§ I turn now to a point relating to motor cars. The 1961 Finance Act limits tax allowances for business cars to those appropriate to a car costing £2,000. This restriction, which I fully supported at the time, and which, in principle, seems to me justifiable, has in practice been more severe in its effects on top quality cars than had been expected. It is argued, for example, that a businessman can have three new cars costing £2,000 each in six years and get the full depreciation allowed, but that if he buys a car for about £6,000 and keeps it for six years he gets an allowance based only on £2,000.
§ I think that there is force in this contention. I am also concerned about the position of the Rolls-Royce car and other quality British cars, whose prestige has a great significance for British engineering exports throughout the world. I therefore propose to introduce a new system whereby the allowance for a car in the first year, when it qualifies, will be limited to £1,100, which is the present first year's limit for cars costing £2,000 and over. In succeeding years the allowances will be limited to a figure of £500. If and when the point is reached at which the allowance would be lower than £500, it will be given in full.
§ The broad effect will be to restrict the allowances for expensive cars in the early years, but the restriction will diminish as time goes by, and the businessman who keeps his £6,000 car for eight years will, in the end, have, broadly, his full depreciation allowed. But it will no longer be possible, as it was before 1961, to get tax relief straight away on over half the cost of these expensive cars. I think that this scheme will preserve the basic 463 purpose of my predecessor's original proposals, but will remove a real anomaly.