The “tampon tax” will be scrapped after European Union leaders agreed to allow a zero VAT rating on sanitary products.
Despite George Osborne indicating in the autumn that he wanted to drop the 5 per cent VAT rate charged on tampons and other such goods, the Government is currently restricted by EU tax law.
But with Eurosceptic Tories threatening to join forces with Labour to embarrass the Government by calling for a zero-VAT rating, David Cameron raised the issue at an EU summit and swiftly won agreement.
The 28 EU leaders agreed unanimously to a statement welcoming “the intention of the [European] Commission to include proposals for increased flexibility for member states with respect to reduced rates of VAT, which will provide the option to member states of VAT zero-rating sanitary products”.
The Chancellor said that the Government had “heard people’s anger over paying the tampon tax loud and clear”.
“We said we’d fight for agreement to reduce the VAT rate to zero and tonight all European leaders have welcomed our plan to do just that,” Mr Osborne said.
“We’ve achieved what no British government has even tried to achieve. It just shows how Britain can make a case for a reform that will benefit millions as a powerful voice inside a reformed EU.”
However the Ukip leader, Nigel Farage, said Britain had been reduced to pleading for permission from “unelected bureaucrats” to remove the tax.
“We have begged for crumbs from the table and for once we have got some,” he told ITV News. “It’s pathetic for our country to have sunk to this level.”
In his Budget, Mr Osborne had sought to appease critics by announcing that £12m in revenue from the tax would go to charities supporting causes that benefit women.
However, Labour MP Paula Sherriff tabled an amendment calling for zero rating which was expected to be supported by at least 25 Eurosceptic Tories. With SNP support, this would have been enough to defeat the Government on the issue.
Ms Sheriff said she now hoped the Chancellor would accept her amendment, adding: “There is no excuse not to act now, and reform is long overdue. In the meantime, the Chancellor should guarantee that essential women’s services won’t depend on a tax on essential women’s products.”
A similar clash between the Government and Eurosceptic Conservatives is likely to arise over EU rules that restrict the UK’s ability to cut VAT on energy-saving products such as solar panels and insulation.
Steve Baker, the Wycombe MP who co-chairs the Eurosceptic Conservatives for Britain group, told The Independent: “Neither vote is about the Chancellor’s Budget, they are both about whether our Parliament can determine these tax rates. Unless we take back control we will continue we will continue to be forced to go in supplication to the EU to ask to set particular rates for particular products.”