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
    +1

    Comment number 974.

    some like it hot, some like it cold, some like it in the pot nine days old
    many like it without VAT

  • rate this
    0

    Comment number 973.

    This lousy government are completely and utterly USELESS stumblimg from one self inflicted crisis to the next. Can we expect them to renege on the 45% tax rate for most of the cabinet and their millionaire "buddies" or is that a step too far? Posh Boys haven't got any street savvy because they simply don't live in the REAL WORLD.

  • rate this
    +2

    Comment number 972.

    953.
    Skywatchman

    And by the way, next time you're buying your seven year old a pair of shoes, also bear in mind that if I were chancellor, child benefit and working families tax credits would be abolished, all sure start centres would be closed, all health visitors would be sacked and you'd loose your right to flexible working and paid parental leave.

    It's all in the name of austerity.

  • rate this
    0

    Comment number 971.

    967.Martin

    If, for one minute, I thought you had anything logical or beneficial to add to this debate I would continue to challenge you on your posts. As your argument fails on both these premises I therefore decline.

  • rate this
    0

    Comment number 970.

    953.
    Skywatchman

    Raising VAT, would be a lot fairer than raising income tax. It would help reduce inflation, get the deficit down, and in the long term could be used to pay for tax cuts for higher rate tax payers, boosting work incentives and growing the economy.

  • rate this
    +1

    Comment number 969.

    Greggs could increase their turnover and profits substantially by selling a bit more than sos rolls and sos rolls and pasties and pasties and sos rolls.

    Has it occurred to anyone at Gregs to sell some Med/Middle Eastern wraps & pastries and salads, pakoras etc? Some different breads - garlic bread? Fruit bread? Rice? Salad pots?

    A bit more choice? Get a chef in there and sort it?

  • rate this
    +1

    Comment number 968.

    #948 The answer why the proposal for VAT on paties has been ditched is because of crass and blatant opportunism by an Opposition that might well have had to levy the VAT itself, due to actions proceeding through the EU Court.Those who have to pay VAT are complaining of the unlevel playing field.They might win.What is Ed Miliband's thought on that action?Has he been asked? Does he even know of it?

  • rate this
    0

    Comment number 967.

    I'm concerned for the employees of all companies, not just Greggs. Jobs exist because people what things - if people want something else instead, jobs are created somewhere else. By your logic, the Chief Exec of Greggs not care about jobs at Tesco.

  • rate this
    +1

    Comment number 966.

    965.Martin
    "Greggs might have to cut jobs, but the customers will buy something else instead; that's jobs created elsewhere - probably in both a factory and a supermarket, and ideally a farm too. Not to mention the jobs of thermometer manufacturers"

    You are really taking the Pasty Thank goodness you don't have a job with Greggs or is that too beneath you to be concerned for these employees

  • rate this
    -1

    Comment number 965.

    Thousands of jobs? Would that many people stop buying them due to a slight price rise? If so, Greggs might have to cut jobs, but the customers will buy something else instead; that's jobs created elsewhere - probably in both a factory and a supermarket, and ideally a farm too. Not to mention the jobs of thermometer manufacturers..

  • rate this
    +2

    Comment number 964.

    Why is it that politicians always talk the talk? We should demand better. A five year term is too long; a review and vote should commence after 1 year in office and the public should decide whether the ruling parties are fit to continue or whether we should go back to the polls.
    Not only are the politicians out of date but so is the system. New law on sacking incompetents applies to them too?

  • rate this
    +2

    Comment number 963.

    956.Martin
    "I'll never shop at Greggs again for their shameless opportunism and exploitation on this case - until they come up with ideas for slashing the deficit themselves"

    I personally think Greggs chief executive Ken McMeikan's lobbying probably saved thousands of jobs and the cost of un-necessary and complicated tax rules having to be regulated by a thermometer.

  • rate this
    +1

    Comment number 962.

    There was a terrible traffic snarl up on the way home, it was all down to a pastie doing a u-turn.

  • rate this
    -1

    Comment number 961.

    958.Fred Bloggs
    Why would you presume that caviar should have a high VAT rate? What Value is added to the basic fisheggs? On the other hand a Ready Meal will have had it's contents cleaned and prepared, weighed and segregated then packed in an oven usable container. So the basic food - say, carrots, potatoe, meat etc - has had value added. Thats how Value Added Tax is supposed to be applied.

  • rate this
    0

    Comment number 960.

    What wonderful news. I can now go to Cornwall and buy a carvan and a pastie and pay no VAT. I have heard that if I go to Skegness instead they will give you a caravan and a Lincolnshire sausage free.

  • rate this
    +1

    Comment number 959.

    The U turn on the pasty tax is an excellent diversion from the more important things going on in the UK and EU ATM. It makes very little difference to anybody - we wouldn't notice whether the tax were there or not because it would only be a few pence.

    In the meantime, the NHS, Police and education are being privatized. The rail workers from the privatized railways are being laid off.

  • rate this
    +2

    Comment number 958.

    @937.Tio Terry

    "There is an argument that anything other than basic foodstuffs should have VAT added"

    There is an argument sure, but it's a terrible argument.

    Where do you draw the line between a basic foodstuff and a non basic foodstuff?

    Presumably caviar should be highly taxed. But what about granary bread? Why not, you can make do with the cheap white sliced rubbish?

    NO TAX ON ANY FOOD!

  • rate this
    +3

    Comment number 957.

    It's pretty scary that Osbourne thought this was a good idea. What's even worse is that of all the people he surrounds himself with, no one made him realise it was a silly idea.

  • rate this
    -2

    Comment number 956.

    In my eyes this was a valid law all along, and it's taken media and business bullying to force an elected Government into changing it. Maybe VAT rules should change to favour healthy staple foods, however they're sold, but I'll never shop at Greggs again for their shameless opportunism and exploitation on this case - until they come up with ideas for slashing the deficit themselves...

  • rate this
    +2

    Comment number 955.

    952.
    Sp3cul8or

    Are you really equating the Iraq war with the pastie tax?

 

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