THE IMPACT OF THE BUDGET
PROPOSAL TO IMPOSE VAT ON THE SALE OF
STATIC CARAVANS IN OCTOBER 2012
28th April 2012
Dear Member of Parliament
In his March statement the Chancellor introduced the
proposition of applying 20% VAT to the sale of holiday caravans.
This will impact significantly not only on the holiday parks
industry, but UK tourism as a whole.
Initial independent economic assessment indicates that
this action will result in:
- 52.2%
slump in demand for static caravans
- 3,810 people losing their jobs across UK holiday parks alone [[1]]
Added to this will be the knock-on impact into the
British manufacturing industry as well as tourism marketing, transport and the
plethora of support services.
As the majority of holiday parks are naturally located on the
coast and in the countryside, the impact upon rural Britain and hard pressed seaside
resorts will be devastating.
This apparently minor addition to the tax portfolio
will have dramatic and long-lasting impacts upon a vital sector of the UK
holiday market.
The net benefits in tax income will be far outweighed
by the losses to the tourism sector in terms of jobs and revenue and the
knock-on effects into manufacturing and sustaining the rural economy.
You are
respectfully invited to vote against this proposal accordingly.
Background
There are some 335,000 caravan holiday homes (210,000
privately owned) on 4,000 holiday parks in Britain, generating an annual £3.06
billion of tourism spending - that's 14% of Britain's entire tourism economy -
and accounts for 22% of all holiday bed nights. [[2]]
Holidaying in caravans is a peculiarly British form of
holiday-taking, second only to hotels in the provision of tourist accommodation.
In many places caravans are the ONLY form of holiday accommodation available.
50% of the British population will take a holiday at a holiday caravan park in
their lifetime.
The majority of parks are small family-owned
businesses, some with farming histories stretching back over generations, and
for which tourism is now a much more realistic alternative to the declining
agricultural industry.
The sector has held up well during the economic
downturn, with holidaymakers taking more holidays at home; encouraged by the
Government’s Tourism Strategy (March
2011) and current TV advertising campaigns. This has been a direct benefit to
rural Britain. However, this does not imply that parks are immune from the
recession. Careful management and discounting have helped to sustain the
industry.
Local Economy
Holiday caravan parks are extraordinarily valuable to
their local economies, generating 7-8 times the tourism revenue per trip from
an overnight stay than a day visitor. They sustain much of rural Britain
through their revenue and job generation in ways that could not be delivered by
other types of development.
- Independent economic research [[3]] shows the direct and indirect spend for each 15 holiday caravan pitches support one Full Time Equivalent Job.
The knock-on benefits from
holiday parks are considerable. Their revenues sustain a raft of local shops,
services and associated businesses (both within and outside the tourism market)
that feed off and support the holiday park operation throughout an extended
season. For example, if visitor levels drop then this will directly affect
tourist attractions, pubs, restaurants and souvenir shops.
Holiday parks are integral to
local economies. Many provide the local shop, the pub and even the post office;
facilities that would otherwise have been lost entirely to the locale. Larger
parks with swimming pools and activity facilities make these available to their
local community in common with their holidaymakers.
|
“It can be
easy to underestimate the importance of holiday parks to rural regions - not
least because parks are generally far less visible than hotels and guest
houses. But collectively, their contribution to local economies is both
substantial and irreplaceable”. - BHHPA
|
The Impacts
HMRC anticipates ‘Up to around 750 manufacturers, retailers
and holiday parks selling static caravans will be affected by this measure’.
This underestimates the impact of
the measure. The BHHPA database shows that members manage 1,156 businesses
selling holiday caravans directly onto 1,627 holiday parks. Since, the BHHPA
membership comprises some 75% of the industry total, this would imply the
measure will impact on over 1,500 holiday park businesses alone (with over
2,150 holiday parks selling holiday caravans) across the UK.
HMRC’s impact assessment
anticipates, ‘a fall in demand of about
30 per cent, if the VAT change is fully passed on’. This is bad enough in
itself, but underestimates the position. There are some 600 British businesses
in the industry’s supply chain – for example, distributors (27), hauliers (60),
manufacturers (34) and the manufacturers/suppliers of parts (494) (furniture,
carpets, curtains, chassis, windows, heating, plumbing etc., etc.). The
unintended consequences of losing a third of the business in this way will
inevitably result in business closure and loss of jobs throughout the extended
supply chain.
In particular, the impact of any decrease in demand, of
‘about 30 per cent’ suggested by HMRC,
will be felt more acutely by the 34 companies manufacturing holiday caravans.
Park Operation and Effects
Owner-occupied caravans are
purchased for personal use, but when not in private use, more often than not
the caravan owner has contracted with the Park operator to rent their caravan
out as part of the wider tourism offer on the Park. This is encouraged by the
park operator in order to help sustain the holiday park and its various facilities.
This business model is very
valuable in securing a sustainable holiday business, importantly providing
commercial certainty at the start of each year with a known level of annual
pitch fee income. In particular this format helps reduce the risk of bad
weather deterring UK holiday-taking decisions at the last minute, which has
become a very evident and commercially damaging feature of our home market of
recent years.
Business investment plans are
also made more certain and secure, allowing regular upgrading and improvement
works to keep pace with the ever increasing expectations of a demanding tourism
market.
Money to make discretionary
spending of this kind on a holiday caravan is hard enough to come by at the
best of times, let alone in the midst of a recession. Adding 20% in this
economic climate is likely to tip the balance between making that investment or
keeping the cash in the bank and spending it elsewhere; i.e. on overseas
holidays.
The imposition of VAT on
static caravans could literally Tax people away from taking holidays in this
country and that is not a good thing.
This very traditional and
UK-centric market is not immune to being attracted away by other
opportunities.
People thinking of upgrading
and renewing their caravan will be discouraged (or at best delayed) and this
will begin to affect the quality of the park. Perceptions in tourism are
everything and maintaining high standards is a key requirement. Park operators
unable to support their business through caravan sales will have less to
re-invest and cannot then sustain pitch fees that reflect their investment.
Slowly but surely a spiral of decline will commence that could be very hard to recover
from.
The government really cannot
afford to let a highly valuable tourism asset wither away for want of
short-term tax revenues that are unlikely to cover a fraction of the potential
losses in jobs and revenue that will be occasioned by this action.
Thank you for taking time to consider this submission.
Ian P Butter
BSc (Hons) FRICS MRTPI
07860 684604
Ian Butter BSc
(Hons) FRICS MRTPI
Ian Butter has been providing professional advice to
the Holiday and Home Parks Industry throughout Britain for over 34 years and
has been instrumental in evolving Development Plan Policy concerning tourism,
leisure and rural initiatives.
Ian was involved with the Matthew Taylor MP report
(Living Working Countryside) for the Prime Minister in 2008 and co-wrote
‘Holiday Caravan Parks – Caring for the Environment’ which is now embodied in
the Good Practice Guide on Planning for Tourism (2006).
His expertise extends further into the wider remit of
rural regeneration, where he has been particularly involved with the heritage
and landed estates sector in the restoration and re-use of redundant land and buildings.
He was recently invited to Denmark to speak on his UK experiences.
Further information is available from www.ruralurbanplanning.co.uk
BHHPA Membership No. -
NAM701
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