The controversial 'tampon tax' looks set to be scrapped after government officials set the UK had secured a deal with the European Union.

VAT is currently charged at a lower rate of 5%, currently the lowest allowed by EU law, on all sanitary products. But the government has faced growing pressure and anger from the public over the tax, with more than 300,000 people already having signed a petition to have it scrapped.

Chancellor George Osborne said the government "heard people's anger over paying the tampon tax loud and clear".

"We said we'd use the money to benefit women's charities and we've already distributed £17m to good causes across the country," he said.

"At the same time 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. 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, confident voice inside a reformed EU."

Following a meeting of the European Council summit, the 28 member states welcomed "the intention of the 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".

A number of euro-skeptic Conservative MPs were threatening to vote against, or vote for an amendment to, the Finance Bill next week, which would have resulted in the UK being able to apply a zero-rate of tax on sanitary products.