VATs entertainment

It’s bread and circuses time as the government cringes into its pasty. But VAT is not a problem if the government would confront the real problem of cuts and duties.

Cars queue for petrol near Hackney in London
Simon Miller
On 30 March 2012 13:15

The Roman emperors use to call it bread and circuses: give the plebs some food and entertainment; they will fail to see what a mess the Empire is in.

And so it is with this government. In a moment of Vespasian brilliance, Georgie Georgie of pudding and pie fame did not so-much kiss the girls and make them cry but certainly got Greggs het up about the so-called pasty tax.

This is a classic example of how a technocrat – this time a Treasury official – sees the world. If you look at it on paper, of course if the chippy has to pay tax, why doesn’t the supermarket rotisserie or the sandwich shop that heats up pies and pasties?

However, in the real world, the one away from Whitehall, the Red Lion and the Wessie, this takes on Yes Ministerial proportions of logic – when does the tax apply? How does the ambient heat apply? If it’s cold by the time I get to the door, will I get my 20p or so back?

In addition, is this business of “when did you last see your father eat a pasty?” From the farce of the PM’s press boys failing to keep it simple – why didn’t they just say “he goes to Cornwall on holiday and occasionally gets one for lunch when he’s there”? – to the cringingly awful Wallace - “oh so this is where the poor eat” - going into a Greggs with a mixture of fear and confusion, it has been a farce that would have the writers of In the Thick of It kicking themselves for not thinking of first.

And yet, away from the Twitocracy and fast-food media, there is a serious point to all this.

VAT is estimated to hit £100.3bn (17 percent of total receipts) for 2011-2012, in comparison national insurance is expected to come in at £100.7bn (17.1 percent).

I like VAT in concept. It is discretionary in the way that it is a tax generated that is predicated on what you buy. If you want that flat screen telly then pay VAT, if you want fresh vegetables then you don’t. If you want a KFC, VAT, if you want to fry your own chicken then no VAT.

However, when taking into account that fuel and energy are VAT-able then the choice of whether to pay that tax is taken away from the consumer. In this world, whether you have a car, have a home or simply need to buy basic food stuff, you will get the effect of VAT on your bills.

Although some companies have in the past absorbed the VAT-rises, these eventually will get onto your food, heating or transport bills. It is simply unavoidable.

Take the latest Yes Minister scene over the potential petrol strike. In a day, the government-inspired panic buying at the petrol pump raised an additional £32m for the taxman according to the AA. Why’s this? Well, as of April 2011, the break down was that petrol duty was 43 percent of a litre of petrol with  VAT (at reduced rate) coming in at 17.6 percent making the total tax 59.7 percent of the litre of petrol – over half the cost.

Even with the rising oil costs (Delta Airlines expects to pay £1bn more in fuel costs as a result), the tax take is simple incredible.

And yet I am still in favour of  VAT over high taxes – one takes your money away from you, the other allows you to make choices – even if it’s only a couple of pence at a time.

What I am not in favour is the duties that are added.

The government has continued to fail in making the cuts that are needed for the country and is still spending vast amounts of ours and other people’s money. As a result you see duty escalators pretending to come under health, or climate change reasoning, but in reality yet another way of pinging us for our wallets.

This is the real scandal. Not that some poor sod who wants a Greggs’ pie will now have to pay 2p more for the dubious privilege – confession: when I was a student I quite often survived on Greggs – but that these escalators are ruining businesses, pubs and people’s pleasures. Be it petrol, beer or cigarettes.

Not only do you fail to make cuts and cut our tax so that we can decide how we spend our money George, you also allow these money grabs to continue without the embarrassment a pasty can apparently bring to the government of the fourth largest economy in the world.

You really do not understand the principle do you George? If you gave us our money back in tax cuts, made the necessary spending cuts and got rid of these ridiculous escalators, the economy would grow and with growing receipts and VAT, you could make more money.

Instead, we have to stand a watch as you give us the bread and the circuses in the hope we will not notice the mess this country, and its politicians, really are in.

Simon Miller is a Contributing Editor to The Commentator and the Editor of Financial Risks Today. He tweets @simontm71

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