Following the Chancellor’s announcement that 20% VAT will be applied to the retail of hot baked goods including those products currently zero rated, such as sausage rolls and pasties, Mark Muncey, Chairman of the Cornish Pasty Association, explains why the Association members are urging the Treasury to rethink.

“We are very concerned about the possible disproportionate effect the introduction of this tax will have on the Cornish economy as twice as many jobs per capita are connected with the food industry in Cornwall than the rest of the UK. Collectively, the Cornish pasty industry accounts as one of the largest employers in Cornwall therefore, this is going to affect a greater percentage of the Cornish economy than the rest of the country.

“We have seen prices throughout the supply chain going up for years which we, as producers, have not been able to pass on either to the outlets that sell our products or direct to the end customer. Generally, our industry has had to absorb these price increases and this means there is no room left for us to cut margins further still. From talking to our retail members, large and small, they simply cannot pass on the 20% VAT in a price increase. Many of our retail members anticipate a 15 – 20% reduction in retail sales and some are already talking about the need to close marginal shops, which will lead to job losses. Having spent years trying to encourage and bolster the Cornish economy via the food industry, it appears counterproductive to now introduce this tax.

“In addition, there are grey areas which need addressing. Not least deciding which products this should and should not apply to. It is simply not practical to say the bakery sector should be subject to the same treatment as the takeaway industry. In the same way we are not governed by the same planning laws because retail bakers are welcomed in the centre of small towns recognised as providing a vital service baking and selling every day morning and essential goods.

“We don’t believe the practical implications of introducing this tax have been thought through and are disappointed that there has been no discussion with representatives of the key food sectors that will be affected ahead of the Treasury’s announcement. We have sought advice from our local politicians and we have the support of our Cornish MP’s but we urgently need a dialogue with the Treasury to discuss other solutions.”

Issue date: 4th April 2012

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