Vince Cable laughed off a question on whether the Government lacks a credible industrial strategy yesterday, despite having made more U-turns in recent weeks than a boy racer in an empty car park.
While the pasty tax has grabbed the headlines a rise in VAT on static caravans is set to hit manufacturers and hurt British tourism. This coincides with a multimillion pound advertising campaign to promote Brits taking holidays in the UK, or ‘staycations.’
Both changes have now been reversed and static caravans will now be charged VAT at 5%, rather than the 20% put forward in the March budget by Chancellor George Osborne.
The tax hike would have added nearly £6,000 to the sale of an average caravan, which manufacturers would have to swallow and almost certainly have to add on to its prices.
The National Caravan Council predicted a severe drop in sales as a result of the tax. It claimed that the tax increase would result in 1,446 job losses in the manufacturing sector as a result, with over 95% of all static caravans sold in Britain being manufactured in the UK.
After all, who would want to pay more money or a caravan in rainy Wales than a hotel in the Seychelles (aside from enthusiasts)?
At a time when billions of pounds are being ploughed into schemes such as the Regional Growth Fund, of which the manufacturing sector has been core beneficiary, the decision to place a tax on caravans raises questions at to how much research goes into the Chancellor’s budget.
With over 90% of all caravans sold in the UK are made in Yorkshire – a region that has received strong support from the Regional Growth Fund – the tax change shows a distinct lack of vision and coordination.
A spokesperson for the National Caravan Council (NCC) said: “Figures in the Government’s impact study were underestimated. The Government didn’t consult with us beforehand, and as far as we’re aware, there was no consultation with anyone else either. The first we heard of the tax was when the budget was announced.”
Dr Cable said to The Manufacturer, “wouldn’t it be great if we all had perfect foresight?”
Wouldn’t it be great if the Government carried out research before creating policies and making tax changes?
Foresight is looking in both directions before crossing the road – this coalition government is jumping out in suicide fashion before quickly retreating to the curb.
The Government did extend the consultation period by two weeks from May 4 to 18. But while Vince Cable called this “intelligent government” for its ability to listen and reverse mistakes, there has been much time and money wasted lobbying and listening to process data that was readily available beforehand.
The NCC’s director-general, John Lally, aptly summed it up. “With a united voice, industry worked to prove to government that if people don’t buy caravans, a whole chain reaction is put in place, affecting a range of businesses, employment prospects in many deprived areas and last, but not least, British tourism receipts.”
Dr Cable is often lauded by manufacturers as a champion of industry within the coalition. The problem is that he is the only one.
Hampered by decisions such as this and Education Secretary Michael Gove’s devaluing of the Engineering Diploma from five GCSEs to just one, the wily Liberal Democrat is wheeled out into industry over and over again, often for awkward photocalls standing beside technicians and apprentices.
For a government that talks a lot about manufacturing, the Chancellor remains hidden from those who he should be speaking to in the real economy because of the Conservatives’ fear of putting a man devoid of the common touch in the public eye. Until this changes, Mr Osborne will continually fail to understand the impact of his decisions until the headlines of granny and pasty taxes haunt him into making U-turns.
While the Government spends large amounts advertising British holidays to keep money being spent within the UK economy, Osborne has his own “staycation” (it’s about five miles wide and in London). It seems that the Chancellor only ever emerges from his economic hole to speak to those that dug it… the banks.
It seems that manufacturers will have to listen to Vince Cable claim that this is an intelligent government while he writes letters saying the opposite, with a leaked document from the business secretary to the PM revealing his fears that the coalition “lacks a compelling vision” for industry in March.
He may laugh, but he must surely know that this is no laughing matter. Like a boy racer, the government is doing a doughnut while it has an economy reverse.