George Osborne feels the heat on 'pasty tax' and cut in 50p rate


Ben Chu,Rob Hastings
Wednesday 28 March 2012 16:11

When George Osborne wrote his Budget speech, he will have imagined and pre-empted countless probing questions the Opposition would ask of his tax policies. But what of his pie-eating habits?

As parliamentary confessions go, "I can't remember the last time I bought a pasty in Greggs" is not one of the most damning, yet it is likely to become one of the more memorable soundbites to emerge from the political digestion of last week's Budget.

It came as the Chancellor was forced to deny that his decision to charge VAT on hot takeaway tax – the so-called "pasty tax" to be introduced on items such as hot pasties – would be impossible to enforce, despite admitting that purchasers of merely lukewarm pies would not be punished.

"The way we operate with companies and large retail chains is that we don't do a check on every product sold," he said. "We come to an agreement with a company, a sensible arrangement between the Inland Revenue and the company, about what proportion of their products are sold hot."

The chief executive of Greggs, Ken McMeikan, dismissed the Chancellor as "out of touch".

He appeared surer of himself defending his decision to scrap the 50p tax rate for people who earn more than £150,000 a year, a move that will benefit 300,000 of the wealthiest people in Britain.

The 50p rate had sent a "very negative signal" about Britain to the rest of the world, Mr Osborne told MPs on the Treasury Select Committee, adding that the tax had raised very little revenue due to widespread tax avoidance by the rich.

"No chancellor can justify a deeply uncompetitive rate of tax that is raising next to nothing," he told MPs.

Some Conservative MPs have been pressing the Chancellor to go further and scrap the 45p rate too. Mr Osborne refused to be drawn on his intentions, but he did hint that the 45p rate was less damaging than the 50p rate. "The 50p rate was assigned a special status, by my predecessor and by me, as being temporary. I don't ascribe a special status to 45p," he said. "I now think we have a competitive rate of tax."

The Chancellor was asked to account for the unprecedented number of press leaks that preceded last week's Budget. He insisted that no Treasury official, minister or spokesperson had briefed journalists in advance of the Budget on any specific information on tax rates or allowances. But the Chancellor did admit to personally authorising a Treasury briefing on tax breaks for oil companies.

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