Hopes of U-turn on Caravan Tax but fight goes on

The National Caravan Council (NCC) said yesterday it has commissioned an urgent study by accountancy giant KPMG to assess the full impact of the Government plan to introduce VAT on static holiday caravans, following the Treasury’s agreement to extend its formal consultation period by an extra fortnight.

The strength of feeling was made clear in an impassioned Commons debate on Wednesday night which saw the coalition facing its biggest rebellion since the hike in tuition fees.

Leading the charge were a cross-party team of MPs from East Yorkshire, where more than 90 per cent of the UK’s static caravans are manufactured. Local industry figures believe at least 1,000 jobs will be put at risk by the new 20 per cent sales tax.

Seven of East Yorkshire’s eight MPs voted to scrap the measure, with Tory backbenchers Graham Stuart, David Davis, Andrew Percy and Martin Vickers among the rebels who slashed the Government’s majority to just 25 as the new tax was forced through.

Mr Davis said: “The size of the rebellion shows the Government needs to re-think. This will destroy jobs at the very time we need to create them.”

Despite the Government’s victory, there is growing optimism the Treasury’s decision to extend its consultation means it may yet be prepared to compromise.

“It’s the sign of a shift, and it’s an opportunity to gather more colleagues on side,” said Mr Stuart, who tried to withdraw his amendment calling for the tax to be scrapped once the Treasury extended its deadline.

“The Government has been clear it doesn’t have all the answers, and that’s why it’s having this consultation. The extension has a small practical benefit, but mostly is a sign that they are recognising the strength of feeling.”

The NCC said the decision to extend the deadline to May 18 will give it time to compile a new body of research which it hopes will help change Ministers’ minds.

NCC director-general John Lally said: “We are heartened by the votes against the Bill. We have commissioned research to confirm our fears that thousands of jobs will be at risk, and that it would result in a significant loss of tourism spend.

“It will be manufacturing hubs such as Hull, and seaside and rural areas dependent on tourism, that will bear the brunt of the pain.”

The Treasury’s own figures state caravan sales are likely to fall by almost a third as a result of the new tax, which will bring in less than £50m per year.

The NCC believes the impact could be even greater, with 4,000 jobs lost across the country as the effects are felt along supply chains and at caravan parks nationwide.

“Some people think sales could be down 50 per cent,” said Mel Copper, chief executive of Beverley-based manufacturer ABI. “This is supposed to come in in October – how is your business supposed to prepare in five months?

“But I hold out hope good sense will prevail. Once the evidence is there, I’m hopeful there will be some compromise.”

Hull North’s Labour MP Diana Johnson, who was the first to raise concerns about the tax following the Budget speech last month, praised those Conservatives who rebelled against the Government and said the “cross-party campaigning” must continue.

Tory grandee Greg Knight, the only East Yorkshire MP to vote in favour of the new tax, said he needs more time to assess the impact on his constituency, but he is hopeful the Government is now listening.

“I gave the Minister the benefit of the doubt,” Mr Knight said. “He had obviously listened to what I had said and extended the consultation – and representations are still being made.”