UK government executes pasty U-turn

The British government has signalled retreat on controversial tax rises on pasties and caravans, in a move that will cost it £…

The British government has signalled retreat on controversial tax rises on pasties and caravans, in a move that will cost it £70 million.

Following a post-budget consultation on closing VAT loopholes, the Treasury last night 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 - some of whom rebelled against the Government in the Commons - but were mocked by Labour as U-turns from a shambolic Government.

READ MORE

The policy changes will mean food left to cool naturally will not now be subject to VAT - for example the popular Cornish pasties rarely sell straight from the oven - while static caravans will be charged VAT at only 5 per cent, instead of 20 per cent. Combined, the measures are expected to mean about £70 million less in revenue for the Treasury.

The pasty tax, announced in the March budget, prompted accusations that chancellor George Osborne and prime minister David Cameron, who both come from privileged backgrounds, were unable to empathise with ordinary Britons.

The criticism forced ministers, including Mr Cameron, to claim they enjoyed eating Cornish pasties.

The decision will have implications for bakers such as Greggs, Britain's largest food-on-the-go retailer.

The Conservatives shed hundreds of seats in local elections earlier this month, and recent opinion polls show their popularity and reputation for economic competence are slipping.