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U-turn over pasty and caravan tax

By Tim Sculthorpe

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

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 moves 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.

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 £70m less in revenue for the Treasury.

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

But Labour said it showed the Government was a shambles.

Shadow Treasury minister Chris Leslie said: “I think they were forced to listen to the total bewilderment of the public who were completely astonished at these rather odd decisions.”

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