Mobile homes: business and regulatory impact assessment

Options

The three common inflation indices in the UK were considered as possible bases for uprating pitch fees:

• RPI to continue
• A change from RPI to CPI
• A change from RPI to CPIH

More information on indices is available on the ONS website.^[11] It is acknowledged that any inflation index will be an imperfect measure for increases in the cost of maintaining mobile home sites. This is because they aim to measure economy-wide inflation or inflation across a wide range of goods and services, rather than just the factors specific to costs of maintaining those sites. The two alternatives considered (CPI and CPIH) both measure general price pressures facing consumers; therefore, using these indices would, similar to using the RPI, help ensure that pitch fees do not grow faster than the general price pressures faced by mobile homes tenants, while ensuring that the increases in costs likely to be experienced by site owners are recognised in pitch fees. A bespoke index was ruled out as requiring disproportionate resources given the size of the sector and information gathering requirements.

Sectors and Groups Affected

It is expected that the policy will:

• Directly positively affect residents of residential mobile home sites who have or will have pitch agreements under the 1983 Act, including some Gypsy/Travellers. As RPI is typically above CPI, pitch fees will not increase as fast as they would have done without the change. While much of the evidence available on mobile homes is dated, the EQIA found that older people, people with a disability and Gypsy/Travellers are more likely than the population as a whole to live in residential mobile homes and to be affected by poverty or be on a fixed income. As a result of the proposed changes, pitch fee increases will align with state pension and benefit income, which are uprated by CPI.
• Directly negatively affect the income of site owners and operators of private licenced residential mobile home sites. As RPI inflation is typically above CPI, the income of site owners and operators will not rise as fast as they would have otherwise. However, as RPI is no longer judged to be an effective measure of inflation, increases by CPI should better reflect actual consumer inflation. The arrangements for pitch fee uprating provide separately for pitch fee increases to reflect improvements to sites as a result of investment.
• The impact on local authorities is expected to be small. This is because of the small number of Gypsy/Traveller pitches currently operational (less than 400 across Scotland in approximately 20 local authorities^[12]) and because of the approach taken to rent setting by local authorities.

The Bill also proposes to adjust section 5 of the 1983 Act to remove references to gypsy and traveller sites that are no longer needed as a consequence of previous changes to the law in relation to these sites. This has no impact because it is a technical change to correct an out-dated cross reference in the definition of “protected site” and this change does not impact on businesses or local authorities.

Benefits of Options

Option 1 - Retail Prices Index to continue

RPI lost its status as a National Statistic in 2013 and the ONS discourage the use of RPI and consider it to be a poor measure of general inflation due to methodological issues. The high RPI rates during the cost of living crisis in 2023 contributed to significant increases in pitch fee levels which impacted on residents. The UK Government has confirmed that it will reform the measure of RPI from 2030, aligning the methodology with CPIH. It is only legally possible to do this from 2030 due to the maturity of the final specific index-linked gilt. For these reasons, we do not think that continuing with RPI as the basis for uprating pitch fees would be appropriate.

Option 2 - A change to Consumer Prices Index

CPI was the ONS headline measure of inflation until 2017 when it was replaced by CPIH. CPI is calculated in line with international standards set by the United Nation’s International Labour Organization. It is considered a more accurate measure of inflation than RPI. CPI is used by the Bank of England for inflation targeting and has a reliable track record as a National Statistic. The statistic is widely recognised and well understood by the public and is used in relation to uprating of state pension and other benefits. It will also be the basis for uprating pitch fees in England and in Wales, giving consistency for businesses that operate in more than one part of the UK.

Option 3 - A change to Consumer Prices Index with Housing Costs

CPIH is broadly consistent with CPI, but is a UK measure designed to better capture the costs of owning housing, including Council Tax. The housing costs included in CPIH do not include mortgage costs, as these are costs associated with purchasing a house. Instead, they cover costs of maintaining and living in a property. Official forecasts of CPIH are not available and it is therefore not commonly used for uprating. Forecasts are required to assess the cost of uprating over a longer time period than the immediate future and would make it easier for residents and site owners to plan ahead.

Based on this consideration the Scottish Government propose CPI as the most appropriate current measure for uprating pitch fees.