Pasty Tax And Secret Trial U-Turns See Lib Dems Claiming Victory

Pasty Tax Climbdown: Another Lib Dem Victory

George Osborne has produced another spectacular U-turn by reversing plans to put VAT on pasties and similar varieties of hot food - as long as those pasties have been put on a tray and allowed to cool down.

The surprise revelation on Monday night means the Treasury has lost around £50m in revenue in this year's Budget, and comes alongside another U-turn; attempts to introduce 20% VAT on static caravans have been scaled back - they will now attract a lower rate of 5%.

Another U-turn seen as a victory for rights campaigners and the Lib Dems also occurred on Tuesday when Justice Secretary Ken Clarke scaled back plans for some court cases to meet behind closed doors. Labour have criticised the government for announcing these U-turns during a Commons recess, when MPs are not at Westminster to discuss the climbdowns.

The U-turn on the caravan tax comes after manufacturers of the static caravans warned thousands of jobs would be at risk. Osborne had wanted to bring static caravans into line with the tax arrangements for towable caravans, which already attract the full rate of VAT.

The U-turn on pasties will be seen as a victory for campaigning MPs in the south-west of England, who warned the tax would damage the region's economy. The campaign saw Corning Tory MP George Eustace and neighbouring Lib Dem MP Stephen Gilbert strongly criticise the plans.

On Monday night Stephen Gilbert said: "If confirmed, the Cornish people will have won and there will be dancing in the streets from Land’s End to the Tamar.

"The strength of feeling from local people and the national baking industry has been clear since these proposals were announced. Plans to extend VAT to batch-baked goods would be unfair, unenforceable and cost jobs and investment across the country.

The announcement was greeted with a mixture of glee and derision on Twitter:

The government insists that the u-turns are part of a "consultation", after Lib Dem chief secretary to the treasury Danny Alexander promised earlier this month to look again at the two taxes.

But another U-turn is expected later on Tuesday when Ken Clarke is to announce a climbdown on government plans to extend the number of court cases which are heard behind closed doors. The Justice and Security Bill will be published later, and expectations are that the original plan for sensitive information gathered by the security services to be heard in secret to be significantly rowed back. The Times reports that under revised plans, the changes will only apply to cases where national security is at stake.

The climbdown on secret trials is another victory for Lib Dems within the coalition, who lobbied against what they saw as undue infringement on civil liberties. It means the minority party can claim two high-profile victories in as many days, but will annoy some Tories.

Some see the pasty and caravan taxes as an attempt to shore up the Treasury's finances, after George Osborne bowed to Lib Dem pressure to raise the personal allowance of income tax to £9,200 in the Budget. The change takes millions of people out of tax altogether but will cost the Treasury £3bn.

In reality the taxes would have done very little to plug this hole - which is largely paid for by raising stamp duty to 7 per cent (from 5 per cent) on residential properties sold for more than £2m. But it's the symbolism of the U-turns which will irritate some senior Tories.

On the flip side George Osborne has not - so far - U-turned on plans to reduce the top rate of tax from 50p to 45p next April. Tories accept this Budget measure is highly unpopular in the short term, but believe it's essential to attract businesses and overseas investment.

The changes to the Budget announced on Tuesday night still have to be voted on by MPs, when the Finance Bill continues its passage through the Commons after the Whitsun recess.


What's Hot