LibLink: Stephen Gilbert – This half-baked pasty tax is offensive

You really must follow the link to the Guardian to see what  Stephen Gilbert, MP for St Austell & Newquay, is eating.

The pasty industry is rising up and marching, it seems.

He writes:

It’s just over a month since George Osborne presented his budget to the House of Commons but the uproar over the proposed “pasty tax” hasn’t subsided. The VAT extension on hot food, which would include the Cornish pasty, is not only politically unpopular, it’s also unworkable, unfair and based on a flawed logic.

Today, I’m joining hundreds of people from the pasty industry to demonstrate outside Downing Street and have presented the prime minister with a petition of almost half a million signatures in opposition to the proposals. The strength of feeling in the House of Commons last week when my amendment went to a vote and the huge number of people who have signed the petition or turned out in the rain for today’s protest just shows that the opposition to these plans is continuing to grow and this issue isn’t going to disappear.

The government needs to drop its flaky proposals and get this issue off its plate.

* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.

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  • John Richardson 27th Apr '12 - 4:15pm

    “Offensive”? Come off it. The opposition to this VAT extension is bordering on hysteria.

    Gilbert’s proposed amendment seems to be reasonable, however:

    I proposed in an amendment to the finance bill last week, [that the government should] avoid making any changes to VAT rules surrounding hot food if – as is the case for Cornish pasties – no attempt is made to keep the product hot after the cooking process has ended.

  • Andrew Suffield 27th Apr '12 - 4:24pm

    Would this amendment mean that restaurants no longer pay VAT, where they always have in the past?

  • Peter Watson 27th Apr '12 - 4:35pm

    This amendment would only relate to take-away food. (VAT on hot take-away food was introduced by the Thatcher government with the infamous “fish and chips tax”).

  • Richard Shaw 27th Apr '12 - 5:39pm

    I don’t see any real justification for pasties to remain VAT free, especially given that they and pies in general are so unhealthy and that the nation is struggling with combating obesity. Perhaps increasing the cost of these unhealthy foodstuffs will encourage people to switch to (and bakers etc to diversify into) healthier options such as fruit, which is VAT free.

    If an extra 20% on something that’s £1-£3 is going to really hurt your personal finances you’re probably eating too many and should cut down anyway.

    I’m sure the Government can come to some form of compromise with the various multi-million-profit bakers. For example, we won’t charge them VAT as long as the calorie information is displayed clearly on the sign and/or menu item. Either that or rename them to Heart Disease Delivery Mechanism (Pasty/Sausage Roll/etc.). 😉

  • It’s not really about the tax; it’s about the perception of the tax.,

    There has rarely (at least in my lifetime) been any budget that has been handled so ineptly. Ask most members of the public about this budget and I’ll bet there will be references to “Granny Tax”/”Pastie Tax” and an overall idea that this was a “Millionaire’s budget”.
    Over the last few weeks the ‘Teflon coating’ on ‘Dodgy Dave’ is cracking and the ‘shine’ is peeling off this coalition faster than off a cheap watch. If there is one thing history has shown us is that such problems beget more problems and I’ll wager, before the end of this parliament, that both Cameron and Clegg will be spending more and more time ‘looking over their shoulders’; Milliband has all the trappings of a loser but I’ll not be surprised if he outlasts Dave and Nick.

  • Matthew Huntbach 27th Apr '12 - 11:06pm

    The impression has been given that a special tax on pasties and nothing else has been imposed. Which is nonsense, and Stephen Gilbert should be ashamed of himself for perpetuating this nonsense, because it is nonsense coming from an unholy alliance of the right-wing press and the Labour Party designed to damage our party.

    My understanding is that this is just a clarification of existing tax law on hot food cooked on the premises. Perhaps Mr Gilbert could tell us what proportion of this is pasties. Also, since it is cooked on the premises, clearly it is not being cooked in Cornwall. Is there a big industry in Cornwall making uncooked pasties to be cooked elsewhere? I should like to see the figures. My understanding is that this is mainly a big fusss cooked up by the Gregg’s bakery chain – do they really source most of their food to be cooked on the premises and eaten hot from Cornwall? If not,. Mr Gilbert is in effect lying to us by helping spread the belief that this is what it is all about, rather than about a big company exploiting a tax loophole to undercut other suppliers of similar food – which in many cases would be independent cafes – if this is not the case. I am willing to be proved wrong here, so if I am wrong, someone please show me the figures to show that.

    There is no granny tax either. Instead a shift from subsidising only wealthier older people (which is what a higher tax allowance does) to subsiding all older people (which is what a higher state pension does). Getting this shift was a good thing done by the Liberal Democrats, a move of tax policy to the left. It is shameful of the Labour Party that they should opportunistically join in the misleading attack on it from the right-wing press.

  • Peter Watson 28th Apr '12 - 12:01am

    VAT on food is a minefield anyway, largely it seems based upon whether a food item is a luxury or an essential (apparently Jaffa cakes are the latter!).
    However, the pasty tax raises and reflects several issues.
    It looks looks like a way to take money from the less well-off in a budget which boasted of a tax cut for the wealthy. This then allows easy jibes about the slogan “We’re all in this together.”, and since the history of the cornish pasty is as a working man’s lunch, it becomes a potent symbol.
    Also, we campaigned in 2010 against Cameron’s VAT bombshell, so every extension of VAT leaves us open to yet more charges of hypocrisy and u-turns. Indeed, liberals and nascent SDP probably argued against the imposition of VAT by the conservatives in the 80s onto hot takeaway food in the first place (when they also increased the rate of 8% to 15%, so were sort of truthful when they previously dismissed pre-election accusations that they planned to double VAT!).
    So we have associated ourselves with a favourite tory tax-raising practice with which we used to disagree while at the same time appearing to be taking extra money from businesses and voters in our SW constitencies.

  • ,i>It is shameful of the Labour Party that they should opportunistically join in the misleading attack on it from the right-wing press.

    This line is trotted out on this forum with depressing regularity. What actually do you expect an opposition to do – agree with the government? I dont remember that being our approach pre-election…

  • What’s “offensive” is that the likes of Greggs and Tesco spent 30-odd years avoiding tax on the grounds that their takeaway pasties and chickens were presented hot so as to improve their texture or appearance, not so as to be taken away and eaten while still hot.

    I can’t imagine how they ever got away with it (perhaps our judges go to Greggs as often as millionaire Ed Milliband does).

    Meanwhile chippies and curry houses have had to charge VAT throughout that whole period. That’s offensive, that Greggs et al should seek to complain instead of hanging their corporate tax-evading heads in shame.

  • Ann Kelan, Greggs and Tesco weren’t avoiding tax, It was simply the tax rules that they didn’t have to, it required no effort on their part. Besides, the lack of tax on supermarket hot food is almost entirely to the benefit of the consumer who pay from lower prices than they would be were the goods taxed, not the companies themselves.

    Consequently it will be the public who will pay the costs of VAT now, not the shops. The public are also voters…

  • Andrew Duffield 28th Apr '12 - 9:31am

    The existence of a tax that penalises added value is the biggest offence.

  • All MPs have to do stuff for their constituencies. Thankfully – and unlike in the US – it is much harder for them to get this sort of special pleading enacted. There is no reason why pasties should be VAT free and fish and chips vat liable. (That said, there is no reason why chocolate cake should be VAT free and chocolate biscuits should be liable for VAT).

    Let’s campaign for the bits of the budget – including the biggest ever rise in the tax allowance – that we like!

  • Richard Dean 28th Apr '12 - 10:43am

    Taxes are not penalties. They are [or should be] ways of sharing the costs of things [like health services] that are [or should be] better [perhaps cheaper too] when shared. [:-)?]

  • Agree with the general sentiment here that the special pleading for pasties is both daft and unjustified. The simplification is an improvement to the preposterous tax rules on food, and should be welcomed for that.

  • Peter Watson 28th Apr '12 - 12:31pm

    I have seen our leaders argue passionately that other changes to taxation have been progressive when accused of the opposite.
    Now we have the extension of a tax on consumption to items that represent a disproportionately larger portion of the income of those with less to spend. It’s about as regressive as it gets.
    Maybe this is a minor issue and a sensible reform. Maybe we have done lots of bigger and better things in the budget that we should be proud of.
    But as LDs this is another own-goal. An example that we are not competent to look at the details or that we’re duplicitous enough to hope no-one else would. It suggests, in conjunction with the higher rate tax-cut, that we have turned our back on our core supporters. Cynical news management of big items before the budget meant that other stories were bigger when they sneaked out after the budget. Our leaders keep reinforcing a narrative and view of us as a party which I think will cost us dearly in 2015, and in every election between now and then.

  • Peter Watson 28th Apr '12 - 12:40pm

    @Stephen W
    Those with lower incomes spend proportionally more on essentials so are severely penalised by flat-rate taxation on consumption. I hope that as Liberal Democrats we do not support that sort of regressive taxation.
    VAT should be on discretionary spending – that money which goes on luxuries and non-essentials. That’s why it gets complex and we have battles over Jaffa Cakes 🙂
    And even on expenditure, the wealthy can avoid taxation. Purchasing can be through companies in a tax and VAT efficient way. Those in the South-East are more able to buy stuff in France than those of us in the north-west (witness the current situation with fags, booze and even fuel to some extent).
    I believe consumption tax can be useful as a way to manipulate undesirable behaviour (e.g. that extra duty on fags, booze and fuel), but not as a core way raise revenue. For that we should be looking at fairer ways to tax income and wealth, so that those with the broadest shoulders bare the heaviest burden.

  • Peter Watson 28th Apr '12 - 11:18pm

    I see many people buying pasties, pies, etc. for lunch in my local Sayers (other bakers are available), and many of these are working in jobs where a hot pasty is a practical and affordable way to have something warm at lunchtime.
    I would confidently suggest that these people:
    1. earn less than Messrs Cameron, Osborne, Clegg et al
    2. spend more on pasties in any given month than those political figures (apart from in the last few weeks when the latter have been keen to be photographed pasty at the ready)
    So yes, I believe that for them, this change in VAT is regressive and will hit them disproportionately.
    I don’t defend VAT on fish and chips and other hot take-away food – I disagreed with that tax when the conservatives introduced it and I don’t recall other liberals being cheerleaders for it then. More recently I don’t recall my fellow Lib Dems campaigning to increase the reach or rate of VAT: these are classic tory practices and if not targetted carefully VAT takes proportionally more money from those with less disposable or discretionary income.

  • Peter Watson 29th Apr '12 - 1:42am

    This new tax does not suddenly make the system simpler and fairer: it introduces new definitions about the temperature of the food with regards to ambient temperature (maybe warm pasties will be VAT-free in the summer) and still leaves an arbitrary distinction between prepared take-away food that is hot and cold (perhaps the middle-classes are more likely to buy a cold baguette than a hot pasty?). As pointed out above, chocolate covered biscuits attract VAT but chocolate covered cake does not, so we still have a system full of anomalies. I have not heard fish and chip shops going bankrupt and blaming tax-dodging bakers on the high street, and the anomaly it is supposed to address is one that has existed almost unnoticed for thirty years since it was introduced with a tax that labour and liberals opposed. This is simply a measure to raise a bit more money from one section of society to allow it to be redistributed to another, and regardless of how sensible or minor it is in economic terms, it is a naive political blunder which reinforces the current public opinion of our party.
    And consumption taxes can be unfair and easily avoided by those with more money. I am fortunate enough to have enough discretionary income to save money – no VAT paid there. I can afford to holiday abroad and spend money there – no VAT paid in the UK. I have come across many contractors who have set up limited companies to reduce their liabilities for income tax and VAT.
    It also concerns me that having paid tax on my income, why should I then be taxed a second time when I spend it. Suppose I earn £1000 and pay £400 to the tax man. If I use the remaining £600 to pay someone to decorate my lounge, then £100 will be VAT, and maybe £200 income tax paid by the decorator. So from the £1000 I earnt, I have a nicer house, the decorator has £300, the taxman has £700. And every time the decorator buys himself a pastie, the tax man gets a bit more!

  • Peter Watson 29th Apr '12 - 2:57pm

    I think that there is an argument for the removal of VAT and only taxing income/wealth once at source, except where we want to moderate consumption, e.g. of cigarettes, alcohol, fuel, and possibly in the future “unhealthy” food. Overall though, I’m pretty agnostic on this issue.
    However, I am glad that we have a system which attempts to make VAT fairer and less regressive by exempting certain essentials (children’s clothes, basic foodstuffs, etc.) so that more taxation is raised from discretionary expenditure and those on a lower-income are not disproportionately affected.
    As far as the pasty tax is concerned though, I think it is unnecessary tinkering of the VAT system in an area which does penalise the less well-off, it brings more complexity rather than simplification, and for a party with a strong base in the home of the Cornish pasty it is political foolishness.

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