CAPITAL ALLOWANCES BILL [Lords] (Hansard, 19 January 1968)

§ The Solicitor-General (Sir Arthur Irvine)
I beg to move, That the Bill be now read a Second time.
This Measure is pure consolidation and represents the existing law. It consolidates Parts X and XI of the Income Tax Act, 1952, with subsequent provisions relating to relief from Income Tax and Corporation Tax in respect of capital expenditure on business assets and on scientific research.
Perhaps I should refer to the boundary of consolidation as it has taken shape and form in this instance. The capital allowances provisions in the Income Tax Acts, in the Finance Acts and in relevant enactments are regarded as being a part of the Income Tax and Corporation Tax codes and law which is sufficiently self-contained to consolidate by 2159 itself. It is regarded, I think reasonably and fairly, as having that character. This is a self-contained subject and it is, we believe, useful to consolidate the laws dealing with it.
A Bill to consolidate capital allowances was introduced a year ago but, in that instance, the Joint Committee reported that it was not pure consolidation and that it should not proceed as a consolidation. Bill. The position now is that, by virtue of Section 21(4) of the Finance Act, 1967, the difficulties have been removed which then prevented the Committee from reporting that the Bill was pure consolidation. The present position is that the Joint Committee has reported this to be pure consolidation, representing the existing law. I therefore recommend the Bill to the House.

§ Mr. Graham Page (Crosby)
I do not on this occasion criticise the limitations of the Bill, because it covers a subject which can be conveniently put into one Measure. Indeed, one can say, from the size of the Bill, that a formidable area is covered. I do not criticise it if it is an instalment of consolidation of the whole area of Income Tax.
As the right hon. and learned Gentleman said, this is a second bite at the cherry. On the first occasion, in March last, the Joint Committee, considering the Consolidation Measure then before it, wished to make certain Amendments which would have made a substantial alteration in the law; and its powers do not, of course, extend to that. Now this has been done in the normal way, by the Finance Act, 1967—in particular by Section 21 of that Act—and, I say humbly, this is satisfactory.
It is satisfactory that the Government did not try to make new law by the procedure which this House applies to consolidation Bills, a procedure which precludes debate. Instead, the Government have followed the normal procedure, which provides us with a chance of debating the matter and discussing amending the law before it is put into a Consolidation Measure.
There are great benefits in tidying up the law quickly, in getting this Consolidation Measure through, but that must not be done by sacrificing an 2160 important constitutional principle, the principle that the House should have an opportunity to debate matters of new law or alterations in the law.
A compliment should be paid to the Joint Committee for forcing this issue. In its Report to Parliament there is a paragraph stating: Since the Committee considered the Capital Allowances Bill of the last Session, Amendments to the existing law contained in Section 21 of the Finance Act 1967 have removed the difficulties which then precluded the Committee from reporting that the Bill was pure consolidation. I was entertained to see the remarks of the noble Lord who is the Chairman of that Committee, when he proposed the introduction of that paragraph in the Report and said: It would improve our image, pointing out that we have really done rather well to make them amend the Act. The Committee did well and we have the result before us now.
Is the right hon. and learned Gentleman satisfied with the title of the Measure, "Capital Allowances Bill"? Chapter VI of it deals with Income Tax, and part of it is so headed. "Capital Allowances "as a title may be somewhat misleading. However, I agree that the Long Title tries to explain in what way it is restricted and I realise that Chapter VI is within Part X of the Income Tax Act, 1952, which this Measure seeks to consolidate. It might have been possible to think of a more comprehensive title a little less misleading.
The Long Title seeks to consolidate Parts X and XI of the Income Tax Act, 1952, but then goes on with the limitation but without the provisions of the said part X relating to patents or to agricultural estate management expenditure which is not capital expenditure. In Schedule 12, however, the Bill deals with those very items. Page 123 deals with maintenance relief for agricultural land, and half of page 124 deals with patents and amendments of that part of Part X of the 1952 Act. It then proceeds to another heading, Business or estate management expenditure. 2161 I cannot follow why the Long Title should state that the Bill excludes anything to do with patents and agricultural estate management expenditure, which truly comes into Part X of the 1952 Act but is not intended to be brought into the Bill, and then brings it in.
Thirdly, is the Solicitor-General satisfied that this is the right moment to consolidate? The Bill sets out certain specific allowances, not simply that the Government or the Minister may be able to set the rate of allowances, but percentages of certain assets or payments as allowances. Will the Bill be overtaken in the next few weeks by cuts which are required as a result of the economic crisis? Is the House perhaps wasting its time in dealing with this consolidation Bill at this stage when these capital allowances may be revised during the next few weeks as a result of the economic difficulties in which the country finds itself under the present Government?
Fourthly, I would like an assurance from the Solicitor-General that this is an instalment of the consolidation of the whole of the area of Income Tax covered by the Income Tax Act, 1952. That Act was a very satisfactory consolidation Measure. It has been of great assistance to those who have to practice in this subject, both in law and in accountancy, but over the period of 15 years it has become gradually out of date in its original form by reason of amendments again and again in Finance Acts.
It is, I am sure, agreed on both sides of the House that while one of the major tasks which Parliament should undertake is the simplification of our tax laws, consolidation is a useful preliminary to simplification. One then has something on which to work in a consolidation Measure. The waste of productive effort and the loss of productive time in trying to understand, let alone evade, the existing tax laws must, however, run into millions of man hours a year.
If the Bill is an instalment for making it simpler to understand the tax laws, to find out where they are and to appreciate them, it is a happy instalment and we shall look forward to the rest of the serial. As the law stands in the statutes, however, there is no doubt that it multiplies the tax burden. One not only pays cash in the tax but pays time in trying to sort out the law. This is a real brain 2162 drain on industry, commerce and professions which any form of consolidation of the tax law would help, but it does not go all the way by any means unless it is a consolidation of the whole of this area, as was done in 1952.
We want a repeat of the 1952 Act, bringing it up to date, consolidating the law and making the law easy to find. If the Bill is simply a chapter, I welcome it. If it is to stand on its own, it will not be very much use.

§ The Solicitor-General
It was suggested by the hon. Member for Crosby (Mr. Graham Page), with particular reference to the contents of Chapter VI of the Bill, that the title "Capital Allowances Bill" was not appropriate. It seems to me, and, I suggest, to the House, that it is an appropriate title. We have all had experience of far greater departures than one discovers here in the body of a Bill from what is regarded as broadly a convenient compendious title. I put it to the House that, taking one thing with another, the title "Capital Allowances Bill" is appropriate and. bearing all factors in mind, accurate in this instance.
Somewhat similar considerations apply to the hon. Member's observations concerning the Long Title and his point that the Long Title exempts provisions of the said Part X of the Income Tax Act, 1952, which Schedule 12 in some part incorporates. The same considerations apply there.
The question was asked whether this consolidation Bill was being brought before the House at the right time bearing in mind economic and other factors. I was asked whether the Bill might not be overtaken during the next few weeks by cuts and changes of different kinds. As to that line of inquiry, I would say that the whole valuable process of consolidation would be very much handicapped and made very spasmodic and haphazard if an attempt were made to harmonise it with shifting states of climate in any areas of policy, whether economic, financial or any other.
It might well happen that a considerable work of consolidation having been achieved in respect of a certain Measure, almost by chance changes in the law are made because of existing contemporary situations which make the consolidation 2163 almost immediately appear to be much less up to date than had been intended and desired. It is entirely theoretical and hypothetical that that may occur. That does not seem a good reason for checking or restraining the process of this very important work of consolidation.
The hon. Member asked whether this was an instalment consolidation of the Income Tax law. My answer is yes, it is. The intention is to consolidate the Income Tax law as a whole. I do not want there to be any misunderstanding arising from what I have just said. It is not the intention that this Capital Allowances Bill, when it becomes law, will at a later stage be as it were re-consolidated into a new consolidation Measure, but I do not think that is what the hon. Member had in mind. This is simply an instalment in a wider and broader process—which both sides of the House, I think, welcome —of consolidating the law in these complex and difficult fields.