The weekend debate: Should Lib Dems support the pasty tax?

Here’s your starter for ten in our weekend slot where we throw up an idea or thought for debate…

The details of the budget have been trailed extensively in the media and the blogosphere. We’ve had the increase in the personal income tax allowance, we’ve had the ‘granny tax’ and we’ve had a new stamp duty level of 7% for homes worth more than £2m. There were always going to be winners and losers in this fiscally neutral budget. But arguably the one measure that affects every self-respecting Briton is the pasty tax.

Across the UK the love of pasties crosses gender, race and class divides. As proof of this Greggs now have over 1,400 outlets – more than McDonald’s – and thousands of us would be hit hard by a rise in the cost of a steak bake or dare I say it… a sausage roll.

Currently pasties are exempt from VAT, which applies to most other takeaway foods but George Osborne is looking to stop this since he considers it a loophole in the system.

According to the Daily Mail (sorry) VAT will be added to all hot food, including pies, pasties and toasted sandwiches, which are “above the ambient air temperature at the time they are provided to the customer”.

This means that we would be effectively incentivising the sale of cold pasties. Is that really what Lib Dems should be supporting in government?

Agree? Disagree? Post your comments below…

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  • Nick (not Clegg) 24th Mar '12 - 11:29am

    So now we have it. The real loser from this budget will be a granny or a tycoon with a weakness for hot pasties. And , don’t forget. of course, football fans who really love their hot pies.

  • Richard Dean 24th Mar '12 - 11:37am

    Another stealth tax! Are there more?

  • Nick (not Clegg) 24th Mar '12 - 11:44am

    @ Richard Dean

    “The footy fan tax?”

  • Jackie heald 24th Mar '12 - 12:24pm

    I don’t know what all the fuss is about! VAT has been applied to hot takeaway food – from anywhere that sells it – for years!! See the HMRC website !! greggs have got away with this for too long!!

  • Nick (not Clegg) 24th Mar '12 - 1:22pm

    “VAT will be added to all hot food which (is) ‘above the ambient air temperature at the time they are provided to the customer’”.

    Does this mean that if I go to the baker and buy a freshly baked loaf , straight from the oven, I will pay VAT but if I buy the same loaf later in the day, after it has cooled down, it will be VAT-free? Will HMRC be employing an army of inspectors to visit bakers and check the ambient air temperature and the temperature of the bread?

  • Hot loaves -very good point. However, they are not sold for consumption “on the hoof”. Now bread rolls……

  • This all seems like tripe to me.

  • IFS press release on Lord Mirlees Tax Review:

    In the deepest and most far reaching analysis of the UK tax system in more than 30 years, the Mirrlees Review puts the case for radical tax reform. It shows how the current system is inefficient, overly complex and frequently unfair. And it sets out a range of proposals designed to increase output and welfare.

    Government, through the tax system, takes around £4 in every £10 earned in the economy. It is not surprising that getting tax design wrong can be hugely costly. Yet the level and quality of debate on tax policy is inadequate; there has rarely been any clear sense of direction from governments; and expensive and damaging mistakes have been all too common.

    In the UK poor tax design contributes to an inefficient housing market, distortionary taxation of financial services, excessive reliance on debt finance, employment levels lower than they need be and distorted and inefficient savings and investment decisions. The review sets out a long term strategy for reform, and in doing so speaks to immediate policy priorities.

    The Mirleess Tax Review suggested VAT itself should be extended to nearly all spending, with existing reduced rates and exemptions removed. A new tax which would be the equivalent of VAT on financial services should be implemented.

    Is this Pasty tax the budget response to the Mirlees review?

  • Nick (not Clegg) 24th Mar '12 - 3:03pm

    @ Tris

    Another interesting point. A lot of supermarkets use air-conditioning in their fresh food areas; is the ambient temperature to be measured in the store or outside?

  • Definitely not , The hot Pie Tax is just too silly and petty for sensible people. Personally I’d remove as many goods as possible from VAT and increase income tax., because stealth taxation is a way of pretending it isn’t a tax and is unfair to the majority.

  • Nick (not Clegg) 24th Mar '12 - 3:55pm

    @ Glenn

    Joking apart, I agree with you.

  • I personally think it levels the playing field for small, independant and local businesses – The local fish n chip shop, has to apply VAT for a pasty and chips you takeaway, yet a huge company like Greggs can supply a hot pasty @ Zero-rate VAT – The independant, local business is up against the buying power of huge multi-national companies, who can further undercut prices by not having to apply VAT. Yet it is probable that the local business uses local suppliers, in turn any monies generated by these local businesses, is used within the local area, providing jobs and income for local trades.

    In respect of the issue around ‘Bread’, this is considered a staple source of food and it has already been stated, (cannot think of where, to provide a link at presesnt) so will remain VAT exempt warm or cold – In respect of bread rolls, from my limited understanding of the complex VAT rules, they are exempt also, but if they are used in the production of a food to ‘Takeaway’ i.e. Burger then VAT is applied – However, and this is why I feel any simplification of the VAT area is needed, I don’t think VAT is applied to those ‘Chilled’ burgers that you take home and microwave.

  • Nick (not Clegg) 24th Mar '12 - 5:43pm

    Who needs a level playing field? The most famous cricket ground in the world, Lord’s is well known for its slope.

  • No to the pasty tax! At least,not on properCornish pasties. Speaking of which, that is *not* a proper pasty in your picture there, so as far as I’m concerned they can go ahead and tax those all they like, I shalln’t be buying any! Horrid, fat-laden gristlebags like that (and much of what people queue up to buy in Greggs) is surely just contributing to the obesity epidemic, so any additional contribution towards the NHS is only right & proper.

  • It’s not a new tax, is it? They’ve simply closed a loophole that has long disadvantaged small locally owned takeaway outlets without a corporate legal department. It was a prime example of sophistical legal argument producing a result completely unfair, irrational and counter to Parliament’s clear intent.

    So I would absolutely support this reform.

    By the way I tried a Greggs pasty for the first time last week and would welcome a special punitive VAT rate.

  • I think the pasty tax a good idea. Other take away’s have to charge VAT – and is it really good that people are encouraged to buy stuff ladened with fat and carbs, that they then munch away at walking down the street.
    Pasty’s and such were invented for the working man to take for his meals – but that was hard physical work where fat needed to be replenished. I bet they were cold when he had them too.
    Not that I am anti Greggs – they do sell Fairtrade fruit juice 🙂

  • perhaps the fairer way would be to raise the VAT threshold so that small local traders were taken out of the picture. But clearly there is an argument for treating everyday foodstuffs as Vat free? Conversely, there should be double Vat on ‘fun foods’, ie crisps and other msg laden rubbish that is probably a more serious indirect cause of obesity.

  • Nick (not Clegg) 25th Mar '12 - 1:21pm

    @ Growler

    “Does this mean that if I go to the baker and buy a freshly baked loaf , straight from the oven, I will pay VAT but if I buy the same loaf later in the day, after it has cooled down, it will be VAT-free? ”

    “Hot loaves -very good point. However, they are not sold for consumption “on the hoof”. Now bread rolls……”

    We thought we were joking: right? But it seems that the real world is even sillier than we thought. According to today’s “Sunday Times”, bread is deemed a basic food, so it is not subject to VAT whether it is fresh from the oven and warm, or has cooled on the shelf. So no problem there, then. But bakers have pointed out that there is no exact definition of bread, so :” Is a croissant bread? What about a hot-cross bun? A scone?” According to the “Sunday Times:
    “To answer these questions, one of the government;’s most bizarre public consultations has been launched … even retail experts are bewildered .. HMRC will have to decide, raising the prospect of tax inspectors issuing recipes for tax-free bread”

    This all reminds me of the old joke about the Frenchman and the German discussing English cuisine. The Frenchman asks, “Why can’t the English make decent bread?”. The German responds, “They make very good bread; but why do they call it sausage?”

  • Let them eat brioche!

  • Nick (not Clegg) : you may not be surprised to hear that I am not surprised to hear that!

    It amuses me a lot to read that several of these budget ideas were off-the-shelf ideas from the Sir Humphreys, allegedly rejected by Labour Chancellors past.

    I think, like the Granny Tax, there needs to be an easing of the cliff edge. Charge less VAT as the item cools… Fit tills with thermal sensors to ensure the VAT is right.

    And make the Daily Mail subject to VAT if it has too many celeb gossip/bikini photos, for that would be another hot takeaway that is extremely bad for you.

  • Matthew Huntbach 26th Mar '12 - 1:38pm

    The comments from the Labour spokesperson quoted in the “pasty tax” link in the original article show how stupidity and a wish to gain the headlines bedevils sensible discussion on tax. This is not a special “pasty tax”. It is a clarity of the law that VAT is not paid on basic foodstuffs, but is paid on food from a restaurant, which includes food taken from a restaurant which is hot and intended for immediate consumption.

    So long as differential VAT rates exist, there will be borderline issues, this is one of them. VAT is payable on “treats”, but not basic foodstuffs, hot takeaway meals are treated as treats, cold takeaway food is not. Remember also the “are Jaffa cakes cakes or biscuits?” issue, which came about because cakes count as basic foodstuffs but biscuits count like sweets, as “treats”?

    Does the Labour spokeperson think that differential VAT rates should not exist? Well, his party had long enough in government to abolish then if that’s what they though. Otherwise, there’s a technical issue here about the exact point where to draw the line, and I would regard it as serious politics if it could be discussed in these terms. The silly jeering comment from the Labour man was not one which enlightened and help us think about these technical things therefore it was worthless, and shameful. I mean this – politics OUGHT to be a serious issue, particularly when we are discussing finances in a time of financial difficulties, and therefore ought to be done in a way that helps generate an understanding of the issues and a coming to an acceptable compromise. People do not like to pay tax, but unless the Labour man holds to a “libertarian” position – in which case let him be honest and propose the abolition of all state services – he accepts tax must be collected. Silly knockabout comments like his create an atmosphere where it is hard to collect the tax needed to pay for the services needed because underneath it is always left for someone else to pay tax, some mythical someone else who won’t moan about it. Or (which seems to be Labour’s position) we just cross our fingers, borrow more, and hope something turns up later.

    I’m one of those who dislikes what our party is doing in the coalition, would like to see the coalition ended earlier than 2015, and would like better to see a coalition to the left rather than the current one to the right. But to get to
    that point, I need to see a Labour Party which understands politics by debate and compromise, which shows it wants to work in cooperation with others and with the people of the country as a whole to develop the best policies for their interest. Silly knockabout jeering shows no interest in that sort of politics, it shows to me a Labour Party that, sadly, isn’t worth bothering with.

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