Britain announces "pasty tax" U-turn

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NY Yankee

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..LONDON (Reuters) - Britain's Conservative-led government is to modify a levy on hot takeaway food after months of criticism that its planned "pasty tax" showed it was out of touch with ordinary people.

A Treasury spokeswoman said that Value Added Tax (VAT) would not be applied to hot takeaway food that is cooling down after being cooked - for example the popular Cornish pasties which shops rarely sell straight from the oven.

The pasty tax, announced in the March budget, prompted accusations that chancellor George Osborne and Prime Minister David Cameron, who both come from privileged backgrounds, were unable to empathise with ordinary Britons.

The criticism forced ministers, including Cameron, to claim they enjoyed eating Cornish pasties - a savoury pastry usually filled with meat and vegetables and often eaten lukewarm.

The decision will have implications for bakers such as Greggs, Britain's largest food-on-the-go retailer.

The Treasury spokeswoman also said the government would cut a tax on static caravans, used by many Britons seeking a low cost holiday, to five percent from a proposed 20 percent.

The Conservatives shed hundreds of seats in local elections earlier this month, and recent opinion polls show their popularity and reputation for economic competence are slipping.

(Reporting by Fiona Shaikh, writing by Mohammed Abbas; Editing by Myra MacDonald)
http://news.yahoo.com/britain-announces-pasty-tax-u-turn-215235091--finance.html

Please keep this thread civil. It's not meant to start an argument.

I don't live in the UK, but from what I hear, it is quite expensive. The last thing people need is another tax. Taxes hurt small businesses and working class people.
 
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IanXC

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Given the uproar that this, and the static caravan issue had caused compared with the small amount of revenue the Treasury has agreed to give up (£35m for pasties, £30m for caravans) I think this is the only sensible option available!
 

Mojo

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It seemed to me to be quite fair; eating out food of this type cannot surely be anything other than a luxury?
 

Schnellzug

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I know it's not traditional to feel much sympathy for David Cameroon, but his opponents have been making hay out of this; as it said on the News, he's being "accused" of making a turn round or climb down. Honestly, you can't win, can you. If you admit that you've made a mistake, you're backing down and climbing down and not being Firm and Decisive, and if you don't, of course, then you're stubborn and arrogant and don't Listen to the People.
 

HST Power

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This entire pasty tax situation is a total embarrassment. I'm from a family of staunch Tory voters but even we were laughing at how completely ridiculous this utter farce looks on the Government.

One Tory MP was on 5 Live this morning, saying that this budget U-Turn reflected that George Osborne had 'listened to the public.' What, over a hot pasty? Would people rather see a cut in the VAT on a pasty, or a cut on petrol and energy prices?

Clearly, we have learned absolutely nothing from the hammering we got at the council elections.
 

D841 Roebuck

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Wealthy Old Etonian merchant bankers don't tend to eat takeaways or holiday in static caravans. These proposed taxes were a typical Tory attempt to gain revenue from the hoi polloi whilst sheltering their rich backers - and deliberately sacrificed with great publicity in an attempt to prove that most of the press don't actively connive in such "snouts in the trough" policies
 

Mojo

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Wealthy Old Etonian merchant bankers don't tend to eat takeaways or holiday in static caravans. These proposed taxes were a typical Tory attempt to gain revenue from the hoi polloi whilst sheltering their rich backers - and deliberately sacrificed with great publicity in an attempt to prove that most of the press don't actively connive in such "snouts in the trough" policies
Surely these ''hoi polloi'' cannot be that hard up if they can afford to eat out? The Daily Mirror website tells me the average pasty costs a whopping £1.49 with no VAT, is this correct?
 

anthony263

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Surely these ''hoi polloi'' cannot be that hard up if they can afford to eat out? The Daily Mirror website tells me the average pasty costs a whopping £1.49 with no VAT, is this correct?
I dont know where they got that figure from in greggs or a few other bakeries around here pasties are normally from 93p-£1.05
 

Schnellzug

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Surely these ''hoi polloi'' cannot be that hard up if they can afford to eat out? The Daily Mirror website tells me the average pasty costs a whopping £1.49 with no VAT, is this correct?
A good pound, if not two, less than you'd expect to pay for a perfectly standard Sandwich in a motorway service station. Would anyone try to argue that they're a luxury?
 

NIMBUS

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From what I've read, the Government has not made a "U-turn" on the tax at all. They are not scrapping it, they are just amending it in line with what Greggs recommended, to make it more workable.

The original proposals were a poorly researched and unworkable farce, the Greggs amendment is a much better solution.

For example, chickens sold from rotisseries will now be VAT-able, as will anything that is kept warm after cooking in a hot cupboard or sold in a container intended to keep the item at cooking temperature. Other cooked items will now continue to be exempt from VAT.

This achieves the Government's aim, to bring cooked takeaway food into line with that sold in restaurants, so that you don't pay VAT in the latter but not in the former on the same cooked item, whilst addressing the practicalities that Greggs highighted.

It sounds to me like the Opposition are mischief-making again by implying that the tax has been scrapped and that a U-turn has been performed. Whilst the original half-baked, amateurish proposal should never have been presented in the first place we should perhaps be celebrating the fact that we've got a Government that listens to public opinion and acts on it rather than bulldozing their own ideology through, as previous Governments of both hues have done in the past.

I wonder if they'll eventually listen to everyone that's telling them that IEP is a poor solution to HST replacement?
 

Ferret

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This entire pasty tax situation is a total embarrassment. I'm from a family of staunch Tory voters but even we were laughing at how completely ridiculous this utter farce looks on the Government.

One Tory MP was on 5 Live this morning, saying that this budget U-Turn reflected that George Osborne had 'listened to the public.' What, over a hot pasty? Would people rather see a cut in the VAT on a pasty, or a cut on petrol and energy prices?

Clearly, we have learned absolutely nothing from the hammering we got at the council elections.
I think the press coverage of it was an utter farce as well! In fact, the whole thing is an unedifying fiasco! With all the serious stuff that's going on like how to get our economy moving in spite of the Eurozone **** up, law and order issues, the NHS - all we can talk about is a god damn pasty tax! No wonder this country is in a mess!

 

142094

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Except they're not - the ones in Greggs are left too cool to room temperature and the shelves are not heated.

This was a stupid idea in the first place, very difficult to enforce and typical Tory thinking (i.e. not very good). In a time of recession (yet again), why put up taxes on a growth area - Greggs are expanding all the time, yet these plans certainly would have reduced any growth plans they had. A 20% rise on anything, whether it be a 90p or £2 pasty is a lot, no matter who you are.

Roll on the next general election.
 

Blindtraveler

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as a fat git I welcome the Pasty tax however to drift slightly the static caravans issue is v important and quite frankly the least this poor excuse of a government can do as although holidays undoubtedly are a luxury opening them up to wider groups of people does at least mean that they too get a bite at the enjoyment apple and its not in old tory style left exclusively for those with jobs in the city.
Taxing caravans would have made this type of holiday which if you havent tried is a lotta fun less affordable!
 

Mojo

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A good pound, if not two, less than you'd expect to pay for a perfectly standard Sandwich in a motorway service station. Would anyone try to argue that they're a luxury?
I would argue that there's a difference between a high street (where the majority of Greggs branches are) with high competition, and a motorway service station. Regardless, I have seen £1 sandwiches in both M&S and Waitrose branches (both chains are available at services). I also paid 99p for a cheeseburger last Wednesday again at a services. I gladly accept that these are all luxury products, and things I've bought through my own laziness in not wanting to make a sandwich or salad before I'd left my origin.
--- old post above --- --- new post below ---
It is interesting that 142094 notes that Greggs are expanding (I was not aware of this fact), despite the fact all they sell is a service which all of the so-called hard pressed people in society could do without.

If you're really that short of cash, then wasting your money on eating out (even if it's only a £1 sandwich every weekday) really isn't a good idea.
 

142094

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Perhaps instead of putting VAT on pasties and static carvans, which apparently would have brought in a pittance of £75m per year, the coalition should have been looking at other ways of collecting £75m.

I'm sure we could reduce MPs expenses by £75m a year and they wouldn't notice it.
 

Seacook

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I would argue that there's a difference between a high street (where the majority of Greggs branches are) with high competition, and a motorway service station. Regardless, I have seen £1 sandwiches in both M&S and Waitrose branches (both chains are available at services). I also paid 99p for a cheeseburger last Wednesday again at a services. I gladly accept that these are all luxury products, and things I've bought through my own laziness in not wanting to make a sandwich or salad before I'd left my origin.
--- old post above --- --- new post below ---
It is interesting that 142094 notes that Greggs are expanding (I was not aware of this fact), despite the fact all they sell is a service which all of the so-called hard pressed people in society could do without.

If you're really that short of cash, then wasting your money on eating out (even if it's only a £1 sandwich every weekday) really isn't a good idea.
What is the minimum income you need to have before you can think of having hot food at lunchtime?
 

Mojo

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What is the minimum income you need to have before you can think of having hot food at lunchtime?
I've sometimes had hot food at work - last night's dinner leftovers reheated, or a tin of soup from the supermarket (24p)!

In any case, with regards to eating out I couldn't answer that question as it depends on what your other expenses are and whether you're saving up for something and thus living on a budget. It's also nice to treat yourself sometimes; if you reward yourself with a luxury item of hot food from the local cafeteria every day, then what do you do on a day you actually deserve a treat?
 

IanXC

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Wealthy Old Etonian merchant bankers don't tend to eat takeaways or holiday in static caravans. These proposed taxes were a typical Tory attempt to gain revenue from the hoi polloi whilst sheltering their rich backers - and deliberately sacrificed with great publicity in an attempt to prove that most of the press don't actively connive in such "snouts in the trough" policies
I don't think I agree that this has all been some kind of set up. The damage to the governments reputation, and the further public feeling that they are out of touch is the biggest problem for the government. As I understand it there is a very large North-South split on this issue and this whole episode just goes to reinforce how out of touch the government are to voters.

I think the reality is that the poor definition and difficulties which became apparent in implementing the new arrangements were a very useful way out of a sticky situation for the government. Expect government ministers to be explaining this is the reason, rather than it being a 'u-turn' as such.

A good pound, if not two, less than you'd expect to pay for a perfectly standard Sandwich in a motorway service station. Would anyone try to argue that they're a luxury?
I would argue that there's a difference between a high street (where the majority of Greggs branches are) with high competition, and a motorway service station. Regardless, I have seen £1 sandwiches in both M&S and Waitrose branches (both chains are available at services). I also paid 99p for a cheeseburger last Wednesday again at a services. I gladly accept that these are all luxury products, and things I've bought through my own laziness in not wanting to make a sandwich or salad before I'd left my origin.
Interestingly the VAT regime classifies Sandwiches as zero rated as part of 'essential food'. It would be interesting to see market share data for types of lunch across the country, as I think this would show quite why the Pasty Tax caused such a stir.

Any thoughts on what reaction there could have been to VAT being applied to prepackaged sandwiches?
 

tbtc

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This is quite a mixed bag...

There are a lot of tax loopholes and unintended consequences. For example, you don't pay VAT on kids shoes, so if you are an adult with small feet you can buy the shoes VAT free, but if you are a child with large feet you will.

At the "pastie" level it's trivial, but these kind of loopholes are huge elsewhere in the economy. For example, Amazon's revenue in the UK is around three *billion* a year but they pay hardly any tax as they are set up so that the order is placed with Amazon's Luxumborg subsidiary (which pays virtually no tax) - the UK part of Amazon is only an "order fulfilment" business (i.e. it is delivering the books that you ordered from the Luxumborg business), so there's not a lot of tax to be paid on the delivery (compared to the tax you'd pay on the products bought).

You pay VAT on hot food (fish and chips), you don't pay VAT on cold food (sandwiches), there's a growing market for "heated" food (like the rotissiery chickens mentioned earlier) which are currently VAT free. If I run a hot food service I'd probably be annoyed that a rival business is able to undercut my prices by around 20%.

I can see why the Coalition are clamping down on these areas - it makes economic sense to level the playing field. However the three points I'd make are as follows:

1. This is a trivially small amount of money that we are talking about (compared to the likes of Amazon and their tax dodges)

2. The Pasty Tax showed George Osbourne's true colours, with his "let them eat cold food" quote - he's a policy wonk much like Gordon Brown, but has no idea of how people work. We can argume about whether he's good at Economics or not, but he's not very good at the Politics side

3. The Pasty Tax showed David Cameron's true colours, with his pretty story about having a posh pasty at Leeds train station (ticking the "I use public transport" box and the "I buy those upmarket Cornish pasties" box, both of which will go down well with focus groups). Sadly like much of Cameron's talk it turned out to be a lie/ misunderstanding, but it showed he's a lot better at understanding human beings than his chancellor (even if it's all fabrications)
 

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I know it's not traditional to feel much sympathy for David Cameroon, but his opponents have been making hay out of this; as it said on the News, he's being "accused" of making a turn round or climb down. Honestly, you can't win, can you. If you admit that you've made a mistake, you're backing down and climbing down and not being Firm and Decisive, and if you don't, of course, then you're stubborn and arrogant and don't Listen to the People.
I'm inclined to agree. Damned if you do and damned if you don't. The opposition don't care about the country less than making the current government look bad; the same is true of all parties!

If I were a cynic I'd suggest that it was to deflect attention from bigger tax loopholes going unclosed for various reasons. After all we know the Trade Union movement provides funding to Labour but who funds the Conservatives?
 

yorksrob

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I must admit, I've never really seen the logic of taxing pasty's at a luxury level. Obviously if you eat one sat down in a restaurant, there's a certain amount of service, which, quite logically IMO accrues tax. However, the majority of pasty eaters will eat them at work or outdoors.
 

tbtc

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If I were a cynic I'd suggest that it was to deflect attention from bigger tax loopholes going unclosed for various reasons
True - the real loopholes are much bigger than a few pence on a pasty - but people are a lot less interested in the tax affairs of Vodafone etc because these numbers are almost "too big to understand" - twenty pence on a pasty is "real". I don't think that the Government understand how people perceive things.

That said, if they can tackle the tax avoidance at the top of the scale then they would make so much in revenue they could knock tax rates for "normal" people.
 
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