Justice Secretary Ken Clarke defends tax U-turns

Controversial plans to impose a 20% tax on pasties have been scrapped. Credit: Press Association

Justice Secretary Kenneth Clarke has defended the Government's tax U-turns, saying the changes have came a result of listening to taxpayers.

His comments follow George Osborne's decision to scrap controversial Budget plans to impose 20 per cent VAT on pasties and caravans.

VAT is expected to only be charged on food intended to be served hot. Tax on caravans is to be reduced to five per cent.

The climbdown on pasties, which followed a campaign to scrap the tax that was supported by 300,000 signatures, saw Greggs shares rise eight per cent today.

Greggs chief executive Ken McMeikan said: "This is fantastic news for the customer more than anything.

"If we had to put up prices by 20% in the current marketplace when consumers are having a very difficult time we expected there would be an impact on sales but we don't know what it would have been.

"I think the Government deserves to be applauded."

Mr McMeikan said the new rules had cleared up anomalies in the tax system and would mean bakers who kept their savoury products hot would now not be able to avoid paying VAT.

He added: "It's a much clearer, workable way forward. We are very pleased for our customers."

The Treasury also scrapped plans for 20 per cent VAT on static caravans and will instead charge 5 per cent from April 2013 rather than October.

Static caravans will be subjected to 5% VAT under revised plans. Credit: Press Association

Nigel Wimpenny, managing director of South Lakeland Parks, which operates nine holiday parks in the Lake District and Lancashire, welcomed the Government's announcement on static caravans.

He said: "As soon as this tax was proposed, we knew that the figures just didn't add up. The Treasury's own somewhat reserved estimates of a 30% drop in the sales of caravans would have impacted upon thousands of direct and indirect jobs across the country, particularly in rural areas like the Lake District."

"Although we are pleased that the 20% rate of tax has been kicked into touch, the Government's revised plans to introduce a new 5% rate of tax to the purchase of static caravans and lodges from next year will still have a negative impact on the industry - albeit not to the level that was originally feared," he added.