Taxation is really interesting. Oh yes it is.
In 1940, Britain was at war. The British Isles surrounded by water. Dependant on imports that couldn’t get through. Shortages everywhere.
So what did the Government do? They introduced Purchase Tax, that’s what. And they taxed everything they considered “luxuries”, i.e. inessentials, with a whopping 33.3%.
The Government wasn’t going to waste our precious resources — land, energy, water, space on board ships running through the German blockade, transportation costs — in growing or importing goods, including food that we could do without.
Essentials such as children’s clothes, books, education, banking — and (nearly all) food products were tax-free. And still are, although Purchase Tax became VAT in the 1972 Finance Act.
So what were these food products that did carry Purchase Tax (33.3%) and do still carry VAT (now 20%)? They are the ones that have little or no nutritional value, except (for some) calories.
VAT-rated ‘food’ products include:
- Savoury snacks such as crisps
- Nearly all drinks (excluding milk for example, as it has nutritional value)
- All confectionery
Why, you might ask, are biscuits taxed, but not cakes and pastries? The reason why is because manufacturing capability to make cakes and pastries was only developed in the mid-60s; in 1940, all cakes and pastries were home-made (or by the local baker in his/her own kitchen).
Last year, the CIEH carried out an analysis of the Defra statistics on our household spend for us. Going back over the years of comparable datasets, this analysis uncovered that we spent just over 30% of our household budget on VAT-rated ‘food’ products, and a further 4% (actually 3.6%); i.e. 34% of the food we buy in supermarkets and other local shops is on products that, at best, have marginal nutritional value.
What would be the effects if the 1.1M population of Birmingham reduced consumption of VAT-rated food and drink products (plus cakes and pastries!) from the current UK figure of 34% to x%
- on agricultural landscapes (soils, water, energy) regionally, nationally and globally?
- on the city’s health and well-being?
And, given that VAT has to be collected at the point of sale (POS), and a VAT receipt given on demand from the buyer, we have a very useful metric to carry out research to find out.