Two political rivals in east Yorkshire join forces to condemn the proposed VAT on static caravans. Their part of the north has thousands of jobs at stake
Among the issues causing controversy following the Budget on 21 March is the Chancellor’s proposal to levy 20% VAT on static caravans from October.
This policy, produced without any prior warning or publicity, would have a disproportionate impact on the Hull and east Yorkshire area, where some 90% of the UK’s caravan manufacturing industry is located.
The Government is introducing this VAT measure to iron out a perceived anomaly within the tax system, albeit not one that many people outside the Treasury have ever expressed any concern about. The merits of the proposed change are highly dubious – it was rejected when VAT was first introduced in the UK in 1973 – and efforts to deal with these issues often simply give rise to further anomalies.
Our main contention is one of priorities. How can a change of such trivial importance be justified without any consideration of the wider economic effects of the measure? The Treasury’s own Budget impact assessment shows that VAT on static caravans would cut demand in the industry by 30%. There have been some even more worrying estimates from within the industry.
In turn this would lead to job losses, mainly in and around east Yorkshire, from local caravan firms and their supply chain running to several thousand. The UK holiday industry has estimated that the Caravan Tax would then have a knock-on effect that would lead to thousands more jobs going, especially in seaside towns and rural communities.
The job losses caused by the Caravan Tax would lead to more redundancy costs, increased welfare payments, and a loss of income tax and National Insurance revenues that would certainly mean that the tax would be a net loser of revenue. Indeed, the Treasury’s own figures show the Caravan Tax losing revenue overall. It would raise £40m, but we estimate will cost £45m.
On the Caravan Tax, the Government has got itself a position of defending a measure that contradicts so many of its stated policy goals and the arguments ministers frequently use to support them. One of the justifications for the controversial decision to cut the 50p tax rate next year was that it does not raise enough. The Caravan Tax only raises £15m in its first year and would lose the Treasury revenue overall!
A Government that cuts Corporation Tax to boost jobs and growth should not be introducing a tax that would harm jobs and growth.
A Government that is concerned about rural areas and coastal towns should not pursue a measure that hits these areas, so dependent on the wider UK caravan holiday industry, so severely.
Neither is it wise or fair to impose such a huge further loss of private sector jobs on a hard-pressed city such as Hull where so many job-seekers already chase each job vacancy. The scale of job losses that the Caravan Tax would impose on East Yorkshire would be several times greater than those threatened at the local BAE Systems site in Brough.
The Caravan Tax also fails by any measure of fairness. While proposing to make static caravans less affordable for so many, there is no Budget tax proposal to target the second homes of the wealthiest.
In the debate about how to achieve sustained economic growth there is much upon which we disagree. The dangerous proposal to put VAT on static caravans is, however, an issue that unites us across the party divide. The Caravan Tax must be stopped now, before it can cause huge damage to an important private sector industry that has been working hard to recover from the global downturn of 2008/09.
It would be perverse for any Government keen on creating the conditions for growth, and especially one which speaks so often about the importance of ‘rebalancing the economy’ towards the north, manufacturing exports and private sector jobs , to do such damage to all these objectives. All for the sake of a tax adjustment of no real importance.
With Parliamentary petitions, debates and an Early Day Motion we are doing all that we can as local MPs to raise this urgent issue and persuade the Government to think again. The Government has helpfully extended its consultation period.
Now we need ministers to listen to the groundswell of opinion and withdraw this tax. We’re not asking for a state subsidy for the caravan industry – just for the Government not to harm an industry for no good reason.