Pasty-gate – it’s a phrase that’s been in the mouths of the media ever since last week’s Budget 2012. So, as I ate my lunch yesterday (homemade sandwiches) I decided to find out what all the fuss was about.
As part of the Budget last week, George Osborne said:
‘Hot takeaway food on high streets has been charged VAT for more than twenty years; but some new hot takeaway products in supermarkets are not. We’re publishing our plans today to remove loopholes and anomalies.’
A half-baked tax?
A VAT on hot food was put in place in the 1980s, but freshly baked goods, like pasties and pies, were exempt. This is the ‘loophole’ that George Osborne has now closed.
To put it more simply, all food sold ‘above ambient temperature’ will be charged 20% VAT. This could add 50p to the cost of a pasty – a decision that has eaten into high-street baker Greggs’ share price, for example.
However, politicians and the media have been picking holes in the proposal, one of which is the British weather. In the summer a lukewarm pasty would be below ambient temperature, but in winter this same pasty would be above ambient temperature – in one case it would presumably be taxed, in the other it would not.
The proposal could lead to bakeries selling cold pasties for you to heat up yourself. It could even hypothetically lead to two queues, separated by those willing to pay extra for their lunch to be hot, and those who aren’t.
Don’t make a meal of VAT
Looking at the Revenue and Customs website, the plot thickens. Cakes and biscuits are in the main exempt from VAT as they are deemed apparently a ‘necessity’, but as ever there are exceptions to the rule.
Millionaire’s shortbread is zero-rated for VAT, but if you took out the caramel and just had chocolate-covered shortbread, it would be standard-rated for VAT.
With many families finding their purse strings ever tightening and VAT now at 20%, there’s no doubt that VAT-able goods will impact our purchasing decisions.
But as much as I could argue about the rights or wrongs of taxing hot food, perhaps it’s worth thinking about the bigger picture. Either all VAT anomalies need to be ironed out, or we need to talk about bigger issues.
Let’s get hot on the Budget
The government’s decision to close this loophole could either be seen as a well-intentioned effort to put all hot food sellers on the same footing, or it could be seen as a ‘stealth tax’ on the poor. However, last weeks’ Budget introduced a number of major changes to tax bands, stamp duty, and child benefits, with most people being affected, whatever their income.
With this in mind, I find it hard to understand why there’s been such a focus on ‘pasty-gate’.
So, does ‘pasty-gate’ show that the government is out of touch with real people, or that people (and the media that feeds them) are out of touch with the real hot potatoes of the Budget?
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