Amidst all the
hype of the Chancellors recent annual budget statement were a number of
additional government proposals that didn't rate a mention at the dispatch box,
but have appeared from the written word. One of these is potentially so
damaging that it will (I have no doubt about this at all) impact very badly upon
the UK tourism market, just at a time when the government is in dire need of us
all spending more on holidays at home.
I speak here of
none other than the imposition of value added tax (VAT) upon the humble static
holiday caravan!
This isn’t about
taxing those who book a week in a caravan (they’re being taxed to the hilt
elsewhere) it’s about the 80% or so of all holiday caravans that are
"owner-occupied". That is to say they are owned privately for holiday
purposes. The government intends adding 20% VAT to the purchase price of a new
one.
So what, I hear
you saying? Now he’s whingeing on about the government fleecing all those tax-dodging,
charity-giving rich people with second homes in the Dordogne access to the first class lounge at airports and downstairs
toilets and all.
Nope. I'm
talking about an industry worth £2.6billion (yes, billion) per annum to the exchequer
(representing 12.3% of total UK tourism spending[1]),
together with a bunch of hard-working people who choose to invest in a holiday
caravan so that they can vacation in this country, with their family, on a
regular basis, year after year, making their tourism contribution to the
national economy in exactly the way this government desires.
And thank
goodness for them, because this peculiarly British form of holiday-taking is
second only to hotels in the tourist accommodation stakes and generates about
74 million bednights per annum; mostly in rural areas.
Holiday caravan
parks are extraordinarily valuable to their local economies too, generating 7-8
times the tourism revenue per trip than a day visitor. In many places they are
the ONLY form of holiday accommodation to be had and they sustain much of rural
Britain through their revenue and job generation in a way that could not be
delivered by other types of development; even if that were achievable in planning
and development terms in the first place.
The knock-on
benefits from holiday parks are considerable, with their revenues sustaining a
raft of local shops, services and associated businesses that support the
holiday park operation throughout the year. Some parks even host the local shop and the pub, facilities that would otherwise have been lost
altogether. Many of the larger parks with swimming pools and activity
facilities make these available to their local community as well as holidaymakers. And let’s not forget that holiday
parks pay considerable sums in business rates and employ lots of local people too.
True. Owner-occupied
caravans are purchased for personal use, but when they're not using their
caravan themselves, 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 in order to help sustain the holiday park and its facilities, whilst
providing commercial certainty at the start of each year with a known level of
annual pitch fee income. If nothing else this business format reduces 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.
The issue is
this. Money to make discretionary spending of this kind is hard enough to come
by at the best of times, let alone in the midst of a world 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.
The initial
impact will be on caravan sales, which of course knocks-on directly into our
caravan manufacturing industry. Employment and revenues in that sector will immediately
be affected. That knocks-on further into such things as steel production and the wide range
of ancillary businesses, from fittings to fire blankets.
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 key. Park operators
unable to support their business through caravan sales will have less to re-invest
and cannot sustain pitch fees that reflect their investment. Slowly but surely a spiral of decline will commence that could be very hard
to recover from. We've seen the same thing in other industries over the years and
lessons just don’t seem to have been learnt.
The other real
worry is that this very traditional and UK-centric market is not immune to
being attracted away by other opportunities.
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 loss in
jobs and revenue that will be occasioned by this action.
I know this
industry well and have argued long and hard over 30 years to keep it alive in
the interests of both the UK and particularly our rural economies. I may be
biased, but I know what can and will happen if this apparently slight change in
stance is allowed to proceed.
The industry body
the British Holiday and Home Parks Association (BHHPA) are preparing their
response. www.bhhpa.org.uk
There has been much promotion of "staycations"
and encouragement to support UK plc by taking a break in this country; much to
the disappointment of U.K.'s budget airline industry perhaps, but anyway. I blogged
about the Governments new Tourism Policy last March (2011)
[1] Figures from BHHPA and NCC
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