Mark Garnier, MP for Wyre Forest, has made a submission to the Treasury consultation on Caravan Tax.
In his submission, sent to David Roberts at HMRC, Mark asks the Treasury to reconsider their proposals to charge VAT on the sale of static caravans. The local MP cites the negative impact on the Wyre Forest tourist industry as one of the mains reasons for dropping the proposals.
Mark's submission is as follows:
Mr. David Roberts
HMRC
VAT Projects Team
3C/10, 100 Parliament Street
London
SW1A 2BQ
17th May 2012
Dear Mr. Roberts
Consultation on the introduction of standard rate VAT on Static Holiday Caravans
This submission is made by the local Member of Parliament for Wyre Forest.
The Parliamentary constituency of Wyre Forest (co-terminus with Wyre Forest District Council) is located in North Worcestershire on the borders of Shropshire and Staffordshire. Wyre Forest has a substantial tourism industry which includes the Severn Valley Railway, West Midlands Safari Park, Stourport Basins, the Georgian town of Bewdley, and approximately half the ancient British woodland of Wyre Forest of which two thirds is a designated Site of Special Scientific Interest (SSSI) within its boundaries.
Within the constituency there are 26 registered holiday parks and 2 registered residential parks. The holiday parks have a total of 2758 static caravan pitches.
For the purpose of this submission, I will be referring to the Wyre Forest Tourism Economic Impact Assessment 2009, being the most recent available.
In addition, I have written to all 26 registered park home owners requesting information on their business model and sales of static caravans.
The static caravan holiday pitches within Wyre Forest are used frequently by their owners, many of whom add their names to the electoral role (as is the case with many holiday cottage owners). Information given to me by those park owners who have responded as well as our own records of electors (where we have had time to check and collate the information) indicate the following number of registered electors:
Park A: Pitches 98 Electoral Roll 59 60%
Park B: Pitches 124 Electoral Roll 12 10%
Park C Pitches 205 Electoral Roll 42 20%
Park D: Pitches 88 Electoral Roll 14 16%
Park E: Pitches 30 Electoral Roll 9 30%
Park F: Pitches 220 Electoral Roll 80 36%
Park G: Pitches 78 Permanent 61 78%
Park H: Pitches 250 Permanent 100 40%
This evidence demonstrates a commitment by the static caravan owners to their local community - a dedication that is both valuable locally and at risk from any possible changes in tax arrangements on these homes.
Effect on Wyre Forest Tourism
The decline of the local carpet industry has led to a decline and partial rebalancing of the local economy. Diversification into tourism has resulted in the development of this industry as a generator of some wealth. It is important to remember that Wyre Forest has the 7th lowest weekly wage in the country. This means that the local economy is both fragile and possibly overly reliant on tourism and is therefore more susceptible to economic shock than perhaps would otherwise be the case. Accordingly a 20% hike in the capital cost of static caravans as a result of a tax increase is liable to depress the economic activity of the tourist industry locally - a point that has been argued well by the various trade associations and one that is extremely relevant in the case of Wyre Forest.
In Wyre Forest there are 1,344 direct tourism related jobs with an additional 374 non-tourism jobs dependent upon multiplier spend from tourism. £76 million estimated total expenditure in 2009 by tourists of which £17million was generated by overnight visitors.
Since 2008 the caravan parks within Wyre Forest have seen a significant change in their trade. Typically on average a 60% fall in the purchase of new caravans and a 40% fall in the trade of second hand homes.
Pre 2008 the majority of Caravan Parks were to capacity with waiting lists. Since the onset of the recession the parks have contained vacant pitches. On average this equates to 8% of pitch allocation is likely to remain vacant.
The basic business model for the parks is that the income from the annual pitch fees is used to pay business rates, utilities, labour costs and the general basic maintenance of the parks. All this incurs VAT at 20%. This income from pitches alone is not adequate, due to the increase in utilities, and the decrease in pitch allocation. Additional revenue for running the parks has been made up by the profit in the sale of the holiday caravans. This profit is also used for the long term capital investment into the parks.
Two of the larger parks have already cancelled/delayed large projects of expansion and development until the industry has stabilised.
This is an industry which has become extremely fragile over the last four years with the recession and runs a high risk of a long term spiral effect as many of the parks are reliant on the income from sales to maintain and invest in the parks. The additional expected 30% decline in this industry's capital turnover, which will be caused by the addition of a 20% VAT, will be detrimental to the many parks within my constituency which are viewed all as a holiday retreat in an area that they have grown to know and love.
The UK static caravan industry is predominately a UK industry which has seen a 53% reduction of output since 2008 (Caravan manufacturing from 28,000 to 15,000). As many of the park owners of Wyre Forest say they are treading water to survive.
Conclusion
This is an industry which has become increasingly fragile over the last four years. A combination of the above points means that Wyre Forest tourism runs the risk of falling into a long term spiral. This would not only impact the park owners and its residents, but also the wider local economy. In fact, the proposed changes have already had an impact; two of the larger parks have cancelled or delayed large projects of expansion and development until they can be sure of what the future holds.
Added to this is the fact that the proposed VAT changes have the potential to penalise permanent caravan residents, living on non permanent occupancy sites, by charging them VAT on their homes.
Yours sincerely,
Mark Garnier MP