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The Economy (Supporting Business)

Despite the fact that Scarborough was recently voted the most enterprising town in Britain, and went on to the finals in Prague, where it was voted the most enterprising town in Europe, we have not managed to buck the trend of this Labour recession. Between April 2008 and April 2009, unemployment has gone up by 68.7 per cent.; that is 1,000 more people out of work. The biggest shock to our local economy was the closure of the two Greaves printing works. On 9 April 2008, almost 200 jobs were lost at the gravure print works, and on 30 January 2009, 200 jobs were lost at the finishing works. On the day of the European elections, people ask, "What are the benefits of Europe?" and some might answer, "Structural funding has gone into the former coalfield areas and into the areas where heavy industry is in decline," but ironically it is precisely because Polestar printing got a £6-million grant from the European Commission under objective 1 funding for its new print works in Sheffield that the print works in Scarborough has had to close. The law of unintended consequences has come into action. The building and construction market is dire. The second-home market for premium flats on the seafront is holding up reasonably well, possibly because many people cannot see the point of keeping their savings in the building society given the low interest rates being offered, and because of the worry that there may be inflation coming down the road as a result of quantitative easing. However, the market for residential property, and certainly new-build property, is very poor indeed. Given that people previously got 95 or even 100 per cent. mortgages, I suppose that now that they are being told that they need a 10 or 20 per cent. deposit, it is not surprising that there will be a time lag before people in rented accommodation come into the market, if indeed they can save that money. The automotive industry is doing better in Scarborough than in other parts of the country, mainly because the Plaxton bus factory and the Bluebird coach factory are selling to local authorities and to the public sector. Of course, the McCain chip factory makes the ultimate counter-cyclical product; there is nothing like a bit of comfort food during a recession. Of course, the lifeblood of Scarborough and Whitby is the tourism industry, and the weak pound is helping there, as people are choosing not to go abroad. As a result of the uncertainty, people are leaving it later and later before they make their booking. In fact, last year, I asked an hotelier in Whitby on a Thursday what the bookings were like for the weekend, and he said, "It's too early to say." People wait for the weather forecast on Thursday night, or even on Friday, before they go online and book their rooms. Fortunately, weather forecasts are more accurate than some of the Chancellor's forecasts in the Budget. For example, the Economic Secretary to the Treasury mentioned the fact that the economy had contracted by 1.9 per cent. That was announced by the Office for National Statistics only two days after the Chancellor had forecast a 1.6 per cent. contraction in the economy. In fact, Treasury forecasts are so consistently wrong that they are in the same league as Michael Fish was when he told us not to worry about that hurricane. I should like to flag up a couple of issues that affect the tourist industry, and they give another example of the law of unintended consequences. The first point is about the threshold for VAT registration. We are trying to make Scarborough and Whitby a 12-month-a-year resort, but all too often, when it gets to February or March and the owners of small guest houses look at their turnover for the year, they see that they are on the point of breaching the £68,000 VAT threshold. It makes more sense for them to close down their guest house and go to Tenerife for a few weeks than to stay open. It is a real problem. If they go over the threshold, they have to pay VAT on all the money that they have taken since the previous April. I do not know whether Ministers are thinking about how that could be addressed. Perhaps we will have to leave it to the next Government to try to come up with a solution to that problem. On holiday lets, bookings are up, but I am concerned about changes in the Budget that affect the holiday let market. From April 2010, income from holiday lets will no longer be classified as earned income; it will instead be classified as unearned income. One consequence is that income from that side of the business cannot be offset against income other than other property income. That affects many small farms that have invested in their farm buildings, and converted them into holiday lets. Those farms now find that the two businesses cannot be offset against each other. Also, income from such holiday lets now does not qualify as "relevant earnings" for pension fund contributions. Such holiday cottages can no longer be considered a business asset, and that will have far-reaching implications for capital gains tax planning. All sorts of reliefs that are available for business assets, such as roll-over, hold-over and entrepreneur's relief, will no longer be available. We know why the Government did that; it was because many people had second homes on the coast, or even abroad, and it was seen as unfair that they could use the cost of running those holiday homes, assuming that they let them for 140 days, against their income from their ordinary jobs, but the case of farm cottages is entirely different. They are a diversification of a business. Farmers do not stay in their holiday cottages, but the cottages are usually in the farmyard. They are an integral part of the steading. In many cases the planning permission given by the local authority or the national park authority means that those holiday cottages cannot be sold off separately from the unit. In fact, in some cases, land cannot be sold off separately from that unit. I hope that the Minister will look at that problem and make sure that we can do something to try to help the hard-pressed tourist industry in my constituency.