16/03/2016 05:13 GMT | Updated 16/03/2016 05:59 GMT

Budget 2016: 'Tampon Tax' Should Be Scrapped By George Osborne, Labour Says

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LONDON, ENGLAND - JULY 08: The Chancellor of the Exchequer George Osborne holds his ministerial red box up to the media as he leaves 11 Downing Street on July 8, 2015 in London, England. The Chancellor is presenting his summer budget today to Parliament and is expected to announce £12 billion in welfare cuts. (Photo by Stuart C. Wilson/Getty Images)

George Osborne has been urged by Labour to scrap the ‘tampon tax’ for good, rather than doling out cash from its proceeds to women’s charities.

Shadow Chief Secretary to the Treasury Seema Malhotra called on the Chancellor to use a new Brussels plan to reform VAT rules to end the current 5% levy on sanitary products.

Mr Osborne will announce in the Budget a long list of charities that will benefit from £15m raised every year from what campaigners say is a ‘tax’ on women’s periods.

As well as some big national charities, scores of local smaller groups are set to benefit from the windfall from the Treasury.

But Labour says that the Chancellor should be much more radical and use a leaked Brussels VAT plan to push for the complete abolition of the ‘tampon tax’ instead.

A 'tax on periods'

Under EU rules, the UK can’t cut the VAT on sanitary products as 5% is the lowest rate permitted. The VAT on most goods in Britain is 20%.

Zero-rated VAT items, which include food, children’s clothes and men’s razors, have remained unchanged since the 1970s.

Yet the European Commission is now planning to hand national capitals more power to set their own VAT rates. Under one leaked option, the “reduced rate list” would be abolished and individual member states allowed to take control of how they levied the tax.

The leaked Brussels plans for VAT

Tory Eurosceptics and SNP MPs, as well as Labour MPs, have pressed Mr Osborne to push harder to scrap the tax, as part of a wider move to win back control from Brussels.

Ms Malhotra said: “Women’s sanitary products are not a luxury. George Osborne should take the opportunity in his Budget to say that he will take the action called for by Labour and feminist campaigners and seek to get the tampon tax abolished.”

Seema Malhotra

"He should also make it clear that the funding for women’s organisations and domestic violence charities linked to the ‘tampon tax’ will be maintained after a zero rate is achieved. It’s the right step forward and it’s time for action.”

Mr Osborne decided last year that the proceeds of the 5% VAT charge levied on all sanitary products will go to ‘women’s charities’ - until he can get the European Union to scrap it altogether.

Among those to benefit from £5m of the money will be some national charities: the gynaecological cancer charity The Eve Appeal, domestic abuse charities Safe Lives and Women’s Aid, and breast cancer charity The Haven.

But the main emphasis will be on a larger number of smaller local groups spread across the entire UK.

HuffPostUK has learned that Treasury officials have spent weeks trying to hammer out the policy, which has caused real headaches over just how much VAT has been accrued and over which projects would get the cash. “It’s been a real clusterf*ck to sort this,” one insider said.

The Chancellor was bemused by the reaction of some critics during his Autumn Statement, who claimed that women should not have to use their own taxes to fund rape crisis shelters and other projects under threat from the Tory Government’s own cutbacks.

Some Tory MPs admit it was an error for him to compare the tax on their bodies with the ‘Libor’ fines levied on wrongdoing bankers that are also donated to good causes.

Some charities are understood to have been reluctant to take the money. Within days of the announcement last year, Polly Neate, chief executive of Women’s Aid, one of the charities to benefit, welcomed the cash with key caveats.