§ Sir William Clark
I beg to move amendment No. 170, in page 43, line 1, at beginning insert:'Subject to subsection (3A) below'.
Mr. Deputy Speaker
With this it will be convenient to take the following amendments:
No. 171, in page 43, line 25, at end insert:'(3A) A television receiver or video system is used for a qualifying purpose when it is leased to a lessee who uses it for domestic purposes and in this subsection "video system" means any electronic equipment which is designed to transmit visual programmes or information through a television set.'.No. 172, in clause 71, page 53, line 20, leave out subsection (5).
Government amendments Nos. 133 and 134.
Amendment No. 173, in schedule 1, page 131, line 37, leave out Part II.
1818 Government amendments Nos. 135 to 138.
§ Sir William Clark
I am grateful to my hon. and learned Friend for taking the point made in Committee upstairs with regard to 100 per cent. capital allowances for television rentals. The television rental industry, in which I have no vested interest, is a major part of, and helps, our manufacturing industry. Of all the sets in use under rental terms, about 93 per cent. are made in the United Kingdom and only 7 per cent. abroad. Where sets are bought by the general public, 40 per cent. are foreign. In those circumstances, it is incumbent upon the Government not to do anything that might damage the television industry.
The Government have changed their mind with regard to the 100 per cent. first-year allowance. In television rentals the phasing down has been put off for two years, and for Prestel it has been put off for four years. If it is logical—I agree that it is—to put off the phasing down of the 100 per cent. first-year allowance for television sets, it is surely logical for video and Teletext.
I cannot understand why the Revenue differentiates between the equipment when it comes from the same industry. I hope that the Government will re-examine the position to see whether we can include video and Teletext. This is an important industry. We must give it all possible support. All that the industry asks is that if an assembly line is developed for video or Teletext, the products should be entitled to the 100 per cent. first-year allowance.
§ Mr. Nicholas Baker (Dorset, North)
I wish to refer to a type of leasing which is ignored not only in the clause but in the amendment. The purpose of the clause is to restrict allowances unless the machinery or plant is leased to a genuine trader. I understand the purpose of excluding the foreign-to-foreign leases which, rightly, are subject to considerable criticism.
The clause excludes allowances for the export leasing of goods manufactured in the United Kingdom which could have serious implications for a form of trading which companies are developing and about which I have corresponded with the Minister of State. I refer to leases backed by the Export Credits Guarantee 1819 Department. I do not intend to describe in detail the advantages that companies manufacturing in the United Kingdom have when practising that form of trading. It is not to be confused with other types of foreign leasing. Indeed, it does not have any of the objectionable features that foreign-to-foreign leasing has.
The value of contracts structured in that way is not large. The ECGD says that it has underwritten between £30 million and £40 million worth of such business in the last two years. The potential for export and bona fide export trade is substantial. Even though the Civil Service has not come across this form of trading much in the past, I urge the Minister of State not to overlook it now but to reconsider it for the benefit of the export trade.
§ Mr. Peter Rees
My hon. Friend the Member for Croydon, South (Sir W. Clark) referred to a case which we discussed upstairs. We recognise how important it is not to damage the television industry. Originally we were sensitive to the issue because we allowed a transitional period for the phasing out of additional allowances. In deference to the important arguments advanced by my hon. Friend and other hon. Members in Committee, and representations from outside, we have extended the transitional relief by a further two years in the case of television sets and by a further four years in the case of Prestel and Teletext.
My hon. Friend pressed me to say why we should exclude video equipment and Teletext. These are fine matters. The conception of the initial allowances was for the re-equipment of British industry. Television sets, video equipment and Teletext do not fall into that category. We are anxious to allow the industry sufficient time to adjust to the altered situation which would be created by the phasing-out of the allowances. Not a great deal of investment has been made in the production of video equipment so far and we did not feel that there was a strong case for allowing a longer period of adjustment. That is why such equipment is not dealt with on the same favourable basis.
My hon. Friend the Member for Dorset, North (Mr. Baker) raised a matter which is more properly related 1820 to amendment No. 147, which is not selected for debate. However, the matter is important and we discussed it in Committee. This Government, like previous Administrations, are anxious to ensure that export industries are not prejudiced. I am not persuaded that capital allowance is the proper way to deal with the problem. If we were too lavish and unthinking we should be in breach of some of our obligations under European Community.
Initial allowances were introduced to encourage British industry to re-equip and produce. They were not designed to encourage exporting. The scheme has been extended—I do not say abused—by a series of anomalies into a range of areas for which they were not intended. As a result we were compelled to rethink the scope of initial allowances. We were compelled to consider the question of individuals who were not directly involved in a true commercial sense in the provision of equipment and to decide how far they should be entitled to set capital allowances against the equipment that they bought for hiring. These matters are not central to the conception of the initial allowance. If there are to be benefits or reliefs for exports they should not come through capital allowances.
I hope that my hon. Friend the Member for Croydon, South will agree that we have done ample justice to the case that he so ably deployed in Committee and which he has continued to champion inside and outside the House, by tabling amendments Nos. 133 to 138. I commend the amendments to the House because they extend by a considerable degree—by two years in the case of television equipment and by four years in the case of Teletext and Prestel—the transitional period before the phasing out of the initial allowances, which was the original intention of the provisions.
§ Sir William Clark
I am grateful for that reply. The House is grateful for the concession in the form of the 100 per cent. first-year allowance. However, I do not accept my hon. and learned Friend's argument about the video production. We are talking of new equipment. If an assembly line is put down what happens will be determined when the equipment is leased. I hope that my hon. and learned Friend will not close his mind.
1821 I thank my hon. and learned Friend for the courteous way in which he received representatives from the television industry. They were delighted that they were given some concession by the Government.
I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Amendment proposed: No. 120, in page 43, line 9, leave out from 'for' to 'or' in line 16 and insert 'short-term leasing'.—[Mr. Peter Rees.]
Mr. Deputy Speaker
With this it will be convenient to discuss Government amendments Nos. 121, 122, 123, 124 and amendment No. 174, in clause 72, page 53, line 37, at end insert'except that the provision of plant and machinery incidental to the provision of a service shall not be considered to constitute leasing or hi ring for those provisions'.
§ Mr. Nicholas Winterton (Macclesfield)
It is not often that one can come to the House and thank the Government for doing something about a particular industry. On this occasion I am doing just that.
I declare straight away my position as parliamentary adviser to the Contractors Plant Association. I have been involved with the industry for many years. The plant hire industry was gravely concerned when the Bill was published and made strong representations to the Government about the effect that its provisions would have upon the industry. As drafted, the Bill would equate hiring with leasing, but there is a great difference between hiring and leasing. As a result the proposed legislation on leasing would have removed, or reduced, the 100 per cent. first year capital allowance to firms which hired or leased plant or equipment to non-qualifying bodies for periods normally exceeding 30 days or exceeding 90 days in any one year to the same client. By non-qualifying companies I mean non taxpaying bodies such as local authorities and certain overseas companies.
Had the provisions in clauses 60 to 67 become the law of the land, they would, when applied to plant hire, at the very least have required extremely complicated additional records to be kept for tax purposes. Different rates of hire would need to be charged, depending on the tax 1822 status of the client or on the circumstances.
The Contractors Plant Association and other bodies related to the construction industry, which is under severe pressure at this time, have made strong representations to the Government.
The CPA in particular considered that if the proposals had become law they would, at worst, have saddled the plant hire industry with a near-impossible situation, whereby it would be required to differentiate between various items of plant, various kinds of client and various periods of hire. The consequences would also have been painful for certain firms over the next year or two in relation to cash flow and the budgets already prepared on the basis of the 100 per cent. first-year capital allowance.
I pay tribute to my hon. and learned Friend the Minister of State, who responded quickly and readily to the representations which I and other hon. Members made to him and which the industry, through its various commercial organisations, not least the CPA, made direct to the Treasury. The response has been such that the Government amendments meet virtually everything that the industry requires, and the industry is grateful for that.
It is clear that the Government have taken on board the unique position of the plant hire industry. That position is not matched in any other country in the EEC and these Government amendments will resolve the problems facing the industry. Therefore, on behalf of the industry I thank the Minister and the Treasury officials for so readily and kindly meeting the justified criticisms that were brought to their attention by the industry.
§ Sir William Clark
The amendment in my name is coupled with the amendments under discussion. I wish to make one point, which is that in Committee I raised the matter of the provision of machinery used in factories and offices for the purposes of hygiene, safety and health. That type of machinery supplies linen and certain types of work wear. I asked my hon. and learned Friend whether the phasing down of the 100 per cent. capital allowance applied to that kind of machinery. My hon. and learned Friend will recollect that he said that the matter had not been brought to his attention before but that he would look into it.
1823 Such machines, although they may be leased to a company are really of minor importance. What matters is the service provided by the machines, such as the replacement of towels and work wear. In those circumstances I should have thought that the phasing down of the 100 per cent. capital allowance should not apply to that kind of machine. I hope that my hon. and learned Friend will say something about that.
§ Mr. Anthony Grant (Harrow, Central)
The Association of British Launderers and Cleaners has its headquarters in my constituency and is particularly concerned about this matter. The association was delighted when my hon. and learned Friend the Minister of State said that he was glad that the point had been drawn to his attention. He said in Committee that he had undertaken to introduce on Report an amendment to deal with short-term hire and that he hoped to be able to do ample justice to the important hygienic point that had been brought to his attention by my hon. Friend the Member for Croydon, South (Sir W. Clark).
On that basis the association had hoped to hear something to its advantage and is extremely disappointed that the Treasury does not seem to have taken the point on board. I stress that the issue is important for two reasons. The character of the laundry industry has changed considerably over recent years. It has become much more sophisticated and technological. Therefore, the matter is of increasing importance to it. As it becomes increasingly necessary for the National Health Service to finance itself by better use of its own resources, launderers undertake about 10 per cent. of laundry work in the NHS. The industry confidently expects that it will be able to undertake a greater proportion of that work and for that reason this matter has become more important to the industry and to the NHS, and I hope that my hon. and learned Friend will consider the point favourably.
I appear in sackcloth and ashes because eight years ago when a similar point came up on behalf of the then Government I had to resist the powerful case made by the launderers. I have reread the debates of that time and I find that what I said was wholly unconvincing.
§ Mr. Peter Rees
We have had a short and extremely graceful debate. It was graceful for the way in which my hon. Friends made their contributions. I was particularly touched and grateful to my hon. Friend the Member for Macclesfield (Mr. Winterton) for recognising what we have endeavoured to do to correct what was, perhaps, an over-stringent initial approach to the problem of short-term hire. I know that that particularly affected the plant hire industry. I also know that my hon. Friend is much concerned with the issue both in his capacity as a Member of the House and as a consultant to the industry. He brings considerable expertise to bear on the problem and we are grateful to him for drawing our attention to the provisions which were drawn too tightly, as we now recognise.
It is in response to the points made in Committee, particularly by my hon. Friend for Croydon, South (Sir W. Clark) and the subsequent representations made by my hon. Friend the Member for Macclesfield, that we hope that we have struck the right balance. We are reassured to hear my hon. Friend's observations on this particular point.
I turn to the more specialised points made by my hon. Friend the Member for Croydon, South and my hon. Friend the Member for Harrow, Central (Mr. Grant). My hon. Friend the Member for Harrow, Central says that he appears in sackcloth and ashes. If I may say so, they are sackcloth and ashes of a particularly elegant kind. We welcome him to our discussion of this somewhat arcane subject.
My hon. Friend the Member for Croydon, South did draw the matter to my atention for the first time. We believed that we had reviewed every possible industry and area of commercial endeavour that might be affected. It shows that one's consultations can be entirely comprehensive. We have looked at this matter again and have consulted the industries which my hon. Friends eloquently championed. The towels are the most expensive element of the expenditure, and under the provisions as we have now relaxed them they will benefit from the initial allowance. However, there is a second category of expenditure, which consists of towel holders, soap dispensers and other such items which are perhaps 1825 supplied to non-qualifying lessees. I admit that it is most unlikely that they will qualify for 100 per cent. first year allowances.
However, we understood from our consultations with the laundry interests concerned that the expenditure is fairly marginal in relation to the main expenditure, which is the provision of linen garments, and so on. So much is that the case that the association with which we have primarily had consultation told us that it might consider whether in future such items might be given away to its members' customers rather than hired to them. That suggested to us that this issue was not one of great moment to them.
I hope, therefore, that on reconsideration we shall be found to have done justice to this matter. I hope that my hon. Friend will recognise that the greater part of the expenditure—that on towels, special clothing, and so on—will still be covered by the initial allowance. I hope that my hon. Friend the Member for Croydon, South will feel able not to press ahead with amendment No. 174.
§ Amendment agreed to.
Amendment made: No. 121, in page 43, line 17, leave out
'in the manner mentioned in paragraph (b) above' and insert 'for short-term leasing'.—[Mr. Peter Rees.]
§ Mr. John Browne (Winchester)
I beg to move amendment No. 107, in page 43, line 22, at end insert'or (e) it is leased to a lessee other than a local authority and is a machine constructed or adapted to supply to persons eitherI accept the general aims of clause 63, but as presently drafted it places an undue burden upon suppliers of fruit machines, juke boxes, video machines and pool tables. I personally have no interest in this industry, but the manufacturers of such machines include members of the British Amusement Catering Trades Association, the members of which employ about 20,000 people.
- (i) goods, or
- (ii) services within the meaning of section 6(2)(b) of the Finance Act 1977: and the use of the machine requires the insertion into a slot or other aperture in the machine of one or more coins or tokens.'.
1826 These companies supply the machines that I have described to a market in which the location of each machine in terms of the owner changes every two years or less. My hon. Friends the Members for Macclesfield (Mr. Winterton), Croydon, South (Sir W. Clark) and Harrow, Central (Mr. Grant) have explained the general arguments as they apply to other industries. However, I draw attention to a particular case because of the rapid change of ownership of the machines concerned. Therefore, I believe that the discrimination in the clause between qualifying and non-qualifying companies places an undue strain in terms of overhead costs on the suppliers of the machines, first, in identifying the type of client, secondly, in recording every movement of the machines in the first four years after their initial sale, and, thirdly, in arranging for the immediate repayment of the capital allowance should such a machine pass into non-qualifying hands within the four-year period.
That overhead is undue in terms of the waste arising from paper work and time, particularly management time. It is therefore against our basic Conservative philosophy of reducing such a burden. I ask my hon. and learned Friend the Minister of State to overcome the problem by accepting the amendment.
§ Mr. Peter Rees
I understand that my hon. Friend the Member for Winchester (Mr. Browne) tabled his amendment on the day that certain Government amendments were tabled. The Government amendments were designed to liberalise the terms of short-term leasing. On reflection, I hope that they will cover at least some of the points raised by my hon. Friend.
We did not apply ourselves particularly to the range of products that my hon. Friend has in mind, not through any value judgment on the ground that we do not feel that they make any contribution to the life of our society—because they probably do—but because, on the whole, we suspected that they were the kind of products that were leased to a person who would not in his own right have been entitled to that range of capital allowances.
The underlying concept of the first-year allowances was to encourage British industry to equip. Irrespective of 1827 whether my hon. Friend accepts that concept, he will understand that in logic, that being the basis, there was no case for extending the allowances to the range of products that he had in mind. Since then I have had occasion to consider in more detail the point that he has raised. I suspect that a considerable number of members of BACTA may well be able to take advantage, under the new terms governing short-term leasing, of the new allowances granted on that basis.
It may be that we did not liberalise the provision with those products in mind, but it is an ill wind that blows nobody any good and the change may carry a few advantages for the members of the organisation that my hon. Friend has in mind.
I cannot advise the House to accept my hon. Friend's amendment, and I therefore hope that he will obtain comfort from the fact that some of the people for whom he is expressing concern will gain advantage from what we have done. If there are any technical points that my hon. Friend would like to raise after reconsidering the matter I shall be delighted to try to respond to him in correspondence. I hope that he will not feel obliged to press the amendment to a Division.
§ Mr. John Browne
I thank my hon. and learned Friend for his reply. If these arrangements do not prove satisfactory, will he be prepared to allow the suppliers the same transitional allowance as it at present granted to television rental companies? I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
Amendments made: No. 122, in page 43, line 22, at end insert—
'(2A) In subsection (2)(b) and (c) above "short-term leasing" means leasing the machinery or plant in such a manner—
§ No. 123, in page 43, line 23, leave out '(2)(b)' and insert '(2A)'.
No. 124, in page 43, line 25, at end insert:
'and where any machinery or plant is leased as one of a number of items which form part of a pool of items of the same or a similar description and are not separately identifiable all the items in the pool may be treated as used for short-term leasing within the meaning of that subsection if substantially the whole of the items in the pool are so used.'.—[Mr. Peter Rees.]
§ Sir Graham Page
I beg to move amendment No. 62, in page 43, line 41, at end insert 'and to containers'.
§ Mr. Deputy Speaker (Mr. Bernard Weatherill)
With this we may also take Government amendment No. 125.
§ Sir Graham Page
In discussing the previous amendments we have heard about the nature of the clause. It excludes the 100 per cent. first year allowance of expenditure on the provision of machinery or plant for leasing unless the machinery or plant will be used for a qualifying purpose. The qualifying purpose is defined in subsection (4) in connection with a ship. It says that the ship is used for a qualifying purposewhen it is let on charter in the course of a trade … operating ships.The containers used on ships are now so much a part of ships that they should be treated the same as ships. There is a considerable trade at present in the leasing of containers. We discussed this matter in Committee. My amendment is a simple one. The Government amendment wraps the issue up very neatly and, having explained my intention, I am most happy to accept it and to thank my hon. and learned Friend for putting it on the Order Paper after our discussion in Committee.
§ Mr. Peter Rees
I am grateful to my right hon. Friend the Member for Crosby (Sir G. Page) for his remarks. To him must go the credit for having focused the attention of the Committee upstairs on the problems of containers—the importance of which to the British economy and world trade cannot be overstressed. If his keen eye is satisfied with the 1829 extended amendment No. 125, I hope that the House will be equally satisfied. I commend it to the House.
§ Mr. John Garrett (Norwich, South)
I am pleased that the Government have extended relief to container leasing. As the Minister knows, we asked in Committee that that should be done. We debated at some length the subject of container leasing, but we received a dusty answer. In and around my constituency 600 jobs have been lost in container manufacturing and allied trades since the Bill was introduced. I am pleased that this measure of assistance, for which we and others in Committee asked, has been granted.
§ Amendment, by leave, withdrawn.
Amendment made: No. 125, in page 43, line 41, at end insert—
'(5A) Without prejudice to subsection (2) above, a transport container is also used for a qualifying purpose at any time when it is leased in the course of a trade which is carried on by a person who is resident in the United Kingdom or who carries on the trade there if—
§ Mr. Peter Rees
I beg to move amendment No. 126, in page 44, line 22, at end insert—'(8A) This section does not preclude the making of a first-year allowance in respect of expenditure on the provision of machinery or plant if it is fixed to a building or land of which the person who incurs the expenditure is the lessor and the circumstances are such that a transfer of his interest in the building or land would operate to transfer his interest in the machinery or plant; and so much of the proviso to section 48(4) of the said Act of 1971 as relates to section 74(3) of the said Act of 1968 (restriction of relief for leased asset not used for trade) shall not apply to any allowance in respect of such expenditure.'.
§ Mr. Deputy Speaker
With this we may take amendment No. 65, in clause 72, page 54, line 2, at end insert—'(7) The foregoing provisions of this Chapter shall not apply to machinery and plant attached to land and forming part of a lease of land.'.
§ Mr. Rees
I hope that the amendment covers the point raised by my hon. Friend the Member for Renfrewshire, East (Mr. Stewart) in amendment No. 65. It is in response to a point made in Committee. The amendment will exclude from the scope of the main leasing provisions machinery or plant that forms part of a let building. The main principles were amply debated in Committee. On that brief basis, I commend the amendment to the House.
§ Mr. Allan Stewart
I am grateful to my hon. and learned Friend for bringing forward Government amendment No. 126. It meets the point that I made in Committee. I give notice that I shall not move amendment No. 65.
§ Amendment agreed to.