Clause 14.—(CAPITAL ALLOWANCES FOR EXPENDITURE ON DREDGING.) (Hansard, 12 June 1956)

§ Mr. John Howard (Southampton, Test)
I beg to move, in page 14, line 44, after "dredging", to insert:

§ The Temporary Chairman
I suggest that with this Amendment it would be convenient to discuss the other two Amendments in the name of the hon. Member for Southampton, Test (Mr. J. Howard), in page 14, line 46, and page 15, line 41.

§ Mr. Howard
The purpose of the Amendments is to extend the scope of the Clause to cover all capital expenditure on dredging incurred by dock and harbour authorities. As the Clause stands, a number of harbour authorities may be adversely affected, none of them more than the Southampton Harbour Board, which is within my constituency and with whose case I propose to illustrate the purpose of the Amendments.
5.30 p.m.
If dredging expenditure is to rank for initial and annual allowances under the Income Tax Act, 1952, it is necessary to meet the very narrow requirements of Clause 14 (1), namely, that the capital expenditure on dredging must be for the benefit of vessels coming to, leaving or using any dock or other premises occupied by the person carrying out that capital expenditure. This narrow definition will exclude almost the whole of the £1 million which Southampton Harbour Board has spent on deepening the approach and main channels to the port of Southampton. I am sure that that was not the intention of my right hon. Friend.
Although Southampton Harbour Board is mainly charged with the duty of maintaining and improving the approach channels to the port of Southampton, the board itself occupies only a small dock and out of the 22 million tons of shipping which annually use the port of Southampton less than 5 per cent. of that tonnage uses the dock which is occupied by the Southampton Harbour Board. The rest use the British Transport Commission's main docks and the facilities at Fawley where tankers of 40,000 tons and more tie up at the oil refinery jetties.
290 The small dock is principally used by certain pleasure vessels and by small craft plying between Southampton and the Isle of Wight. They can be said to be the only vessels coming to, leaving or using the dock owned by the Southampton Harbour Board. For those reasons it can hardly be contended that expenditure on dredging and deepening the approach channel to enable the "Queen Mary, "the "Queen Elizabeth" and other large passenger and cargo vessels to reach Southampton docks, and to enable the tankers to move up the channel to the jetties at Fawley, is for the benefit of these small vessels using the Southampton Harbour Board dock.
It is reasonable to suppose, therefore, that capital expenditure on dredging, which is incidentally responsible for making Southampton second only to London in the tonnage using the port annually, does not fall within Clause 14 (1). The Amendments would rectify that position and would enable the Southampton Harbour Board, and any other harbour authority similarly placed, to obtain tax relief in two ways. First, the board would obtain the initial allowance on all capital expenditure on dredging incurred in this fiscal year and henceforward. Secondly, it would obtain the annual allowance of one-fiftieth of all capital expenditure under the heading of dredging, with certain limitations in respect of capital expenditure already incurred.
The last provision is the most important from the point of view of the Southampton Harbour Board. If the Amendment is carried, the Board will be allowed to claim an annual amount of one-fiftieth from 1956 onwards on expenditure incurred already, and it can be claimed for the balance of a period of fifty years commencing on the date on which the expediture first appeared in the balance sheet of the harbour authority.
I should like to illustrate this point. This is a particularly valuable concession in the case of the authority in my constituency. A sum of £650,000 has been spent since the war on harbour improvements. Thus expenditure incurred immediately after the war, say ten years ago, will secure an annual allowance of one-fiftieth over the unexpired portion of the fifty years for which the annual allowances are available, namely forty years. Any later expenditure within the 291 post-war years will rank for allowance for a period of forty-one to forty-nine years from 1956-57. In the ten years immediately preceding the war, over £300,000 was spent by the harbour board on similar purposes in extending and improving the channel. Again, this allowance of one-fiftieth will be granted annually for periods of roughly twenty-three to twenty-seven years from 1956–57. Therefore, on the average, about half of that expenditure of £300,000 will rank for tax allowance. It is not putting it too highly to say that if the Amendment is accepted this very important concession will enable the harbour board to avoid putting up its harbour dues. Expenditure and costs have been rising and unless the concession is granted, it might be necessary to raise the dues.
The Chancellor of the Exchequer has already recognised the importance of the shipping industry by continuing the investment allowances upon new ships, and I am sure that it was his intention to secure that all capital expenditure on the improvement of harbours would rank for allowance under Clause 14. As drafted, the Clause does not seem to cover the case of Southampton Harbour Board and it may be the cases of other harbour authorities. Therefore, I hope that, in view of their importance, the Amendments will be considered favourably.

§ The Financial Secretary to the Treasury (Mr. Henry Brooke)
I should like to congratulate my hon. Friend the Member for Southampton, Test (Mr. J. Howard) on the clarity with which he has explained to the Committee the highly technical point which his Amendments raise. I can assure him that my right hon. Friend the Chancellor of the Exchequer, when he presented the Bill, had no desire to discriminate against the great port of Southampton or, indeed, against any other port which was similarly placed.
The point at issue is that the Clause as it stands is not wide enough to cover expenditure on dredging incurred by a harbour authority which does not itself occupy a dock that can be said to benefit from the dredging. My hon. Friend, who represents one part of the City of Southampton, has spotted and drawn to the attention of the Committee the fact that owing to the precise wording of the 292 Clause it would not be possible for Southampton to benefit, because the main docks at Southampton are owned by the British Transport Commission, and the Southampton harbour authority, which does the dredging, owns only one small dock and it could hardly be said that the dredging is carried on for the benefit of the vessels which use that small dock. There may well be other ports where the same situation arises.
I cannot say for certain whether Southampton is unique in this respect, but I should like to assure my hon. Friend that my right hon. Friend is anxious that the Clause shall be drafted so that it will benefit harbour authorities in the position in which Southampton finds itself just as much as it will benefit other harbour authorities which own the main docks and can thereby gain the benefit of the Clause. I hope, therefore, that the whole Committee will agree with me that it will be an act of justice if we accept the three Amendments in the name of my hon. Friend.

§ Mr. G. R Mitchison (Kettering)
I wonder if the right hon. Gentleman would answer a question which puzzles me a little. The Amendment says: … the trade consists of the maintenance or improvement of the navigation of a harbour, estuary or waterway … In the case that was put before us the harbour authority, apparently, does not own the docks. What is the taxable income of the harbour authority of Southampton in respect of that trade? I am sure there is an answer. I find it a little troubling. It clearly, of course, is not dock receipts. It would not be even if the authority owned the harbour—it might or it might not, but in this case the authority does not own the harbour. Whence does it get its funds? Upon what income is it taxed?

§ Mr. Brooke
I am advised that the Southampton Harbour Board is taxed as carrying on a trade. I think that both I and my hon. Friend the Member for Southampton, Test mentioned that the harbour board does own one dock as a commercial proposition.

§ Mr. Mitchison
So that the position is that the dredging of the estuary and the harbour, and so on, is incurred for the common benefit but the Southampton harbour authority is taxed on that solely 293 because it owns a dock which is not part of the trade, as I understand it, for this purpose. It seems rather rough on a public authority that that should be taken into account against it, as it were, which it does in its capacity as a public authority, simply because it happens to own one out of a number of docks, the majority, at any rate, of which belong to other people, including British Railways.

§ Mr. Brooke
I addressed myself to the matter in general. I am not fully and in detail informed about the source of the revenue of the Southampton Harbour Board. There is no doubt, however, that at present no allowance can be claimed by the harbour authority, and I hope that the hon. and learned Gentleman will agree that it is wise that we should give it this advantage. Maybe my hon. Friend the Member for Southampton, Test can supply further information in detail about the doings of the Southampton Harbour Board.

§ Mr. Mitchison
Let me assure the right hon. Gentleman at once that my anxiety was lest he had been over-taxing Southampton in the past in its capacity as a public authority. As he well knows, it is often very difficult to draw the line.

§ Mr. J. Howard
Perhaps I can help. A considerable amount of the board's income is derived from dues collected from all vessels entering the harbour, including those which pass through our approach channels into the main docks owned by the British Transport Commission.