Financial News

  • 29 March 2012, 10:14

I Love Pasties: Cameron Enters Pie Tax Row

His Chancellor could not remember when he last ate a pasty but David Cameron has tried to show he is more in touch by declaring himself a keen eater of the Cornish delicacy.

The Prime Minister entered into the bizarre row, sparked by last week's Budget, during a Downing Street press conference on the Olympics.

In contrast to George Osborne, Mr Cameron insisted he had recently bought a large pasty while passing through Leeds train station. "And very good it was too," he said.

Not to be outdone, Labour leader Ed Miliband and shadow chancellor Ed Balls stocked up on sausage rolls during a trip to Redditch - buying eight in total for 4.70.

Hot takeaway snacks have taken on a new political significance in the wake of the Budget, which added 20% to the cost of hot pies and pasties.

The Chancellor closed a loophole which meant that some hot takeaways escaped VAT but the move has caused consternation among retailers and consumers.

The high street chain Greggs saw millions wiped off its value following the move, which the Government argues will help protect takeaway restaurants.

Its approach has sparked ridicule because whether the extra charge is levied or not depends on the "ambient" temperature.

This means food that is sold warm during the summer will not incur the duty but it will in winter when the weather is colder.

Mr Osborne confirmed the confusing rules when he was quizzed by the Commons Treasury Committee on Tuesday. "If it's cold when you buy it, it will not be [VAT-able]," he said.

But Labour MP John Mann said: "With the weather as it is today, a lukewarm pasty from Greggs is not VAT-able because the ambient temperature outside is the reference point, whereas if it is the middle of winter and freezing cold it is VAT.

"It is an extraordinarily complex situation when you are having to check with the Meteorological Office on whether or not to add VAT on pasties in Greggs, which is what your consultation paper does."

When Mr Osborne admitted that he could not remember the last time he had eaten a pasty from Greggs, the MP retorted: "That kind of sums it up."

Mr Cameron defended the move on Wednesday, saying: "It was Nigel Lawson who over 20 years ago put VAT on hot takeaway food, and many pasties and other items of hot takeaway food have had VAT on them since that time.

"What we have seen since then is a number of businesses trying to find ways around that rule, fighting court cases and the rest of it.

"Many, many small businesses in this country, whether selling fried chicken or fish and chips or hot takeaway pies, are already paying VAT. What the Government has to try to do is make sure the VAT rules are fairly applied.

"I don't think it is fair that the small businessman running a fried chicken takeaway is having to charge his customers VAT but the big supermarket isn't having to pay VAT on fresh hot chicken. It's about trying to have a sensible vat arrangement where the boundaries are sensible."

He said his pasty had come from the West Cornwall Pasty Co at Leeds station - but the branch there closed in March 2007. Staff at its city centre branch said they were unaware of ever serving the Prime Minister.

A different outlet - The Cornish Bakehouse - also used to operate at the station but shut down last Friday.

Greggs chief executive Ken McMeikan claims ministers have "lost touch" and do not appreciate the impact the changes to VAT rules will have on ordinary people.

"For ordinary, hard-working families, putting 20% on to a product that is freshly-baked actually is going to make a severe dent in their pockets when they can ill afford it," he said.

In Redditch, Mr Miliband claimed the measure was one of many that showed "the Government is hitting people's living standards in every way they can".

"Not just fuel duty going up, child benefit taken away, tax credits being cut, now even putting 20% on the cost of pasties, sausage rolls, and the Chancellor's excuse? Well, he says you can buy them cold and you can avoid the tax," he said.

"It just shows how out of touch this Government is and it shows that we've got a Budget that is hitting millions of people while cutting taxes for millionaires. It's not fair and it's out of touch with the vast majority of people in this country."