment 916 jl45
    What does relevance does that have with the pasty tax this is about a silly definition of hot pasties

  • Comment number 918.

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

  • rate this
    +3

    Comment number 917.

    906.Laurie Knight
    2 Minutes ago
    @863.stan howard
    He fought the Tories to stay out of Europe? Can I have some of what you've been smoking please?

    No, because the Tories have re-criminilised it after years of 'no-one cares' policing. Only because poor people like it, though.

  • Comment number 916.

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

  • rate this
    0

    Comment number 915.

    Generally more happy to see a U-Turn than a hoodwink. A U-Turn is a bad idea they're unable to put through.

    A Labour hoodwink usually went along the lines of 'leaking a report' about a 50% cut. Followed by outcry, when the cut arrived it'd be only 10%. Everyone calmed happy that this was much more reasonable.

    Forgetting they were still10% down.

    Now if only we could get a U-Turn on HS2 as well.

 

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