---

Finance (No. 4) Bill

It is a pleasure to follow the hon. Member for Gainsborough (Mr Leigh), who made a valiant effort to persuade the House that the proposal for a flat tax was something on which the left and the right could agree. It will be interesting to see how Ministers respond to the challenges with which he presented them. I intend to concentrate on an issue that greatly concerns my constituents and local businesses. I have already raised it in the House several times, and on the day of the Budget, when I was flicking through the accompanying documents, I saw the announcement that VAT would be levied on static caravans. I have noted what the Treasury has said about the effect, and the more I have looked into it over the past couple of weeks, the worse it has appeared to be for my constituents and local businesses. The VAT on static caravans policy is part of the muddled approach that runs through the Budget. The Government are giving mixed messages: they say they want growth, yet they introduce policies that impede growth. There are also many unintended consequences that Ministers and civil servants have not properly thought through, and that is particularly true of the VAT on static caravans policy. The caravan tax announcement came completely out of the blue. It is currently subject to a belated consultation that will end very shortly, on 4 May. My understanding is that it is to be implemented in October. The effects of this proposal must be properly scrutinised and debated fully. I am therefore disappointed that the consultation period is so brief. My Front-Bench colleagues have tabled an amendment to the proposed tax, which I hope will be selected during our deliberations on the Bill. In common with many Members on both sides of the House, I oppose the Government's proposals on this issue. The caravan tax was not leaked in the announcements before the Budget at the end of March. Like the granny tax, it was news that was kept back, but which has subsequently caused a lot of problems for the Government. The confusion over the caravan tax is similar to that over the pasty tax. It is also similar to the confusion over the charity tax measures. Before the election, the Government talked a lot about wanting to encourage charitable giving, and there are provisions in the Finance Bill to offset charitable giving against inheritance tax. However, the proposals to limit tax relief on charitable giving that were also announced in the Budget and that are contained in the Finance Bill appear to contradict those earlier statements. First, I want to outline some of the arguments in respect of imposing VAT on caravans. I listened with great interest to what the Chief Secretary said in his opening remarks about simplifying tax regimes and ironing out anomalies. We all support that, of course, but we must ensure that there is proper and full consultation in advance of any changes being implemented. My main concern is the effect on the ability of businesses to plan accurately for the future and decide what they need to do—what investments they need to make, and how many employees they need in their company. Investors need confidence, but a key point that comes up time and again is that companies do not currently have the required levels of confidence for the economy to grow. Recently, the Government have made similar mistakes that have dented business confidence, such as the solar power feed-in tariff debacle. As a result of that mistake, we in Hull have already seen Carillion restructure. We will lose jobs, and Hull cannot afford to lose any jobs. The caravan industry has spent three years working hard to recover from the problems resulting from the 2008-09 global downturn, when Hull lost more than 1,500 jobs in the industry. Now we have this hammer blow set for October, when thousands more in the caravan sector may lose their jobs. If tax changes are to be made, it would be sensible to give greater warning and to give the industry time to adapt. Instead, the Government appear to be kicking people when they are down, just as the caravan industry was getting back on its feet. Most particularly, this is happening in Yorkshire, and it will have an effect on the entire region. Ministers talk a lot about the need to rebalance the economy in respect of the public and the private sectors and the south-east and the rest of the country, yet this measure will have a disproportionately negative impact on the north and Yorkshire. Secondly, these changes will not do much to simplify the system. Indeed, we could end up with more anomalies being created, as with the pasty tax. The taxing of sales of static caravans was considered at length and rejected when VAT was first introduced in the UK in 1973. There has not been a proper opportunity to review that decision and to investigate whether the situation has changed in the intervening years. Thirdly, what if the changes damage businesses and cost private sector jobs, which are supposed to be powering recovery, growth and deficit reduction? Over 90% of the UK's caravan firms are in east Yorkshire, and they still employ some 6,000 people despite the contraction in the 2008 global downturn. The industry supports a further 15,000 to 20,000 jobs through its supply chain. The Treasury forecasts that the caravan tax will cause a 30% cut in demand. According to the industry, that will result in up to 3,000 jobs being lost from caravan firms and their supply chain. The situation could get even worse. We are currently facing almost 900 jobs going at BAE Systems in Brough, and our area already has high levels of unemployment. We have already seen jobs go at Warmsure, too, and at Comet and P&O in Hull, and many jobs are going in the public services as well. My constituency of Kingston upon Hull North and the neighbouring constituency of Kingston upon Hull East are already in the UK top 10 for having the most jobseekers chasing each job. The number of NEETs—those not in education, employment or training—is soaring as the quality and quantity of jobs, apprenticeships and training opportunities have declined. In my constituency, unemployment now stands at about 13% for those aged between 16 and 64. The next few years already looked like being tough for jobs in Hull, but by introducing this measure, the Government are making the situation much worse. The Government's ““rebalancing”” rhetoric that we hear so much does not hold water. Fourthly, what if the economic damage caused by the caravan tax leads to the Treasury losing revenue overall? The Treasury's own impact assessment shows that the tax will lead to a 30% cut in demand for static caravans. Consequent job losses on the scale predicted by the industry will result in tax revenue being lost and welfare costs increasing. As the right hon. Member for Haltemprice and Howden (Mr Davis) said in this House on 26 March, the Chancellor's own Red Book states that the total annual revenue raised from this measure will be £40 million, but the cost in unemployment from losing 30% of business, as forecast by the Treasury, will be up to £45 million. The caravan tax would therefore actually lose revenue overall. That is a crazy policy. That point was brushed aside by the Chief Secretary to the Treasury in his winding-up speech on the Budget. The justification for cutting the 50p rate of tax was that it does not raise much money, but according to the Treasury's own figures the caravan tax will lose revenue overall. The Government also cut corporation tax on the basis that that is good for jobs and growth. By the same logic, how can the caravan tax be good for jobs and growth in my constituency and the wider region? I realise that the Chancellor is as likely to have had a caravan holiday recently as he is to have eaten a pasty or played bingo, but there is no excuse for introducing a damaging tax that will cost thousands of private sector jobs in the caravan industry and its suppliers, especially as the private sector is precisely where Ministers claim our growth will come from. This measure will lose the Treasury revenue, harm the aspirations of many people saving up for a holiday home, and damage the wider UK holiday industry. Fifthly, is the caravan tax fair? Given that the Budget did not put VAT on the second homes of the wealthy and did not contain a mansion tax, how is it fair to tax the second homes of those who are not so wealthy and often save for many years to be able to buy a static caravan to use on their weekends and holidays? The Chancellor's rhetoric is that he is trying to build a tiger economy, but it seems more like just a fat cat economy. Along with my hon. Friend the Member for Blackpool South (Mr Marsden), I visited Willerby Holiday Homes Ltd in east Hull on 26 March to hear its serious concerns about this measure. I have also received a letter, dated today, expressing concerns about what will happen to its 820 workers, 100 of whom are young workers under the age of 25. On 5 April, along with the hon. Member for Beverley and Holderness (Mr Stuart), the right hon. Member for Haltemprice and Howden, the hon. Member for Brigg and Goole (Andrew Percy) and my hon. Friend the Member for Kingston upon Hull East (Karl Turner), I met representatives of caravan firms in the Hull and East Riding area, and the information we received about the damage that this tax could do was devastating. Some 44 employees of Normandy Holiday Homes in my constituency have written to me saying:"““We are concerned that the proposed VAT increase on caravan holiday homes that was announced in the Budget last month will have a detrimental effect on the business. We have already had a number of short time working weeks in this tax year and we are concerned that if the level of orders falls, the company may be forced to make people redundant or cease trading.””" In addition, I have received letters from people involved in the supply chain to the caravan industry, one of which came from six workers at 3Core group, which supplies Normandy Holiday Homes. The letter said that the caravan tax would have a ““detrimental”” impact on them, too. In addition to letters from caravan firms and their direct suppliers, I, like other right hon. and hon. Members, have received an e-mail from May Reader of Heathland Beach holiday park in Norfolk. She says:"““We, as a family, have been running our Holiday Park for 40 years and I personally am Chairman of our local Conservative Association and I am very distressed that it is a Conservative Government that is about to ruin a lifetime's work.””" That shows the negative impact that the caravan tax would have on the UK holiday and tourism industry, at a time when, as many hon. Members have said, there is a push to get people to holiday in this country and there is a vogue for staycations. To be fair, some Conservative Members are joining Labour Members in opposing this particular tax; I know that the right hon. Member for Haltemprice and Howden and the hon. Member for Beverley and Holderness are planning to meet the Chancellor on Wednesday. It is being reported on the wires that the Prime Minister is willing to think again on the charity relief tax plan, so I hope that he is also willing to think again about the caravan tax. I am also interested to learn what the response will be from the Liberal Democrat Business Secretary, to whom the National Caravan Council wrote about this issue on 12 April. So far we have seen the Liberal Democrats, yet again, defending the Treasury view to the hilt. In conclusion, my constituents just want the chance to work, to trade, to earn a living and to spend money locally in east Yorkshire. That is all those workers and business people want. They are not asking for a state subsidy. They are just asking for their industry to be allowed to carry on trading without being seriously harmed by this new tax. That is in the regional interest and in the national interest, and I hope that the Minister will think again. As I said at the start of my speech, Labour has tabled amendments on this issue and I hope that we will have a chance to stop the caravan tax on Wednesday through the amendment to the Finance Bill tabled by my hon. Friend the Member for Pontypridd (Owen Smith), the shadow Exchequer Secretary. If the Chancellor does not change his mind, I ask hon. Members to back this amendment. Let us kill this caravan tax before it kills thousands more jobs in Hull and the East Riding of Yorkshire.