§ I announced last November major improvements in the capital allowances designed to encourage new investment in industry. The Finance Bill will put these into effect. They include, as the Committee is aware, increases in the investment allowances, substantial acceleration of the annual allowances for heavy plant, and a new tax deal for scientific research. For technical reasons this last item has a separate Resolution.
§ Taken together, these increased investment allowances and the new minimum rate of 15 per cent. for plant and 488 machinery will be of immense benefit to British industry. The depreciation allowances now available to British industry compare favourably with any of their competitors in the Western world. Effectively, 100 per cent. of the cost of plant and machinery can be written off in seven years and then there is still 30 per cent. to come.
§ In addition to these changes, which I announced last November, I propose now to make some further improvements. I will simplify the depreciation code by fixing only two higher annual rates for new plant and machinery, namely, 20 per cent. and 25 per cent., according to the expected life. Where plant already qualifies for more than 25 per cent, the existing higher rate will be preserved. This will both improve and simplify the position so far as plant and machinery is concerned.
§ Turning to new industrial buildings and structures, it has been represented to me that the present system of a 2 per cent. annual allowance corresponding to an assumed life of 50 years is unrealistic. I accept this argument and I propose, therefore, as regards expenditure on new industrial buildings becoming due and payable after 5th November last year, to double the annual rate from 2 per cent. to 4 per cent.
§ The cost to the Exchequer of all these changes is only £11 million this year, but it will rise to about £130 million by 1966–67. This is the measure of their importance to British industry.