DAVID CAMERON was forced to defend the “pasty tax” after MPS questioned how fair it was to apply 20 per cent VAT to baked goods while caviar was exempt.

The Prime Minister told the Commons he understood why “feelings in Cornwall run high on this” but insisted it was unfair that other takeaway food was covered by the tax while pasties were not.

The Liberal Democrat Stephen Gilbert, one of the MPS behind the proposed Finance Bill clause, raised the issue at Prime Minister’s Questions.

“The Prime Minister will be aware that there is no VAT chargeable on caviar, yet the Government is proposing to put VAT on the Cornish pasty,” he said. “Can he tell me why that’s fair?”

Mr Cameron told the Commons: “What I think is unfair is that products sold in a fish and chip shop which are subject to VAT, those same products can be sold in supermarkets not subject to VAT. I don’t think that’s fair and that’s why it’s right we redraw the boundaries.”

The VAT changes last night survived a Commons rebellion by Conservative and Lib Dem MPS from the South West.

The Government defeated an amendment proposed by Mr Gilbert that would have exempted hot pastry products from the change.

But the revolt cut the Government’s Commons majority from about 80 to 35. About nine Conservative MPS rebelled over pasties, including George Eustice, the Camborne and Redruth MP and a former aide to Mr Cameron.

At least four Liberal Democrats voted against the Government.

The Coalition also faced a rebellion last night over Budget plans to impose VAT on static caravans.

Up to 16 Conservative MPS voted against the Government on the caravan tax, cutting the Coalition majority to 25.

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