The Government has scrapped plans to implement 20% VAT on pasties and reduced the planned tax on static caravans to 5%.

Combined, the measures are expected to mean about £70 million less in revenue for the Treasury.

The 'pasty tax' became one of the most widely criticised plans revealed in the Budget and the widespread uproar has lead to a u-turn on the policy.

While some hot foods will have VAT, pasties and sausage rolls will remain exempt. Treasury sources have said that the new clarifications to the rules are, 'nice, easy and simple'.

Lucy Manning reports on the changes:

What's hot and what's not?

The following will be not have VAT:

  • Pasties

  • Sausage rolls

  • Any food sold from shelves and being allowed to cool having been cooked

The following will have VAT:

  • Food served to be eaten hot, or food which is cooked hot to order

  • Food is kept hot in hot cabinets, on hot plates, under heat lamps etc

  • Food in heat-retaining packaging or other packaging specifically designed for hot food - an example would be foil-lined takeaway packaging for Indian and Chinese takeaways

  • Food advertised as hot

Tax on static caravans has also be revised with plans to implement 20% VAT to 5% and will be delayed from October 2012 to April 2013.

Liberal Democrat MP for St Austell & Newquay, Stephen Gilbert, welcomed the reports:

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.

Shadow Treasury minister Chris Leslie has said that the pasty tax u-turn is evidence thatGeorge Osborne's Budget is in 'a shambles'.

He said: "The whole of the budget is in total crisis and obviously the whole of the Treasury is having its competence questioned."