Bloomberg News

Osborne Reverses U.K. Budget Plan to Put Tax on Pasties

May 29, 2012

The original hot-snacks proposal drew anger from bakers including Greggs Plc, the U.K.’s biggest such chain. Photographer: Justin Tallis/AFP/Getty Images

The original hot-snacks proposal drew anger from bakers including Greggs Plc, the U.K.’s biggest such chain. Photographer: Justin Tallis/AFP/Getty Images

U.K. Chancellor of the Exchequer George Osborne reversed a plan to make hot takeaway snacks such as Cornish pasties subject to value-added tax, one of the most controversial measures in his March 21 budget.

The Treasury said last night that it had dropped the proposal to impose the sales tax at 20 percent on hot baked snacks such as pasties and pies, to align them with other hot takeaway food. It also amended a second budget plan to put the full rate of VAT on static caravans, mobile homes that are left on the same site. Instead, they’ll be subject to a tax of 5 percent.

“The government has done the right thing,” Treasury minister David Gauke told BBC television. “We’ve listened to the concerns the people have raised.”

The original hot-snacks proposal drew anger from bakers including Greggs Plc (GRG), the U.K.’s biggest such chain. It sparked the “pastygate” affair, in which Prime Minister David Cameron attempted to deflect the complaints and declare his enthusiasm for the west-of-England snack consisting of meat and vegetables baked in a pastry case.

Greggs rose 5.6 percent to 492.8 pence at 12:04 p.m. in London, having earlier surged as much as 9.3 percent, the most in 3 1/2 years.

In a second government policy reversal, Justice Secretary Ken Clarke said he’d make “substantial changes” to his proposals to have evidence from security agencies at court hearings given in secret.

Memories of Pasties Past

Cameron, who has spent vacations in Cornwall and whose youngest child was born there, attempted to calm the tax spat a week after the budget, telling a news conference of the last pasty he’d eaten, a large one from a stand at Leeds railway station in Yorkshire. Local reporters discovered it closed at least two years ago.

A day earlier, Osborne told the House of Commons Treasury Committee as it quizzed him on the budget that he couldn’t recall the last time he’d eaten a pasty from Greggs, drawing derision from members of the opposition Labour Party.

‘Dancing in the Streets’

“There will be dancing in the streets from Land’s End to the Tamar” at each end of Cornwall, lawmaker Stephen Gilbert from Cameron’s junior coalition partners, the Liberal Democrats, who represents a district in the county, said in an e-mailed statement. “The strength of feeling from local people and the national baking industry has been clear since these proposals were announced.” He said the original plans “would be unfair, unenforceable and cost jobs and investment across the country.”

Labour called on the government to go further and drop the headline measure in the budget, cutting the top rate of income tax to 45 percent from 50 percent with effect from next year.

“George Osborne’s budget has been a total and utter shambles,” a Labour finance spokeswoman, Rachel Reeves, said in an e-mailed statement. “These partial U-turns, just a few weeks after ministers were defending the pasty tax and caravan tax, show just how ill thought through the budget was and how out of touch David Cameron and George Osborne are.”

The latest changes of policy come less than three weeks after an announcement that Britain will equip its aircraft carriers with a jump-jet variant of Lockheed Martin Corp.’s F-35 Joint Strike Fighter, instead of a version launched with a catapult and arrester-wire system as originally planned.

To contact the reporters on this story: Gonzalo Vina in London at gvina@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus