David Cameron defends 'pasty tax'

Dissenters are piling in about the so-called "pasty tax" (Reuters)

Prime Minister David Cameron today defended the decision to charge VAT on hot food served by shops and supermarkets.

Mr Cameron said that the move - which will add 20 per cent to the cost of hot pies and pasties sold by shops like Greggs - would defend takeaway restaurants against competition from major chains.

Chancellor George Osborne was yesterday accused of being out of touch after he was unable to recall when he last bought a pasty as he answered questions about the so-called "pie tax" in Parliament.

But Mr Cameron was quick to declare himself a keen pasty-eater, telling reporters he recently bought a large one from the West Cornwall Pasty Company's outlet at Leeds station, adding: "And very good it was too."

Greggs chief executive Ken McMeikan last night said ministers had "lost touch" and did not appreciate the impact the changes to VAT rules would have on ordinary people.

The high street chain saw millions wiped off its shares after the Budget closed a loophole that has meant some hot takeaway foods, such as sausage rolls and pasties, escaped the duty.

The move sparked outrage, with critics pointing to the contrast of a cut in the 50p top tax rate.

But speaking at a 10 Downing Street press conference today, Mr Cameron said that Mr Osborne was trying to bring shops into line with the VAT charged for more than two decades on takeaway burger bars, fried chicken restaurants and fish and chip shops.

The Prime Minister said: "It was Nigel Lawson who over 20 years ago put VAT on hot takeaway food, and may 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."

The move was ridiculed by Labour MP John Mann during Mr Osborne's appearance before the Commons Treasury Committee yesterday.

"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," Mr Mann said.

Labour leader Ed Miliband talked to the press outside a Greggs outlet in Redditch, where he and Ed Balls made a brief stop to buy eight sausage rolls at a cost of £4.70.

He said: "There is a serious point here which is that 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.

"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."

Leeds station's last pasty shop closed earlier this month.

The Cornish Bakehouse concession now stands empty in the main concourse of the busy interchange.

But shop workers said the station also once had a branch of the West Cornwall Pasty Co. But this shut in 2007.

One woman who works in a station store said: "David Cameron? Buying a pasty on this station? I don't remember that."

Workers at another branch of the West Cornwall Pasty Co. - about 400 metres away in Leeds city centre - said they had not seen David Cameron either.

Staff at the branch of Greggs next door also said they had no recollection of ever seeing the Prime Minister in the store.

Mr Cameron did not appear exactly sure of the details of his pasty purchase when he mentioned it during a Downing Street press conference about the Olympics.

The PM told reporters: "I am a pasty-eater myself. I go to Cornwall on holiday, I love a hot pasty.

"I think the last one I bought was from the West Cornwall Pasty Company. I seem to remember I was in Leeds station at the time and the choice was whether to have one of their small ones or one of their large ones.

"I have got a feeling I opted for the large one, and very good it was too.

"But I would be pretty sure that I would already be paying VAT because it was hot takeaway food."

West Cornwall Pasty Company chief executive Gavin Williams said: "It's great that David Cameron is discerning enough to select our traditional and authentic Cornish pasties.

"We thank him for his glowing endorsement of our quality product and for helping to spread the news that a West Cornwall Pasty Company pasty is the best around.

"However, what we really need from Mr Cameron right now is not advertising but clarity and leadership.

"We would have hoped that if he had been rubbing shoulders with our customers he'd better understand the impact that this move will have on them, and our sector and all the great suppliers within it.

"This is not about the West Cornwall Pasty Company but about the Cornish pasty industry as a whole and as the country's biggest specialist retailer we need to stand up for everyone within it."

The firm, which has 80 branches across the UK, said it is estimated more than 13,000 jobs are sustained by the Cornish pasty industry.

The National Federation of Fish Friers, which represents 8,500 fish and chip shop owners across the country, said that it backed the changes proposed in the Budget.

At present, supermarkets and bakeries enjoyed an unfair competitive advantage over fast-food outlets because they do not have to pay VAT on hot food, said the Federation.

"There should be a level playing field," said the NFFF in a statement. "Why should the UK's fish and chip shops have to pay 20% on all the hot food they sell, including chicken and pies, when the bakery next door sells hot pies, pasties and sausage rolls free of VAT?

"Also, why is the supermarket along the street allowed to sell hot chicken, potato wedges and a variety of pies and pasties free of VAT?"

If implemented, the Budget proposals would help to provide the 'level playing field' that the NFFF has been campaigning for, said the organisation.

Meanwhile, the three Conservative MPs in Cornwall, Sheryll Murray, George Eustice and Sarah Newton, have urged Cornish people to take part in the HMRC consultation on the so-called "pasty tax".

Mrs Murray, MP for South East Cornwall, has written to Chancellor George Osborne describing the pasty tax as "ill thought-out" and highlighting the difficulties in enforcing it.

"Who is going to monitor the ambient against pasty temperature?" Mrs Murray wrote.

"Surely the last thing we need is to employ an army of thermometer-wielding tax inspectors poking our pasties to see if they have cooled enough?

"What is going to be the difference allowable from ambient temperature? If a pasty is sitting in a window and the sun is shining, then is this pasty VAT-able?

"If a pasty is sold cold but an oven is made available to customers, is this then VAT-able?

"Would it be VAT-able if a charge was made for the use of the oven?"

Mrs Newton, MP for Truro and Falmouth, spoke out in the House of Commons over the tax changes.

"There is growing concern throughout Cornwall about the possible unintended consequences of the Budget and about the undoubtedly real threat to the Cornish pasty of the pasty tax," she told MPs.

Mr Eustice, MP for Camborne and Redruth, said: "The pasty is a huge industry in Cornwall enjoyed by people every day and we need the largest number possible from Cornwall to respond to this consultation."

Last week the Say No To The Pasty Tax group was set up on Facebook and an online petition has also been established.

Steve Gilbert, Lib Dem MP for St Austell and Newquay, has also written to the Chancellor asking for a meeting with pasty manufacturers to discuss the impact of the proposal on their business and the Cornish economy.

"The pasty industry employs thousands of people in Cornwall and is worth millions of pounds to the Cornish economy," he wrote.

"We believe that adding VAT will undermine the industry and are calling for foods that have significantly advanced Protected Geographical Indication (PGI) status in Europe, such as the Cornish pasty, to be exempt from this proposal."

Mr Gilbert added: "These proposals could hit the pasty industry greatly.

"I'm determined to find a way for the pasty to be exempt from this tax and protect the industry that brings millions to the Cornish economy and directly employs thousands of local people."

PA