§ Mr. R. B. Cant (Stoke-on-Trent, Central)
; I beg to move amendment No. 55, in page 6, line 11, leave out subsection (2) below ' and insert'subsections (2) and (3A) below '.
§ The Temporary Chairman (Mr. Michael English)
With this amendment it will be convenient to take Government amendments Nos. 57, 58 and 59, as well as amendment No. 56, in page 6, line 27, at end insert—' (3A) Where any vehicle is the subject of a hiring agreement on terms falling within the provisions of subsection (2) above and that hiring is a further hiring of a vehicle already the subject of a hiring agreement, subsection (2) above shall apply to the first hiring agreement as if the terms of that agreement were within the provision of subsection (2) above, and the first year allowances which shall be made by virtue of subsection (2) above shall he made accordingly '.
§ Mr. Cant
I listened to the right hon. Member for Down, South (Mr. Powell) with some interest. In a sense he almost held out a ray of hope, because he said that the list of amendments nowadays is very much like a racing card, and that an hon. Member whose amendment did not have the names of members of the Government associated with it could abandon all hope.
I notice that my amendments were linked with a number of Government amendments. Even though I do not fully understand my own amendments, I have drawn the conclusion that there is no particular relationship between what I am proposing and what the Government are proposing.
Had the Opposition carried on as the Government of the day, this whole question of leasing might have led to some quite exciting discussions in the Finance 210 Bill Committee. There is no doubt at all that this has become one of the growth points among our financial institutions. Figures of £2,000 billion or £3,000 billion are the amounts that are talked about. It has become respectable only because some very reputable names, such as the commercial banks and such household institutions as Tesco and Mothercare—searching hectically for tax shelter—are associated.
Had they continued as the Government of this country, anything that the Opposition would have done to close loopholes, and so on, is all water under the bridge. I rise only to put a point that has been made to me by people interested in this area. Although they do not object to the clause as a whole, it would appear that there is something of an anomaly implicit in it, in the sense that where cars are bought for leasing—that is, long-term—the capital allowance is reduced to 25 per cent. per annum, but where cars are bought for short-term hire, the first-year allowance remains at 100 per cent.
A short-term car hire business must finance its fleet of cars in some way. In fact, many such businesses finance their fleet by leasing. As the clause now stands, such businesses will be at a competitive disadvantage against those firms that choose another method of finance, such as purchase financed by loan, for they will lose the 100 per cent. first-year allowances, whereas their competitors will not.
In all cases where the actual use of the car is short-term hire, there should be 100 per cent. first-year allowances, even in those cases where the car hire firm does not own its own cars but leases them. To put it more popularly, it would seem that it is legitimate to look through the long-term lease and see the short-term hire. If these amendments were made, car-hire firms would be able to compete on equal terms, regardless of the method of finance.
That is the main burden of the argument behind these two amendments. I hope that I have convinced the Minister. I have listened to earlier debates on perhaps rather more important and emotional social problems. I have not noticed the Minister yield, but in this rather more esoteric atmosphere of finance, 211 about which he is much more knowledgeable as well as happier in discussing, perhaps he will respond favourably on this occasion at this late hour.
§ 12.15 a.m.
§ Mr. Geoffrey Dodsworth (Hertfordshire, South-West)
I was at one time chairman of the organisation that has helped draft some of the amendments, and I believe that the Government amendments might well meet the points raised by the hon. Member for Stoke-on-Trent, Central (Mr. Cant).
The object of the exercise is to maintain a balance between the provision of equipment based on loan or lease. That has been the historical perspective of repeated parts of past Finance Bills. The clause seeks to redress an imbalance and ensure that we look through the long-term lease to the short-term letting as the basis for the allowance.
As framed, the clause has the effect of changing the provisions of paragraph 12 of schedule 8 to the 1971 Finance Act. That deals with the treatment of rentals paid and provides for a disallowance of some of those rentals. The amendment to that schedule has an effect that was not intended when it was drafted. It cuts off a section of the short letting activity. It is a point for the Financial Secretary to consider in future correspondence and not for this debate, and it has only recently come to my attention.
§ Mr. Lawson
My hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth) is a former chairman of the Equipment Leasing Association. The matter that he raised has only now come to my attention, and if he cares to write to me I shall look into it.
It is a pity that the hon. Member for Stoke-on-Trent, Central (Mr. Cant) is surrounded on his side of the House by empty Benches, because for the first time in these debates an Opposition amendment has raised a good point. He is on to a winner. The clause is designed to correct a flaw in the capital allowance provisions which enabled expenditure on cars bought on long-term leasing to qualify for 100 per cent. first-year allowances instead of the 25 per cent. allowances 212 normally available for expenditure on business cars. That was clearly a loophole that we have closed with our amendments, and I am glad that my hon. Friend the Member for Hertfordshire, South-West agreed that it should be closed.
It was not intended that it should at the same time mean that expenditure on cars bought by a leasing company and leased to a taxi or short-term car hire business should no longer qualify for the 100 per cent. first-year allowances in the same way as expenditure on cars that are bought by a car hire business. My right hon. and learned Friend the Chancellor of the Exchequer has tabled amendments Nos. 57, 58 and 59 to meet that point. If I may say so, they do it slightly better than do the amendments drafted by the hon. Member for Stoke-on-Trent, Central. I congratulate him on his great acuity in spotting the flaw in the Bill, but perhaps he would care to withdraw amendments Nos. 55 and 56 and assist in the passage of the Government amendments.
§ Mr. Cant
I am rather taken aback by the Minister's reply but find it very acceptable, even though the hour is late, the press have gone to bed and my colleagues have departed. I shall be happy to withdraw my amendment. I am glad to hear that the Government amendments will meet the case. I therefore beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
Amendments made: No. 57 in page 6, line 14, after ' (a) ', insert
the following conditions are satisfied—(i).
§ No. 58, in page 6, line 17, leave out ' (b) ' and insert ' (ii) '
No. 59, in page 6, line 20, at end insert
(b) it is provided for hire to a person who will himself use it wholly or mainly for hire to, or the carriage of members of the public in the ordinary course of a trade and in a manner complying with the conditions specified in paragraph (a) above '.—[Mr. Lawson.]
§ Clause 14, as amended, ordered to stand part of the Bill.
§ Clause 15 ordered to stand part of the Bill.