POLITICS

How George Osborne's 'Omnishambles' Budget Wasn't That Bad For Him

He's already netted £700m from VAT changes in 2012

15/03/2016 22:53 GMT
The Sun
The Chancellor has since recovered from his "omnishambles" Budget 

George Osborne faced embarrassment after being forced into a U-turn over his “omnishambles Budget” in 2012 where he "scrapped" taxes on pasties and caravans.

But official figures show the Chancellor could be having the last laugh after netting at least £700 million from ramping up VAT at the time.

In his Budget four years ago, Osborne announced he wanted to close a series of VAT “loopholes” and “anomalies”, most notoriously pasties and other “hot” baked goods but also “sports drinks, holiday caravans and … the rental of hairdressers’ chairs”.

In effect, items being sold tax-free would now be subject to the levy.

HM Treasury
How the "pasty tax" and "caravan tax" were unveiled in 2012

Once the dust had settled, it led to a public outcry that reached its zenith when Osborne appeared before MPs and suggested eating cold pasties would mean hungry workers would not have to pay the extra 50p being slapped on a £2.50 savoury dish.

In what was an early form of the now widespread photoshopping of politicians, Osborne was transformed into Marie Antoinette by The Sun.

The Sun
How The Sun saw Osborne

In May, after a public consultation, he folded, announcing caravans would not face the full the 20% VAT levy and dispensations were handed to pasty makers who served their wares “hot” straight out of the oven - but did not keep them warm under lamps. The financial hit to the Treasury was reported as £70 million at the time.

The detail was spelled out in his next financial update - the Autumn Statement. 

HM Treasury
The 2012 Autumn Statement spelling out revised VAT changes

But it was only ever a partial retreat.

The figures have only been open to full analysis since April last year when the Office for Budget Responsibility published a database of all tax and spending decision since 1970.

It shows that between the 2012 and 2015 financial years, the Treasury was expected to net £940 million from tackling VAT “loopholes” and “anomalies”.

The total was offset by VAT “amendments” that rise to £240 million by 2015-16. Over nine years, until the end of the decade, Osborne could be in line to net more than £2 billion.  

No wonder the pasty industry later admitted the fresh settlement was a "compromise" and the crackdown put one chain into administration.

HuffPostUK
Data from the Office for Budget Responsibility

Ben Bradshaw, Labour MP for Exeter, the only non-Conservative in the West Country, which was outraged by the "pasty tax", told The Huffington Post UK: "VAT is the most regressive of all taxes as the least well off spend a far higher proportion of their income on it.

"In spite of levying vast stealth taxes and slashing public spending Osborne has repeatedly missed his own deficit reduction targets because his fundamental approach to the economy is flawed.”

HuffPost has asked the Treasury for comment.

 

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