Strawberry and cream sandwiches are the new jaffa cakes

CityAM reported earlier this week:

M&S has jumped on the bandwagon of the viral Japanese strawberry sando by launching its take, taking the internet by storm, but the sweet treat has raised the old familiar question about VAT.

The British retailer’s strawberry and cream (half) sandwich, wrapped up in its meal-deal packaging, is all over social media as shoppers race to taste the sweet sandwiches. Most are intrigued to know if the bread is the standard meal-deal bread or if it is sweet, as the Japanese typically use milk bread in their original version.

However, as the hype builds up, accountants and lawyers have been lighting up LinkedIn, questioning whether this dessert sandwich may be classified as confectionery.

If a food product is deemed a confectionery, it will be liable for 20 per cent VAT, compared to zero-rated, which most sandwiches typically fall under.

The mystery surrounding VAT has long persisted, following the famous ‘Is it a biscuit or a cake’ debate from the Jaffa Cake legal battle with HMRC.

The question of whether a particular food item is of one type or another, because different types attract different levels of tax, is exactly the sort of debate that New Zealand avoids through our very simple GST regime. With only a couple of exceptions, which are fairly well delineated (like residential housing rents, and financial services), every good or service that is traded domestically attracts the exact same rate of GST. There is no quibbling about whether a strawberry and cream sandwich is a confectionary, or whether a jaffa cake is a biscuit or a cake.

It is this simplicity that would be lost if advocates for removing GST from 'healthy foods', or all unprocessed food, or any other set of favoured goods, got their way. We'd then be left arguing over whether cut pineapple is a fresh food, or a processed food, or whether fresh and frozen pizza should be treated differently, or whether the set of ingredients on the pizza made a difference, and so on. You laugh, but witness previous arguments in the UK about whether a flapjack is a muesli bar or a cake, or in the US about whether a snuggie is clothes or a blanket.

Thankfully, for now, the government doesn't appear to have an appetite for messing with our simple GST.

[HT: Marginal Revolution]

 Read more:

• Judge rules that snuggies are blankets, not clothes
• Stephen Hickson on why we shouldn't remove GST from food
• We also shouldn't be debating removing GST from food
• Flapjacks, jaffa cakes, and the quiet simplicity of GST

Greg Mankiw on Modern Monetary Theory

Modern Monetary Theory (MMT) had a real moment in the spotlight in the late 2010s, with political support in the US from Presidential hopefuls Bernie Sanders and Alexandria Ocasio-Cortez. However, mainstream economists mostly didn't understand it, or ridiculed it, or both. I mostly ignored the detail of it, only picking up what I knew about it from the mainstream media. Some economists took it a little more seriously. At least seriously enough to look into it in more detail.

One example is this 2020 article by Gregory Mankiw (Harvard University), published in the AEA Papers and Proceedings (ungated earlier version here). Mankiw carefully explored a new textbook:

...simply titled Macroeconomics, written by three MMT proponents: William Mitchell and Martin Watts (both of the University of Newcastle, Australia) and L. Randall Wray (Bard College).

Mankiw then compares the MMT textbook treatment of macroeconomic issues with a more traditional approach (such as that found in Mankiw's own textbooks). Obviously, Mankiw has good reason to challenge other textbook treatments as they compete with his offering. So, we should be careful in over-interpreting Mankiw's views. Mankiw concludes that:

In the end, my study of MMT led me to find some common ground with its proponents without drawing all the radical inferences they do. I agree that the government can always print money to pay its bills. But that fact does not free the government from its intertemporal budget constraint. I agree that the economy normally operates with excess capacity, in the sense that the economy’s output often falls short of its optimum. But that conclusion does not mean that policymakers only rarely need to worry about inflationary pressures. I agree that, in a world of pervasive market power, government price setting might improve private price setting as a matter of economic theory. But that deduction does not imply that actual governments in actual economies can increase welfare by inserting themselves extensively in the price-setting process.

Put simply, MMT contains some kernels of truth, but its most novel policy prescriptions do not follow cogently from its premises.

Based on those conclusions, it is unlikely that MMT is going to have much impact on the economics mainstream. However, it is worth keeping Mankiw's views handy, because MMT is something that caught the public's (and politicians') attention, and even though it doesn't have the profile now that it did five or more years ago, it will likely remain a factor in public debate for some time.

This week in research #81

Here's what caught my eye in research over the past week:

• Farnell et al. (open access) use data from Major League Baseball pitchers to study task switching, finding that task switching between pitching and batting, can improve subsequent pitching performance, shown by fastball velocity increasing by up to 0.225mph on average after reaching base
• Reddy critiques the work of 2024 Nobel Prize winners Acemoglu, Johnson, and Robinson, arguing that their property-rights-based approach is excessively narrow, and that other factors, including the privileged relationship between settlers and their countries of origin, can both explain the divergence between settler colonies and other countries

The challenges of farmer succession

This week Christchurch hosted the 2025 Primary Industries Summit. As this article in the New Zealand Herald noted, alongside the summit Rabobank released a new white paper on farmer succession, titled "Changing of the Guard". The white paper outlines the challenges that the farming community in New Zealand faces in preparing to transfer farms to the next generation of farmers, as well as highlighting the experiences of some farming families that have been relatively successful at managing succession. In his overview of the white paper, Rabobank CEO Todd Charteris wrote that:

Succession can be a highly emotive process and is becoming increasingly complex. The stakes are increasing as the value of farming assets continues to grow amid challenges around maintaining profitability in the face of geopolitical, regulatory and climatic hurdles...

New Rabobank data (February 2025) shows that only one-third (33%) of farmers have a formal succession plan. However, over the next 10 years, more than half of all New Zealand farm and orchard owners – around 17,320 farmers – will hit retirement age.

The scale of the challenge is clearly large. I made a research contribution to the white paper, along with my colleagues Frank Scrimgeour, Gemma Piercy-Cameron, and PhD student Kalpani Vidanagamage. Our role was to collate and summarise demographic, economic, and land use data from various sources, and to conduct some focus groups with young farmers to understand their experiences and aspirations related to farm succession. You can see our contributions to the white paper in the various quotes from young farmer focus groups early in the report, and in the data reported on pages 13-18.

There was far more detail in the data we had available than could fit into the white paper. Rabobank have held over some of the data, possibly to be used next year. However, we intend to write up our findings for a more academic audience in due course (and I'll blog on it in more detail at that stage).

To some extent, this project was a 'back to the future' moment for me. In 2010, I published an article (co-authored with Pat Barrett, Bill Cochrane, and Kellie McNeill) in the International Journal of Environmental, Cultural, Economic, and Social Sustainability (it is gated, but contact me for a pre-print version if you are interested) that covered very similar ground. What we found in 2010 is not dissimilar to what we found in 2025 - rural population decline, ageing rural and farmer populations, and succession challenges, were leading to the aggregation of farm holdings and the corporatisation of farms.

As the saying goes, the more things change, the more they stay the same.