Government does U-turn over 'Cornish pasty tax'

The government is to reverse its plans to impose VAT on Cornish pasties, the BBC has learned.

Ministers have also reduced the intended 20% charge which was due to be levied on static caravans to 5%.

The U-turn from Chancellor George Osborne's Budget follows protests by bakers and caravanning enthusiasts.

The government has altered the definition of what is a "hot" pasty to allow the reversal of its plans. Labour said ministers were "incompetent".

After the amendment, food such as sausage rolls or pasties sold on shelves - that is, cooling down, rather than being kept hot in a special cabinet - will not be liable for VAT.

'Addressing concerns'

During a parliamentary debate last week, MPs from all three main parties criticised Mr Osborne's proposals, arguing they were unenforceable and would have an adverse impact on jobs and businesses.

Currently, VAT is not charged on most food and drink, or hot baked goods, but is payable on takeaway food sold to be eaten hot.

However, hot savouries including pasties and pies are exempt. The U-turn would effectively maintain this situation where they are left to return to "ambient temperatures" on shelves in bakeries and supermarkets.

Sheryll Murray, Conservative MP for South East Cornwall, said: "I told the government that I didn't want to see an army of thermometer-wielding tax inspectors poking our pasties and that I was really concerned about the vagaries of ambient temperature. They listened."

Liberal Democrat MP Stephen Gilbert, who represents Newquay, added: "The Cornish people have won and there will be dancing in streets from Land's End to the Tamar as people hear that the government has dropped its plans to clobber local people and local businesses with this tax."

Static caravans do not currently incur VAT. The new 5% rate will be delayed from October to April next year.

A Treasury said: "The Budget announced a consultation on a change to VAT on hot takeaway food, designed to remove inconsistency and ambiguity in the system and level the playing field across the takeaway food market.

"After extensive engagement we have improved the policy, addressing practical concerns, ensuring that the new regime could be as simple as possible to apply.

"We have addressed these in a way that allows us to remove the inconsistent VAT treatment, while not imposing any additional requirement on businesses to test the temperature of their products."

For Labour, shadow Treasury minister Chris Leslie said: "This government is proving time and time again they can't think through policies before it makes announcements.

"It really ought to have got some of these consultations done before the chancellor decided to put up the taxes."

He added: "To go along making policy reverses is an incompetent way to run the government."