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Pasty Tax: The Government Need to Drop Their Flaky Proposals and Get This Issue Off Their Plate

Posted: 26/04/2012 09:05

The proposals for a 'Pasty Tax' have certainly caused a stir in Westminster and across the country. It will have been hard to avoid the media furore on this, one of a series of measures in last month's budget which have attracted criticism from across the board.

Why? Well, 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.

The problem with the proposal is that it lumps a pasty into the same category as a fish and chip supper or a take-away chicken korma: they are meals which are cooked to order, sold as hot and intended to be consumed before they've cooled down. That's not how pasties are sold. Pasties are baked in batches, and sold as and when a customer arrives.

The difference is that one customer may arrive straight after a batch of pasties have been removed from the oven and purchase the product when it's piping hot, while another may come in 45 minutes later and purchase the product when it's cooled to room temperature.

The two customers didn't set out to buy a different product - neither knew what the temperature of the pasty would be as they entered the bakery - but under Osborne's proposal the first would be charged VAT while the second would not. Though technically, on a day when it's zero degrees outside, a pasty at room temperature would still be subject to VAT as it will be over the "ambient temperature"!

The government says the reason for changing the VAT rules is to 'remove anomalies'. I say that it is, in fact, adding a huge anomaly for bakeries to apply tax to pasties sold to the first customer but not to the second and when it all depends on the weather outside.

And if the government is serious about removing anomalies from the VAT system then it needs to ask itself why vegetable oil is tax free while linseed oil is subject to VAT at 20%; or flapjacks at 0% while cereal is rated at 20%; or why cream gateaux is at 0% but ice cream gateaux is sold at 20%.

And let's be clear: if the VAT hike goes ahead, it could have disastrous implications for the Cornish economy. The pasty production industry directly employs 2,000 people west of the Tamar producing 86 million pasties a year and contributing £37.5million to the Cornish economy.

In a recent YouGov survey, 32% of people said they would "stop buying the dish altogether" if the tax hike goes ahead. Even if this figure turned out to be more like 20%, that could equate to a loss of £7.5million to the local economy and 400 job cuts (with huge knock-on effects for those involved in the supply and distribution of ingredients or who work in retail positions).

Since the plans were announced, I've stood on the side of pasty makers and consumers to argue this point and show the government why their policy doesn't make sense. Last week, I put forward an amendment to the Finance Bill which would have prevented the government making any change to the 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. Clear, simple and easy. It hits the rotisserie chickens and keeps baked food exempt.

When the amendment came to a vote, I was overwhelmed to receive the support of 260 MPs from all sides of the House of Commons. Labour MPs threw their weight behind my suggestion and I was backed by a significant group of rebels from the government benches too. The end result, sadly, was that the amendment was lost by just 35 votes - a small majority which just goes to show the strength of feeling across the House and across the country.

When George Osborne paid a campaign visit to Cornwall in 2008, he said:

"Cornwall is having a tough time with the economy and businesses are finding it hard. There are things that the Conservatives can do."

He's right. Cornwall is having a tough time with the economy and businesses are finding it hard. But his proposals four years on will only make things worse.

Today, I will be joining hundreds of pasty manufactures to protest outside Downing Street and will be presenting one of the largest petitions ever - almost half a million signatures - to the prime minister.

Opposition is continuing to grow and this issue isn't going to disappear for the government - the strength of feeling being demonstrated today is evidence of that.

I will continue to seek meetings with ministers to explain why they are wrong and I will be making representations at every turn as these proposals progress through the legislative process.

The government need to drop their flaky proposals and get this issue off their plate.

 
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