Caravan tax ‘will cost 4,300 jobs in areas of high unemployment’

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The Government’s proposed caravan tax would cost nearly 4,500 British jobs, strip almost £1bn from the national economy over five years and may ultimately cost the Treasury revenue rather than raising extra funds, according to a new study.

A damning report by accountancy giant KPMG into the likely impact of Chancellor George Osborne’s plan to start charging VAT on the sale of static holiday caravans has concluded the negative impact of the new 20 per cent tax rate upon the economy would actually outweigh any financial benefit to the exchequer.

The report was made public as one caravan manufacturer in East Yorkshire – Willerby Holiday Homes – announced 350 jobs are at risk at its factory in Hull.

The Treasury’s own estimates suggest sales of static caravans, 95 per cent of which are manufactured in East Yorkshire, would fall by a third if the measure is introduced as planned by Ministers this October.

KPMG estimates this could cost the Exchequer nearly £50m a year in lost revenue. The tax is only expected to raise £35m in its first full year of operation, rising to £45m by 2016. The study says the caravan industry’s contribution to the British economy would be reduced by £856m over five years.

It puts estimated job losses at 4,370 and warns they will be “focused on regions with already high unemployment (Humberside), and marginal rural and coastal economies (the overwhelming majority of which are also in areas of multiple deprivation and high unemployment).”

The report was submitted to the Treasury on the final day of an extended consultation into the proposals, which were announced by Mr Osborne in his Budget.

The Treasury has also received a barrage of responses to its consultation from Yorkshire MPs ahead of a final decision this summer.

Hull MP Diana Johnson, who raised the first concerns about the tax, warned of the “substantial” impact upon the local economy.