Suggesting VAT on food in Britain sounds almost politically impossible.
Food is essential. Everybody needs it. Lower-income households spend a greater proportion of their budgets feeding themselves than wealthier households. So surely food should simply be tax-free?
We understand that argument.
But there is another side to it.
Zero-rating food does not only help people struggling to afford their weekly shop. It also gives exactly the same tax treatment to households spending considerably more on food.
Our proposal is therefore to introduce a very low 3.75% VAT rate for essential consumption, including most food currently zero-rated, as part of a much wider reform of VAT.
This isn’t about making food expensive.
It’s about asking whether 0% is really the fairest possible rate — and whether blanket tax relief is the best way of helping people on lower incomes.
Was food always tax-free in Britain?
No.
The idea that Britain has always had an absolute principle against taxing food isn’t historically accurate.
Before VAT, Britain operated Purchase Tax, introduced in 1940. Some foods were subject to it.
When the government was preparing to introduce VAT in 1973, its original proposal was broadly to zero-rate food for human consumption while continuing to tax items that had previously attracted Purchase Tax, alongside meals eaten out.
But just before VAT came into force, Chancellor Anthony Barber went further.
In March 1973 he announced that confectionery, ice cream, crisps, soft drinks and other foods that had previously attracted Purchase Tax would also initially be zero-rated.
VAT itself began on 1 April 1973 at a standard rate of 10%. (GOV.UK)
Even that didn’t last.
The government subsequently reversed part of the decision. Over the following decades various foods and forms of consumption were brought within VAT.
Hot takeaway food became standard-rated in 1984, for example. Today the UK still charges the standard 20% VAT rate on numerous things we eat and drink, including confectionery, crisps and savoury snacks, ice cream, soft drinks, catering and hot takeaway food. (GOV.UK)
That has produced some of Britain’s famously complicated VAT distinctions.
The important point is simpler:
Britain does tax food.
The debate is actually about which food we tax and at what rate.
What did the EU have to do with it?
Britain’s VAT system became closely tied to European VAT rules after joining the European Economic Community.
Crucially, Britain’s food zero rate pre-dated the relevant European VAT rules. The UK was therefore allowed to retain existing zero rates under transitional provisions covering zero rates already in force at the end of 1975. (GOV.UK)
This is sometimes simplified into the claim that EU membership prevented Britain from changing VAT as it wished.
There was some truth to the broader point that EU membership constrained VAT policy. But it would now be misleading to argue that only Brexit allows countries to zero-rate essential goods.
The EU changed its VAT framework in 2022.
Member states now have substantially greater flexibility. EU rules allow, within limits, reduced rates below 5% and even 0% VAT with the right to deduct input VAT for selected categories covering basic needs.
Food is explicitly among the categories that can qualify. (EUR-Lex)
So this shouldn’t really be a Brexit-versus-EU argument anymore.
Both Britain and EU countries have considerable scope to make political choices about how essential consumption should be taxed.
The question is what choice makes sense.
Is Britain’s 0% approach normal around the world?
There isn’t one international model.
According to the OECD, the vast majority of OECD countries give food preferential VAT treatment, normally through a reduced rate.
But preferential treatment does not necessarily mean zero tax.
The OECD identifies only a small group where food generally attracts the normal standard VAT/GST rate — including countries such as Denmark and New Zealand — while many others apply reduced rates. (OECD)
New Zealand provides perhaps the clearest contrast with Britain. Its GST is deliberately broad. The standard rate is 15%, and GST applies to most goods and services rather than creating Britain’s extensive system of food distinctions. (Inland Revenue)
At the other end of the spectrum are countries such as Australia and Canada.
Australia makes many basic foods GST-free, including products such as basic meat, bread, cooking ingredients, milk, cheese and eggs, while various prepared and non-essential foods remain taxable. (Australian Taxation Office)
Canada similarly zero-rates basic groceries. Its government explicitly describes this as a social policy choice rather than an inherent feature of a consumption tax. Soft drinks, confectionery and various snack foods remain taxable. (Canada)
So Britain isn’t uniquely generous, nor would taxing food make Britain internationally unusual.
There are broadly three approaches:
Zero-rate basic food.
Tax food at a reduced rate.
Apply the normal consumption tax broadly, including to food.
Our proposed 3.75% essentials rate sits deliberately towards the low end of that spectrum.
But isn’t VAT on food regressive?
This is the strongest argument against our proposal — and we shouldn’t pretend otherwise.
Lower-income households spend a greater proportion of their budgets on food.
The latest ONS-linked government figures for the financial year ending 2025 show that the poorest fifth of UK households spent around 15.2% of their total expenditure on food and non-alcoholic drinks.
For the richest fifth it was only 7.9%. (GOV.UK)
That means a food tax considered completely in isolation is more burdensome on a poorer household relative to the amount of money it has available.
That is precisely why we’re proposing 3.75%, not 20%.
But percentage of household budget isn’t the only question worth asking.
We should also ask:
Who receives the cash benefit from making food completely tax-free?
Let’s do the maths
ONS data put total average weekly expenditure in the financial year ending 2025 at approximately:
Poorest fifth: £407.30 per household
Richest fifth: £1,083.60 per household (Office for National Statistics)
Combining those figures with the government’s reported food shares gives an illustrative food and non-alcoholic drink expenditure of approximately:
Poorest fifth: £61.91 a week
Richest fifth: £85.60 a week
Now apply our proposed 3.75% rate, assuming for illustration that the entire tax is passed through into prices and that all of this expenditure falls within the proposed essentials rate.
A household currently spending £61.91 would face approximately:
£2.32 a week
or around
£121 a year
in additional VAT.
For the wealthiest fifth, £85.60 of weekly spending would produce approximately:
£3.21 a week
or around
£167 a year.
These are illustrative calculations rather than estimates of the exact tax liability: existing UK VAT rules already tax some food and drink, household composition differs between income groups, purchasing behaviour could change, and retailers may not pass every tax change through exactly.
But they demonstrate something important.
The wealthier household receives a larger cash benefit from zero VAT.
At the same time, the smaller £121 cost matters considerably more to the poorer household.
Both things can be true.
That’s the problem with blanket tax relief
Zero VAT sounds perfectly targeted at people who need help.
It isn’t.
A millionaire buying qualifying groceries receives exactly the same VAT rate as somebody using a food bank.
The government doesn’t ask whether you need the support.
It doesn’t ask how much you earn.
It doesn’t even cap the amount of consumption receiving the benefit.
The more qualifying food you purchase, the greater the cash value of the zero rate.
This is one of the fundamental problems with using blanket consumption-tax exemptions as social policy.
They are extremely simple, but simplicity and targeting aren’t the same thing.
If the objective is to support households struggling with the cost of living, we should be willing to ask whether there are better ways of doing it.
Why 3.75%?
We are not proposing that essential food suddenly attracts Britain’s standard 20% VAT.
That would be a radically different policy.
Our wider VAT reform creates an essential consumption rate of 3.75%.
The purpose is to keep taxation on necessities extremely low while broadening the tax base.
That sits alongside our wider principle of charging different rates according to the nature of consumption.
Essential consumption should attract very low taxation.
Ordinary economic activity should not be excessively taxed.
Activities that provide wider economic or social benefits can justify preferential treatment.
And genuinely extreme luxury consumption can reasonably contribute more.
This is tax reform, rather than simply another tax rise.
The £121 question
There is nevertheless a challenge our policy has to answer.
If a low-income household could pay approximately £121 more a year because of this change, what does that household get in return?
If the answer is “nothing”, then this isn’t good enough.
The 3.75% essentials rate therefore cannot sensibly be viewed independently of the rest of our tax reforms.
Revenue raised from broadening the VAT base creates fiscal space that can be used to reduce taxation elsewhere and fund services and targeted support.
Our objective should be that people on low and ordinary incomes are better off across the tax system as a whole, rather than claiming victory because one particular product carries a 0% rate.
And where households genuinely cannot afford basic necessities, targeted support can concentrate resources on those households rather than subsidising the grocery consumption of every millionaire in Britain.
Zero doesn’t automatically mean fair
There is an understandable political attraction to saying:
“We don’t tax food.”
But Britain already does.
Other developed economies tax food in numerous different ways.
And even the European Union now allows considerably greater flexibility for governments wanting very low or zero rates on essential products.
The real debate isn’t therefore whether food taxation is inherently right or wrong.
It’s about designing a fair consumption-tax system.
We think 3.75% on essential consumption is reasonable — provided the wider tax system protects people on low incomes.
A tax system shouldn’t be judged by whether one particular number says zero.
It should be judged by who ultimately pays, who ultimately benefits and whether the system as a whole is fair.