Storm re a teacake

Most people have an enduring affection for the UK's VAT zero rates - the main exceptions are the hapless individuals who have spent time answering correspondence from the mothers of oversize children who can't understand why supersized Jeremy has to pay VAT on his school blazer while anorexic forty year olds can buy the latest size zeros in Topshop VAT free.

But while the children's clothing zero rate usually generates the biggest postbag, it is the food borderline that verges in the surreal -- something I had forgotten until the issue reared its ugly head again with the decision vs HMRC in re M and S teacake this week (it looked more like a chocolate marshmallow to me - but as they could say in Spain - yo que se?). The borderline was not at issue here -- that had been decided N years ago - but it still looks pretty odd. For those of you not up with VAT intricacies, the key and much disputed issue re teacakes, jaffa cakes etc etc, is what is a cake (VAT rate zero) and what is a biscuit (VAT rate 17.5%). The alleged test is whether aforesaid object softens on ageing (= biscuit) or hardens (= cake). But what nobody seems to question (and what probably only Alex Allan as a C and E neophyte in the 70s knows) was why cakes are deemed worthy of a zero rate and the evil biscuit attracts the full whack....

The tax purist would argue that the right answer (and how many times did we dream of this in the Chancellor's Private Office) would be a single uniform VAT rate across the whole economy. But the advent of the EU minimum standard rate of 15% in 1992 probably put paid to that (the fiscally neutral equivalent used to be about 12%).

But now that food policy is back on the agenda -- alongside increasing concerns about the expanding national waistline - there might be a case for looking again at some of the oddities of the VAT treatment of food. So given that a uniform move to 17.5% looks a courageous Chancellorial move too far, it might be a start to move cakes to the other side of the borderline - a healthy cake is pretty much of an oxymoron.

Having started there, and notwithstanding Delia's latest attempts in "How to cheat" to convince us that processed is best - or at least OK - how about 17.5% on all processed food - and keep the zero rate just for that nice fresh stuff - whether from Kent or Kenya. Or 17.5% on anything that has red or amber on a food label - which owed probably amount to much the same thing. Come on Jamie -- your next campaign?

Of course I realise that there will be scope for more arguments. Is UHT milk processed or not? what about those innocent smoothies (fruit juices and blended fruit drinks like smoothies are now at 17.5% alongside Coke and Sunny Delight -- HMRC believes food - however rich in e numbers - is an essential of life but beverages aren't)? what about the frozen peas so beloved of Gordon Ramsay and our top chefs? Anyone for Birds Eye v HMRC?

Still, a serious look at the way we tax food seems about 36 years overdue - and that is before we start thinking up new ideas like the famed but stillborn PMSU fat tax. But once we have started out making more sense of VAT we can start looking at what 21st century sins we want to target with excise duties.