Wednesday, May 30, 2012

Where's the Beef?

So the "Pasty Tax" U-Turn comes (or as I call it, the Sausage Roll). Rather too late to help the Tories through their little local election difficulties.

Paul Goodman has written a powerful piece giving a number of excellent reasons why the government shouldn't be u-turning - it would have raised much-needed revenue that the government will now have to find elsewhere, it makes ministers look weak, it makes loyal backbenchers (who've already voted it through) look ridiculous.

It was, however, inevitable that the government would have to buckle on this. It was an ill-considered policy, apparently foisted on the coalition by the Civil Service while they were asleep at the till (or in Osborne's case, on holiday). How do you judge whether something is "warm" or not without taking the temperature of every item? What is "room temperature" defined as? How many degrees from that temperature is an acceptable margin of error? Those conditions would have been difficult to comply with, but more importantly, they would have been impossible to enforce. (I'm not sure what the Civil Service was thinking of - perhaps issuing thermometers to HMRC inspectors?)

Nigel Lawson was wise enough to sidestep this quagmire when he first introduced VAT on hot food, writing:
"It does not apply to food and drink which has cooled to room temperature by the time it is sold, or to things like pies and pastries which are sold warm because they happen to be freshly baked, and not to enable them to be consumed while they are still hot."
Liberal Democrats are claiming victory on this, but I am rather suspicious. They have been in a bit of a muddle on this from start to finish - local candidates claiming the pasty tax was a Tory initiative (and that it would hurt "the Cornish pasty industry" - in spite of all the evidence that the only disadvantaged business would have been the Newcastle-based Greggs) when it was Lib Dem MPs who voted for it and Sarah Teather being the first politician to come out and justify the tax increase on Question Time.

In fact Teather's defence of the change was so thorough and heartfelt I wondered at the time whether this might be a Lib Dem initiative - after all it has all the hallmarks of a Lib Dem policy, a tinkering tax hike in the name of their warped sense of 'fairness'. On last Friday's edition of the Daily Politics, Toby Young gave some credence to this with a more developed theory of his own:
"I blame the Lib Dems. My theory is, we saw the Damian McBride blog in which he said the Treasury constantly produced this list, this wish list, of various taxes which he and Gordon Brown used to bat away. But I think what happened was, George Osborne announced quite late in the day that he wanted to cut the top rate of tax, so Danny Alexander and his team huddled with some Treasury officials, they said "well what can we ask for in return?" and the Treasury officials said "funny you should ask. We've got this list..." And then that's what the Lib Dems demanded as the price of accepting the tax cut."
It rings true to my ears...

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