MINISTERS have made a U-turn over the controversial ‘pasty tax’ which threatened to wipe out profits for thousands of bakers.
The move, in which the government decided to re-think closing VAT loopholes on hot food, as well as proposed VAT on static caravans, is estimated to cost the treasury £70m.
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 five per cent, instead of 20 per cent.
There had been a public outcry over the plans, with North Tyneside-based bakery giant Greggs one of those most vocal in its opposition.
The chain has shops in Ashington, Bedlington, Blyth, Cramlington and Morpeth.
Wansbeck MP Ian Lavery said: “First of all the pasty and caravan tax are very important to people in south east Northumberland.
“It’s the heartland of Greggs, Andersons and the many independent bakers which have been around for many, many years.
“They will be absolutely delighted that the government has abandoned these plans.
“They should never have been put in place in the first place.
“It was an absolutely ludicrous idea, as has proved to be the case.”
Blyth Valley MP Ronnie Campbell said: “The whole thing was a shambles from start to finish
“This government is just getting itself lost completely in oblivion.
“They want to get revenue in but not by picking on pasties and caravans.
“These are working class people.”
The decision to drop the controversial plans was confirmed in a letter to the treasury select committee chairman Andrew Tyrie, the government said.
Treasury minister David Gauke said: “One of the anomalies we have sought to remove is the fact that you pay VAT on your hot chicken or pie in a fish and chip shop, but you don’t in a supermarket.
“What we have managed to do is improve the test so those bakers who produce a Cornish pasty or hot sausage roll and let it cool over the course of the day, they are not going to face VAT.”