Controversial caravan tax 'won't be revised'
MINISTERS have ruled out revising the controversial caravan tax – allaying fears that the 5 per cent tax rise would be used as a stepping stone for a larger hike in the future.
Treasury Minister David Gauke said the Government would not "return to the issue in any great hurry" after it was forced to back down on plans to impose a 20 per cent VAT on static caravans.
Mr Gauke made the claim after Brigg and Goole MP Andrew Percy called on the minister to give assurances to the industry that the Government would not attempt to increase the rate, which it agreed to reduce to 5 per cent, in the future.
Mr Percy said: "It is important to recognise there needs to be stability, so an assurance that the Government will not raise the rate in the future would be welcome, as would an undertaking that there will be an assessment of the rate after a year or two to see whether it has had any impact."
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Concerns have been raised about the impact of the tax rise after the Government admitted it could affect up to 2,500 businesses – with those in East Yorkshire expected to be worst hit.
But despite being criticised for failing to conduct a robust impact assessment into the change, the Minister said he did not expect the caravan tax to have a "significant impact" on the industry.
Mr Gauke told MPs: "The industry has welcomed the change to our policy.
"As we would expect, it does not anticipate the 5 per cent rate to have a significant impact on it.
"As far as the stability of the rate is concerned, the standard wording is to say that all decisions are for the Chancellor and all taxes are kept under review but I do not anticipate the Government will return to this issue in any great hurry."
Hull North MP Diana Johnson also challenged the Minister on the impact of the caravan tax, which she said would hit an already fragile industry.
She asked whether it was correct to assume the imposition of a 5 per cent tax rise would result in a quarter of the job losses anticipated by the 20 per cent rise, which would result in 1,500 job losses.
The Labour MP said: "The National Caravan Council has said the caravan industry is fragile after the problems it experienced in 2008.
"There would have been 6,000 job losses if the imposition of the 20 per cent rate had gone ahead.
"Am I right to assume that with the 5 per cent rate, the Treasury is working on the assumption that the impact will be a quarter of that number, which means 1,500 job losses?"
In response, the Minister said there is an "elasticity" of demand, which could fall by up to 5 per cent as a result of the changes.
Mr Gauke said: "There is then an elasticity of demand and the 5 per cent per cent rate might result in a 5 per cent reduction in demand but, of course, that involves various assumptions and some uncertainty.
"However, much of the industry does not think it will have a significant impact."
The amended caravan tax, which will impose 5 per cent VAT on static caravans, was approved by 311 votes to 230 – despite being opposed by Labour MPs.
The tax change will now come into effect next April.