Finance (No. 4) Bill

Alan Johnson Excerpts

Wednesday 18th April 2012 Commons Chamber

[Alan Johnson (Kingston upon Hull West and Hessle) (Lab)]

I join the hon. Member for Waveney (Peter Aldous) in supporting new clause 6, and I wish to make a few brief points.

First, on the anomaly issue, in the early ’70s a Conservative Chancellor looked at towable caravans, which are VATable, and residential caravans, which are not, and decided that so-called static caravans should be classified as residential property and therefore not be subject to VAT. In the ensuing 40 years, every Chancellor, both Labour and Conservative, has made the same decision.

In the global recession of 2008, the caravan industry was hit hard. In my neck of the woods, east Yorkshire, we know how difficult that was. I took a delegation to meet the well-known caravan user Lord Mandelson, to make the argument that the industry needed a bit of help from his Department—which was not at that time known as the Department for Business, Innovation and Skills. [Interruption.] Yes, yachts were his main form of holiday. In the entire history of the caravan industry, so great has been its feeling that it could survive independently without Government help that not a single official in the whole vast empire of that Department knew anything about it. Frankly, apart from a bit of tinkering around the edges of the car scrappage scheme, there was not much that we could do for the caravan industry. As a result, companies went bust, people went bankrupt and the supply chain was hit very hard.

Through its own efforts, however, the industry is now getting its head back above water. Atlas Leisure Homes in my constituency went into receivership in 2008 and lost 250 jobs. It has fought its way back and now employs 120 people in an area that has been badly hit by unemployment. Companies in the supply chain have had similar experiences. Meadley International Transport is involved in distribution. It is run by a father, his son and his daughter. He put in the whole of his pension and all his assets to get Meadley through the global downturn, and it, too, is now getting its head back above water.

This measure will destroy Atlas and Meadley. It will destroy small businesses across the country. It will destroy an industry that is almost the last purely British success story in the manufacturing sector. Some 95% of UK caravans are made in this region. In 2008 and 2009, people did not decide not to buy a caravan; they deferred that purchase. If those companies had gone out of business, German and Dutch firms would now be prospering from the fact that a market is developing again.

[Karl Turner (Kingston upon Hull East) (Lab)]

As my right hon. Friend will know, I have three such manufacturers in my constituency. One of the biggest is Willerby Holiday Homes. It is based in east Hull and employs 700 people. I spoke to its chief executive today. He tells me the firm has been operating a three-day week since the banking crash in 2007, but he hopes it may return to full-time work in the next few months. He says it is ridiculous to expect that to be able to happen if this VAT measure is introduced.

[Alan Johnson]

My hon. Friend raises a crucial point. I say the following to those on the Treasury Bench: this was meant to be a Budget for manufacturing; it was meant to be a Budget for growth in the British economy; it was meant to be a Budget that ended some of the anomalies in the north-south divide.

How can we go ahead with this measure, given that hon. Members in all parts of the House know the effect it will have on jobs and British manufacturing, and know that the savings of about £40 million to £45 million set out in the Treasury’s own document will be far exceeded by the costs in unemployment, waste and redundancies throughout the country? How can the Treasury possibly decide, after 40 years of looking at this, that this is the year in which it needs to put the price of caravans up? Again, its own figures show that that will lead to a 30% reduction in demand, although the National Caravan Council says that the real figure will be more like 75% or 80%. I believe Treasury officials now understand that their own analysis was deeply flawed.

[Diana Johnson (Kingston upon Hull North) (Lab)]

As a Hull MP, I wish to stress that we are facing job losses in so many private sector businesses, from BAE Systems, Comet and P&O to many others across the city. It sounds as if we may end up with thousands more job losses as a result of this measure, and we really cannot afford to see that happen in our city.

[Alan Johnson]

My hon. Friend is right because, on the Treasury’s assessment, more than 1,000 jobs are going to be lost. Some 90% of this manufacturing industry is based in east Yorkshire. I say to those on the Treasury Bench that this is not an industry that has asked for help from the Government—indeed, in 2008-09, it had to pull itself up by its bootstraps. Having done that, this is not a question of its asking the Government for any help; it is about asking the Treasury and the Government not to inflict on that industry a possible death blow to a great British manufacturing success story.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

It is my pleasure to follow the other speakers. Like all those who have spoken so far, apart from those on the Front Bench, I shall speak to new clause 6 and the proposal that the Finance Bill should set out that this House will not approve, in a future statutory instrument, the imposition of VAT on static caravans. So much has already been said, but I must point out that my constituency contains ABI, a major manufacturer in the heart of Beverley; companies in the immediate area that are part of the supply chain; and a series of parks along the Holderness coast that depend for their profits on the sales of static homes, as we discover when we speak to the owners.

The Treasury’s assessment of the impact of introducing the VAT is that there would be a 30% reduction in sales. When we think about the employers in the various constituencies in Hull, in my constituency and in those of my right hon. Friends the Members for Haltemprice and Howden (Mr Davis) and for East Yorkshire (Mr Knight), we find that so many companies are involved. More than 90% of the production of static caravans in the UK is concentrated in east Yorkshire and, as has just been said, so successful is this industry in the UK that nearly all the caravans that are bought and installed in the UK are built there. So my constituency has a great concentration of all those who may suffer from a 30% reduction in demand—manufacturers and all the people who work in that area, suppliers, and the parks themselves.