Lower-rate caravan tax ‘will not damage industry’

Treasury Minister David Gauke told MPs that the Government’s decision to reduce the new VAT rate on the sale of static holiday caravans from 20 per cent to five per cent would minimise the negative effect on companies in the Humber area, where most of the UK’s caravans are built.

Last week the Treasury published an updated impact assessment of the various controversial changes to VAT rates, which were proposed in the Budget but then drastically revised following widespread outcry.

Its initial assessment had suggested the 20 per cent rate would reduce public demand for static caravans by almost a third, leading to fears of thousands of potential job losses in East Yorkshire.

The updated assessment has no precise estimate of how the new five per cent rate will affect the industry when it is introduced next year, and Hull North’s Labour MP Diana Johnson warned jobs may still be lost in her constituency.

“If the Treasury thinks that the imposition of five per cent VAT will be fine for an industry that is struggling in a double-dip recession when people are not spending, it really needs to look again at its figures,” she said.

But Mr Gauke told the House of Commons he expected the impact upon the industry would be minimal.

“Clearly there is a substantial difference between 20 per cent VAT and five per cent VAT,” he said.

“We do not think the impact of the five per cent rate is likely to be substantial.

“In the usual course of business there are tax changes – National Insurance contributions and rates are the subject of regular fluctuations – and in many cases the VAT change may well be absorbed.

“In addition, we have given industry much more time by deciding not to implement the change until April next year.

“Caravan manufacturers will have the opportunity to sell more caravans in advance of next year’s summer season – the information we have is that spring tends to be the busiest period.

“The overall impact on the industry is therefore unlikely to be significant.”

His verdict was backed by East Yorkshire Conservative MPs who fought hard against their own Government to see the original plans revised.

Beverley and Holderness MP Graham Stuart, who led the backbench rebellion, said: “The National Caravan Council and the British Holiday and Home Parks Association have welcomed the five per cent rate.

“They feel the Government did listen and that the industry can take on that burden.”