From the NY Times:
A sales tax of 20 percent on pasties and other takeout snacks…. announced last week as part of the government’s austerity budget, was aimed at closing a loophole that exempted hot, freshly baked takeout foods, like pasties, pies, toasted sandwiches and rotisserie chickens, from the point-of-sale tax known in Britain as the value-added tax. Under the new budget, which effectively becomes law immediately, the price of such items will henceforth include a value-added tax of 20 percent.
Having recently experienced the fact that there were two different prices being charged for my toasted sandwich at a Pret a Manger in London, one if I ate in (with tax) and one if I carried it out (without tax), I was at least sympathetic to the fact that this discrepancy in prices should probably be removed (especially in a rainy city!).
But here’s the rub. While the “pasty-tax” is only a peripheral part of the budget:
Mr. Osborne’s [the British minister of finance] central budget measure: cutting the top tax rate to 45 percent from 50 percent
Maybe good economics, but cutting taxes for the rich while simultaneously raising the prices on the cheapest lunch options is probably not great politics. Hence, the birth of pasty-gate.
He boasted that he loved Cornish pasties in order to seize a public relations advantage after critics accused the Government of being out of touch with ordinary people. But his claims, at a Downing Street press conference, that he last ate a pasty at an outlet of the West Cornwall Pasty Company at Leeds station were quickly exposed as untrue. Network Rail revealed the West Cornwall outlet was closed down in March 2007 – five years ago to the month.
Apparently, the old adage is still true: you are what you eat. Or what you don’t eat, as the case may be.
[Photo Credit: AP via AJE]
[Note: This post was updated to reflect the author’s lack of knowledge about whether the budget plan is good or bad economics! H/t to Andrew Gelman and Phil.]