Government drops 'pasty tax' plans

THE Government has signalled retreat on controversial tax rises on pasties and caravans, in a move costing the Treasury £70 million.

Following a post-Budget consultation on closing VAT loopholes, the Treasury said it would be modifying its plans to charge VAT on hot food and static caravans.

The move was confirmed in a letter to the Treasury Select Committee Chairman Andrew Tyrie, the Government said.

It won praise from coalition backbenchers but was mocked by Labour as U-turns from a shambolic Government.

The policy changes will mean food left to cool naturally will not now be subject to VAT, while static caravans will be charged VAT at only 5%, instead of 20%.

Combined, the measures are expected to mean about £70 million less in revenue for the Treasury.

Treasury sources said the figure was small in comparison to a Budget which included a £3.5 billion giveaway to people on low incomes and £2bn cuts in spending.

Shadow Treasury minister Chris Leslie said: “What a chaotic way to run a country. How on earth can you have a budget process that unravels in a day when you’ve got this kind of shambolic business?”