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War of words over 'the pasty tax' continues

George Osborne has been accused of "losing touch" over the decision to add VAT to hot takeaway baked goods Photo:

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

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

He said: "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."

Mr Cameron also admitted that he had eaten a hot pasty from the West Cornwall Pasty Company in Leeds. After his comments, the company tweeted:

Network Rail later said the branch of the company in the station closed on the 31 March 2007.

But they also said that there was a branch of the Cornish Bakehouse up until the 23rd March.

On Wednesday morning, the Labour leader Ed Miliband talked to the press outside a Greggs outlet in Redditch, where he, the shadow chancellor Ed Balls and the shadow Chief Secretary to the Treasury Rachel Reeves made a brief stop to buy some sausage rolls.

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.

On Tuesday, the boss of Greggs accused George Osborne of having "lost touch" after the Chancellor admitted he could not remember the last time he bought a pasty.

Chief executive Ken McMeikan said ministers did not appreciate the impact changes to VAT rules would have on ordinary people.

The high street bakery chain saw millions wiped off its shares after the Chancellor used the Budget to clamp down on a loophole which has meant some hot takeaway foods - like sausage rolls and pasties - escaped VAT.

During George Osborne's appearance at a Treasury select committee, he was asked by the Labour MP John Mann the last time he bought a pasty at Greggs.

The Chancellor replied: "I can't remember the last time I bought a pasty in Greggs."

Mr Mann retorted: "That kind of sums it up."

He then went on to ridicule the Treasury consultation document setting out the new criteria on what qualifies as "hot" food for VAT purposes:

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.

Mr Osborne, however, insisted that it was all perfectly straightforward.

He said:

We don't do a check on every single product sold. We actually come to a sensible arrangement between the Inland Revenue and the company about what proportion of their products are sold hot.

What are the hot take away food VAT changes?

  • Hot food means food which, or any part of which, is above the ambient air temperature
  • Ministers say all food sold "above ambient temperature" should carry VAT.
  • Food that is at or below ambient temperature at the time they are purchased will not be taxed
  • Ministers say this will clarify the rules in this area and ensure all hot takeaway food is taxed consistently

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