HC Deb 15 July 1981 vol 8 cc1318-38

Amendment made: No. 142, in page 62, line 25, at end insert— '(1A) A person other than a company may, in making a claim to an initial allowance at the rate applying by virtue of this section, require the initial allowance to be reduced to a specified amount; and a company may, by notice in writing given to the inspector not later than two years after the end of the chargeable period for which an initial allowance at that rate falls to be made, disclaim the allowance or require it to be reduced to a specified amount.'.—[Mr. Newton.]

1.30 am
Mr. Anthony Grant (Harrow, Central)

I beg to move amendment No. 144, in page 62, line 25, at end insert— '1(A) Paragraph 1 of the said Schedule 6 shall be further amended by substituting for the words "one-fifth" the words "30 per cent." . ' . The amendment was tabled by my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies), who may wish to take part in the debate later. It merits some debate and consideration. It is designed to give hotels the same increased benefits in terms of allowances as have been enjoyed by other industrial buildings.

There was a time when the Treasury took the view that hotels were such strange and curious animals that they could not be regarded in the same light as factories or warehouses. That view was sustained for a long time. I had some responsibility in Government for tourism and I had to do substantial battle with Treasury Ministers to try to persuade them that hotels had as big a contribution to make to our economy as did factories. I failed, but we have passed that point and it is accepted that hotels have a right to such allowances.

All that we are seeking to do is to provide that hotels should have an increase in the allowance which coincides with that given to the rest of industry. I understand that the cost of our modest amendment would be no more than about £3 million—my right hon. Friend the Financial Secretary will correct me if I am wrong—which is puny by any standard and represents only two or three days of subsidy to the British Steel Corporation or any of our other gigantic loss-making outfits.

The hotel and tourist industries are successes, and we should be encouraging and backing success in our economy. When we debated this matter while the Conservatives were in Opposition, the strongest supporters of the case made in the amendment included my right hon. Friend the Financial Secretary, my hon. Friend the Parliamentary Private Secretary to the Prime Minister and other distinguished right hon. and hon. Members. I hope that my right hon. Friend the Financial Secretary will reflect on that time when he put the case so clearly and lucidly and will agree that times have not changed. I hope that he will reply sympathetically to our proposal.

Mr. Robert Hicks (Bodmin)

The amendment, so ably moved by my hon. Friend the Member for Harrow, Central (Mr. Grant), is essentially about investment and jobs. I should have thought that these two items would be given top priority by the Government. I believe, in particular, that there is a need to maintain equity between industrial building allowances for the manufacturing sector and for the hotel industry. My right hon. and learned Friend the Chancellor of the Exchequer, in his Budget Statement, increased the building allowances for manufacturing from 50 per cent. to 75 per cent. The allowances for hotels remained at 20 per cent. This caused surprise and disappointment within the tourist industry.

The United Kingdom tourism industry should be given every encouragement. It earns over £4,000 million a year in foreign currency from the 14 million visitors to the country. It provides employment for 2 million people—a fact that should appeal to Opposition Members—representing 6 per cent. of the current work force of the United Kingdom.

An increase in the industrial building allowance for hotels would give a much-needed stimulus to investment at a critical period. It would provide additional employment not only in the building and construction industry but also in ancillary trades connected with the hotel industry—everything from the manufacture of carpets to the supply of cutlery and all that goes into a new hotel or the extension of existing premises. The British Tourist Authority estimates that by 1985 there will be 15 million visitors to this country, which means that additional bedrooms will be required.

An increase in the industrial building allowance to 50 per cent., I am told, would involve an immediate cost to the Treasury of £10 million. The cost, in terms of this amendment, would be £3⅓ million. My argument is that the immediate loss of revenue would be more than offset by subsequent savings and revenue to the Treasury. There would be a saving of unemployment benefit and increased revenue to the Treasury from taxation, VAT receipts and national insurance contributions as well as the overall multiplier effect.

There are also the regional implications. I represent a constituency in the West Country. In 1979, the last year for which figures are available, domestic tourists spent £650 million in the region. Overseas visitors contributed an additional £105 million. The net effect was that tourism contributed £250 million to the economy of the South-West and generated 200,000 jobs in an area of high unemployment.

Within the South-West region, the further west one goes, from Avon and Gloucester in the east to Devon and Cornwall in the west, the more important the tourism factor becomes in the local economy, and, at the same time, the incidence of unemployment in those areas increases.

I should have thought that the principle of assisting a growth industry and a successful industry would appeal to the Government. It is somewhat ironic that it was a Labour Chancellor of the Exchequer who introduced the principle of industrial building allowances for the hotel industry in 1978. It would be logical that our Treasury Ministers, given the current economic climate, should be given every encouragement to back winners now. As its public sector borrowing requirement objective, the Treasury has a figure of £10,500 million. I should have thought that it was virtually impossible to fine-tune that figure to the extent of £10 million one way or the other—or, in terms of the amendment, £3⅓ million one way or the other. Even if the Minister thinks that that is possible, he is showing very little imagination or political nous. Therefore, I hope that he will give every sympathetic consideration to the amendment.

Mr. W. R. Rees-Davies (Thanet, West)

I apologise for not being in my place for the opening of this debate. I am delighted that my hon. Friend the Member for Harrow, Central (Mr. Grant) moved the amendment in my absence.

We are indebted to my hon. Friend the Member for Eastbourne (Mr. Gow) for the beginnings of this whole matter. On 7 June 1978 he moved that we should increase what the Labour Party then proposed. The Labour Party then produced for the first time the suggestion that all new hotels should be classified as industrial buildings.

A new hotel is purpose-built, in the same way as a factory. The most important concession that I ask the Minister to give tonight is the reiteration that he stands firmly by the fact that what was agreed by all the parties in the House—that hotels should be treated as industrial hereditaments—shall stand.

It is singularly unfortunate that the Labour Party is not here tonight. [HON. MEMBERS: "Oh"] No, it is not.

Mr. Cook


Mr. Rees-Davies

There are only four Labour Members present.

Mr. Cook

Will the hon. and learned Gentleman give way?

Mr. Rees-Davies

I shall not give way.

Mr. Cook


Mr. Deputy Speaker

Order. If the hon. and learned Member for Thanet, West (Mr. Rees-Davies) does not give way, the hon. Gentleman should resume his seat.

Mr. Rees-Davies

I shall not give way, because it is singularly unfortunate that as Labour Members were the original promoters of the idea of the right hon. Member for Sheffield, Park (Mr. Mulley), that they should introduce this scheme and that they did so, they should not be here to speak in support of it tonight. I am very sorry that the whole of the Labour Party has gone home tonight and is not prepared to support—

Mr. Cook

On a point of order, Mr. Deputy Speaker. You have eyes to see who is in the Chamber. I grant that every hon. Member has to be responsible for the content of his own speech, however mistaken, but it surely cannot be beyond your capacity to observe that the Labour Party is represented in the Chamber and has been represented in the Chamber throughout all the hours of tonight and last night, when the hon. and learned Member for Thanet, West (Mr. Rees-Davies) has not been seen in the Chamber.

Mr. Deputy Speaker

Order. The hon. Gentleman has made his point, but it is not a point of order.

Mr. Rees-Davies

It was on 7 June—

1.45 am
Mr. George Robertson (Hamilton)

On a point of order, Mr. Deputy Speaker. Is it in order for the hon. and learned Gentleman to imply that there are no hon.

Members on the Opposition Benches? I speak as a member of the Scottish Tourist Board for three years and as a member of the development committee of the British Tourist Authority for the same three years, and I have some expertise on the subject. Surely, it cannot be in order for the record to show that the hon. and learned Gentleman says that there are no members of the Labour Party present.

Mr. Deputy Speaker

I am not responsible for the hon. and learned Gentleman's speech, and if he wants to make his speech he is perfectly at liberty to do so.

Mr. Austin Mitchell

The hon. and learned Gentleman should get some glasses.

Mr. Rees-Davies

It is singularly unfortunate that, having regard to the fact that the amendment was originally moved by the Chancellor of the Exchequer on behalf of the Labour Benches, all but four Labour Members should have gone home. Moreover, it was supported by the Liberal Party, none of whose members are here. Nor are there any members of the Social Democrats.

I read the words of the then Chancellor of the Exchequer, in his Budget Statement, which were quoted in the opening observations of my hon. Friend the Member for Eastbourne: In recent years a substantial increase in tourism has made an important contribution to our invisible export earnings. I therefore propose that any expenditure incurred after today on the construction or extension of an hotel with at least 10 bedrooms should qualify for capital allowances at the rate of 20 per cent. initial allowance and 4 per cent. annual allowance". My hon. Friend the Member for Eastbourne then said: The effect of the amendment would be to put hotels in a similar position for capital allowances as is already enjoyed by industrial buildings and structures under the Capital Allowances Act 1968. the Bill as at present drafted provided that there shall be a capital allowance of 20 per cent. only of expenditure, whereas in the case of industrial buildings the expenditure for which an allowance is granted is 50 per cent."—[Official Report, Standing Committee A, 7 June 1978; c. 812.] He went on to argue, very eloquently, that it should be increased to 50 per cent.

The entertaining aspect of all this is that not only is my hon. Friend in the Chamber now but the two persons involved in answering the debate were my hon. and learned Friend the Member for Dover and Deal (Mr. Rees)—the Minister of State—and my right hon. Friend the Member for Blaby (Mr. Lawson)—the Financial Secretary. Moreover, the Whip was my hon. Friend Me Member for Braintree (Mr. Newton). They all fully supported what we are proposing now. I propose to establish that absolutely, because it is the first time in my 25 years' experience in the House that I have ever known a case when all four hon. Members on the same side have been present who supported an amendment that was moved in 1978.

I should point out, moreover, that it was totally accepted by the then Government—the present Opposition—yet they are not here to support my right hon. and hon. Friends who are so anxious to obtain the concession that the amendment seeks.

The Liberals, who were represented by Mr. Pardoe, the then Member for Cornwall, North—which happily is now represented by my hon. Friend, who is also present—were also in favour of the proposal.

The picture is very clear. It is a matter of principle, and it is an important principle. It was stated that night that it was to be accepted beyond any doubt that this was an industrial question. Hotels were in future to be treated as industrial hereditaments. For that reason, they were able to get capital allowances. It was pointed out by my hon. and learned Friend the Minister of State that as a start they should be treated at 20 per cent. rather than at 50 per cent. The Opposition rightly took the view that they would not press the matter to a Division, as my hon. Friend the Member for Eastbourne wanted.

My hon. and learned Friend the Member for Dover and Deal said: The Minister of State"— that is, of the Labour Party— has been perfectly candid about it. Our argument is this. Do the hotel industry and those dependent on it, including, as my hon. Friend the Member for Braintree (Mr. Newton)— that is, the Whip— has perceptibly pointed out, the building industry, deserve an additional shot in the arm now and over the next few years? Speaking for this side of the Committee, we think that they do. Here I draw particularly on my own constituency experience. It may come as a surprise to hon. Gentlemen who represent inland constituencies, particularly north of the Trent, that there are considerable pockets of unemployment in the South-East in the coastal areas. I cannot speak for my hon. Friends who represent Eastbourne and Weston-super-Mare, but it is certainly true in the South-East, in Thanet and parts of East Kent that I am privileged to represent, by any standard there are quite high unemployment figures. My hon. and learned Friend went on to deal with the question of a direct contribution to alleviating unemployment, as the amendment does. He said that we should back success. He said: it will draw on the resources of the building industry and the ripple effects may spread outwards."—[Official Report, Standing Committee A, 7 June 1978; c. 812.] He went on to deal with other matters.

The essence of what the Front Bench was saying was that it entirely accepted the principle that hotels should be regarded as being purpose-built. If they are purpose-built, they are the same as factories. Therefore, factories and purpose-built hotels should be treated as if they receive taxable allowances.

We accept that initially 20 per cent., as against 50 per cent., can be accepted. That is a start. Later that position would be married. What amazed me when I first read the Bill was that there was no reason why the Government should not keep the same rate in pari passu. All that the Government had to do was to increase it from 20 per cent. to 30 per cent. They have rightly put up industrial allowances from 50 per cent. to 75 per cent.

There is no differentiation between the cases. The rate for industry was put up because of the present trouble that it is in. However, the most successful industry, which can make a good return for the money invested, is the tourist industry. We must put up the rate for the tourist industry from 20 per cent. to 30 per cent. at the same time as raising the industral rate from 50 per cent. to 75 per cent.

The cost would be nothing in the current year. The effect of the 1978 Act was considerable. First, Ladbroke's went into action. It produced a number of hotels. Each hotel created increased employment and a large increase in the country's income.

The Mercury hotel and conference centre at Warwick was opened in April 1981, with 160 new employees, 132 bedrooms and 60 conference and syndicate rooms. Having regard to the 20 per cent. allowance, the firm has been able already to start to show a good profit in return for the money that the Labour Government allowed by their Act. That is why I find it so surprising that the Labour Party is not here tonight to support what is obviously an amendment that it would wish to support.

On 1 July 1981 Ladbroke's opened the Dragonara in Edinburgh, with 130 employees and 142 bedrooms. In September 1980 it opened the Mercury hotel and conference centre at Bracknell, which employs 140 people, with 150 bedrooms and eight conference rooms. The Mercury hotel and conference centre at Leyland also opened in September 1980. It employs 90 people and has 93 bedrooms and seven conference rooms. All those are producing immensely valuable revenue for Britain. They are all producing money that is a good return. They are also producing employment, which is immensely valuable.

Unfortunately, the debate started badly upstairs. An amendment that was not really suitable was moved to increase the allowance to 50 per cent. My right hon. Friend the Financial Secretary made a statement which, I am sorry to say, must be taken to pieces. It was in reply to a most inadequate debate. That is why I am so delighted that we have the opportunity to debate the matter on the Floor of the House. My right hon. Friend said. I can assure my hon. Friend the Member for Cornwall, North, who raised the point, that in that context the position of hotels will be taken into account in the review of capital allowances. Views that have been expressed in this brief debate will be taken into account by the Government in the framing of the Corporation Tax Green Paper which will come out some time this winter—I hope, before the end of the year. Earlier he said: the whole question of capital allowances, including the questions whether there should be several rates, whether there should be discrimination and whether there should be differences, are pre-eminently matters which must be discussed in the Green Paper and the discussion which will follow it. It is just the sort of issue for which the Green Paper is intended."—[Official Report, Standing Committee E, 16 June 1981; c. 715–6.] It is nothing of the sort. The issue has already been decided by the House. It was decided absolutely in 1968—with no disagreement from the Conservative Party, the Labour Party or the Liberal Party—that the tourist industry should be regarded as an industry, treated as an industry, and given allowances on that basis. In due course, when finances permit, those allowances should be increased to level them with industry allowances.

What could be the argument for not increasing the allowances in pari passu today, taking them from 20 per cent. to 30 per cent.? The argument cannot be that that will cost the Government any money this year. It will not. It will not cost them any money until, at the earliest, next year, and probably not until the year after next. Therefore, the only reason can be that they want to wait and see.

The danger is that if the matter is to be included for discussion in the Green Paper it will give the Treasury the opportunity to back-track on what it has already agreed should be accepted. If it back-tracks, we may find ourselves in danger of losing the 20 per cent. allowance. The first assurance that I want to hear from my right hon. Friend is that there will be no question of back-tracking on the 20 per cent. allowance. The second assurance that is required is that next year it will be brought into line with industrial allowances, namely, 30 per cent. Those are crucial aspects.

We ask for those assurances for a simple reason. For many, many years both sides of the House have failed to recognise, as has the Treasury and a large part of the Civil Service, that the one really successful industry in Britain is tourism. It is the one that pays. It is the one in which we back success. It is the one that is really improving. It is the one that has every opportunity of improving. Why do we spend hundreds of millions of pounds backing failures such as British Leyland when a small proportion of that expenditure would bring a good return if it were directed to the tourist industry?

2 am

The Opposition Members who are in their places, such as they are, must recognise the force of my argument. My right hon. and hon. Friends recognise that what I am saying is true. We must persuade the Treasury that it is completely wrong and demolish its argument.

There is no truth in the suggestion that an office building is purpose-built in the same way as a hotel. A hotel is purpose-built to provide accommodation for conferences and to provide bedrooms. Offices may be used for many purposes. However, those who are concerned about offices will ask for the same type of privilege or tax advantage that we are saying should be not only maintained but extended for the tourist industry.

I have mentioned one of the companies that is involved in the industry. Another example is the Swallow group, which has introduced a first-class hotel close to the M1. It has 183 bedrooms and 150 employees. It may be argued that it is a powerful and rich company. There are other small companies that are not so wealthy and that will not be prepared to invest in the tourist industry unless they have the advantage of a grant.

I regard this as a vital matter for the tourist industry. That is not only because many of my right hon. and hon. Friends gave an undertaking to Sir Henry Marking that we would seek a debate. The British Tourist Authority and the English Tourist Board regard this as the most important amendment on the Order Paper from their point of view. It was as a result of their representatives coming to the House that the amendment was tabled. It is the indulgence of Mr. Speaker that, notwithstanding a similar amendment being debated in Standing Committee, has presented us with the opportunity of this debate, albeit late at night. However, that is no one's fault.

We want to ensure that we get from the EEC the vital grants to which I have referred. The grants will go only to areas in industrial regions. If the hotel industry is not regarded as a qualifying industry, we shall not be able to obtain the EEC grants. That is why the amendment and the treatment that the industry receives will be crucial to the future of the industry. That is why there is strong feeling on the Government Benches, which I hoped would be shared in other quarters, that the issue should receive the keenest and closest attention of my right hon. and hon. Friends on the Treasury Bench, who previously supported almost every word that I said on the matter. I hope that they will continue to give their support in Government, following their support when the Conservative Party was in Opposition. I hope that we shall give the tourist industry the support that it badly needs, which will enable it to grow with great success for the benefit of the nation.

Mr. David Mudd (Falmouth and Camborne)

I intervene briefly to support mainly the points made by my hon. Friend the Member for Bodmin (Mr. Hicks). It is beyond doubt that the tourist industry is for many regions in Britain, particularly Cornwall, our last great industry. It is a labour-intensive industry which provides opportunities to people irrespective of age and of skill. It also undertakes the social responsibility of providing jobs for the disabled.

We have heard a great deal about the input value of any money made available to the tourist industry in providing more taxation, more national insurance contributions and more VAT, and about its stimulus to the building industry. We should not overlook the fact that if the tourist industry gets the investment that it requires its contributions in rates to the local authorities will not be insignificant.

Therefore, in terms of jobs created for the underprivileged, the young, the unskilled, and the disabled by the tourist industry, for its bringing the building industry back into operation and for its contribution to rates, I am delighted to support the amendment in the hope that something will be done for the tourist industry of Great Britain.

Sir Julian Ridsdale (Harwich)

I am glad to support my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies). In supporting this amendment in the early hours of the morning, I underline the fact that I believe that in this Budget we should have supported a little more the tourist industry, which, as my hon. and learned Friend the Member for Thanet, West has said, is one of our most successful industries.

I point out to the Financial Secretary that in some places in the coastal districts there is a high rate of unemployment. We look to this amendment as a pointer of what the Government may be able to do to help the hotel industry, particularly over employment. I was talking yesterday to a hotelier in my constituency. He underlined the fact that, whereas he had kept people permanently employed over last winter, this winter, because of the increasing rate burden, because no help had been given over VAT and because we were not giving help over special development area status, the burdens on the hotel industry will increase and he will not be able to keep people employed but will have to make them casual labour, which means increasing the unemployment rate.

That is why I hope that we shall hear an encouraging reply from the Financial Secretary, because this amendment is a pointer to help to solve unemployment in the seaside areas, which is becoming acute. It is for that reason particularly that I support my hon. Friend the Member for Harrow, Central (Mr. Grant).

I am sure that we must do much more nationally to help our tourist and hotel industries. Yesterday I was talking to a great number of hoteliers from all over the country. Their mood was that we should give them more help as their industry is successful. In order to get the tourists here, we should do more than we are doing, because otherwise we shall not be able to earn the exchange.

I hope, therefore, that the reply will be a pointer to hope for the tourist industry, which at the moment is slightly dubious of the help which the Government are giving.

Mr. Terence Higgins (Worthing)

For some years I have had the unique distinction of being president of the Worthing Hotel and Guest House Association. It is therefore with some enthusiasm that I rise to support the case which has been put forward by my hon. Friend the Member for Harrow, Central (Mr. Grant).

The tourist industry is important for Worthing and is an important source of employment. It is a reason why the town is prosperous. For that reason, it is right that the industry should be encouraged. I studied with interest the report of the Committee stage in which a similar amendment was debated. The answer which the Financial Secretary gave on that occasion was not encouraging. If my right hon. Friend still has "Resist" written at the top of his brief, I feel that he will need to be far more convincing than he was on that occasion if he is to carry the House with him.

I want to make a number of specific points, dealing first with the arguments that might be deployed against the amendment and then with positive points in favour of it. One of the arguments that could have been deployed against the amendment some years ago was what might be called "the thin end of the wedge" argument. That was to the effect that if we went along with this sort of allowance for hotels as well as industrial buildings, there would be other structures that people would feel had a similar claim. As has been pointed out, that argument is no longer valid. The point of principle has long since disappeared because there are already allowances for hotels, albeit at a much lower level than is the case for industrial buildings. There is no point of principle involved here and no case for the "thin end of the wedge" argument that would encourage my right hon. Friend to resist the amendment. It is purely a question of quantity.

The second argument always used on these occassions is that of cost. I do not think that the cost of this amendment is such that one could consider that it would wreck my right hon. and learned Friend's medium-term financial strategy. The cost is wholly within the possible margins of error in any computation of this kind and trivial compared with many of the other items on which we are quite happy to expend revenue or give allowances for. It cannot be argued that there is any ground for resisting the amendment on grounds of cost.

An argument that my right hon. Friend deployed in Committee was to the effect that we ought not to make a change at this stage because there is to be a Green Paper on corporation tax that will include the question of capital allowances of this kind. Having read the reports of the Committee proceedings, I found a certain amount of inconsistency between the point my right hon. Friend made in replying to the debate on hotels at column 716 of the Official Report, where he argued essentially that we must wait for the Green Paper, and, on the other hand, the argument deployed at column 708, where he discussed industrial allowances, when he said: We thought that the Green Paper which will come out this winter should be the proper means for considering this matter and for having a full discussion. At the same time, that should not preclude us from giving some assistance now to investment and to the construction industry. That is why the clause, which I commend to the Committee, is in the Bill."—[Official Report, Standing Committee E, 16 June 1981; c. 708.] If that is so for the construction industry, the Green Paper argument cannot be a valid argument for failing to do something for hotels as well.

Those are the three main arguments against the amendment and they are all clearly invalid. That being the case, we need to look at the positive angles. As a result of the Government's policies, there has been a significant reduction in overmanning in industry. It is to be hoped that when some economic upturn takes place we shall find, at that stage, that it is possible for manufacturing industry to spread its overheads, cut its unit costs and so on. But there is still a great need on the supply side of the economy, which my right hon. Friend is keen to stress. There is also a need not simply to improve the overheads position but to get new investment.

I say to my right hon. Friend, against the present economic background, that the clause that we are seeking to amend will not have a very significant impact on investment in manufacturing industry. On the other hand, the amendment might well have a significant impact on investment in the hotel industry because the situation there is not the same as it is in manufacturing industry and, I am happy to say, nowhere near as depressed, generally speaking.

The industry has, of course, suffered significantly, as have industry and exports generally, from the exchange rate. We have seen a significant fall in the sterling exchange rate—particulary in relation to the dollar—so that it is reasonable to suppose that if this continues over the next year or 18 months we shall see an upturn in the tourist industry compared to this year. If that is so, and if we are to compete in a very intensive market for tourism world-wide, it is important that we should have hotels that are able to deal with the situation and able to invest in new products. That reinforces the argument for accepting the amendment.

It is apparent that there are no valid arguments against the amendment, and there are positive arguments in its favour. It would encourage investment and employment, improve our balance of payments, which after the recent slide in sterling needs strenghtening—I would not wish to see the sterling exchange rate fall significantly further—and generally help the economy.

The tourist industry makes a significant contribution to our economy, and we should encourage it. I therefore hope that the Minister's reply will be far more forthcoming than the reply that we had in Committee.

2.15 am
Mr. Peter Emery (Honiton)

The Government are fortunate that it is 2.15 am. Earlier in the day speeches would have been much longer and the Government may have been pressed harder.

In my constituency I have three times as many hotels as factories; four times more people work in the hotel industry than in manufacturing industry. The hotel industry does not understand why it should not be treated in the same way as industry generally. The variation has never been understood. In Devon and the South-West it is imperative for employment and particularly for work in the construction industry that our wealth-creating industries should be treated in the same way as manufacturing industry.

The Minister must convince the House and the hotel industry that the Treasury considers that that industry is as important as manufacturing. That is not the impression at present. I repeat the warning given by my right hon. Friend the Member for Worthing (Mr. Higgins). We wish to see the Treasury's approach to the economy work and do not wish to hamper my right hon. and learned Friend in his general intent, but we do not feel that £3 million, which could greatly help a major industry certainly in the South-West, should be taken away by the Treasury.

I therefore hope that the Minister will seriously consider the strong pleas made from the Benches behind him.

Mr. Cook

As you will be aware, Mr. Deputy Speaker, it is my custom, along with many of my colleagues, to attend the Labour Party conference once a year. You may recollect—although I know that these days you are not supposed to bring these matters to the forefront of your mind—that there is a rhetorical trick which never fails to produce a round of applause and which is practised by speakers seasoned in how to manipulate conference. It is to say that an issue is so important that it is tragic that so many delegates have chosen not to be present. Without fail, that line provokes a round of applause from those present who feel smug and complacent about the fact that they are there on such an important issue.

I do not know when the hon. and learned Member for Thanet, West (Mr. Rees-Davies) attended a Labour Party conference, but plainly he has captured exactly the same rhetorical trick. I do not wish to detain the House to any great extent by responding to the red herring that the hon. and learned Gentleman raised on the question of attendance, but it is important to put on record that we have been debating the Finance Bill for close on 48 hours, in the course of which we have discussed a wide range of matters. Yesterday we debated at some length the issue of reduction of national insurance surcharge contributions, which would have had given a far greater stimulus to the finances of the. hotel industry than the modest proposals before us now. We also debated the major issue of tax evasion and avoidance. Some hours ago, we debated the taxation of the unemployed and those on strike. We have had separate debates on the Government's failure to uprate, for the first time since 1968, any personal allowances.

In none of those debates was there a single contribution from the Government Back Benches. Nor do I recollect the hon. and learned Member for Thanet, West being present for one of those debates. Indeed, as he was obliged to point out, he even arrived late for his own debate. It is therefore not for him to bandy words about who was present to hear him speak.

The Opposition recognise—although Conservative hon. Member; appear to doubt this—the important role of the hotel industry. I come from a city based mainly on service industries. There is comparatively little manufacturing content in the labour force of Edinburgh. It is primarily a service industry city, based on commerce, the Civil Service, insurance companies and the hotel industry. I therefore recognise the very important role of the service industries in our economy. recognise in particular that one of the advantages of the tourist trade is that it is labour intensive. That aspect must appeal to all hon. Members in view of the present recession.

The right hon. Member for Worthing (Mr. Higgins) said that British industry had been going through a period of welcome reduction in overmanning. I must put it to him that we have in fact been going through a period of unwelcome reduction in manning, in the course of which the cost per unit output has increased rather than diminished. As a result of that reduction, we now have a very large pool of surplus labour for which work must be found. I recognise that one of the ways to find that work is to consider those industries which are labour intensive to see how they may be assisted.

I accept that the industry deserves assistance. In all humility, however, I should have thought that one way to assist it would have been for Conservative Members who are so keen to speak in this debate to support the Opposition's proposal last night to cut the national insurance surcharge. That was, after all, an objective in the manifesto on which every one of them stood for election only two years ago

We must consider, however, the proposal in the amendment and whether the way to assist the industry is through an improvement in capital allowances. The Financial Secretary will be aware that in Committee I expressed a certain scepticism about the efficacy of capital allowances. There are a number of reasons for being sceptical about the effectiveness of such allowances in stimulating further investment. One obvious macroeconomic reason for being doubtful about it is the fact that we now have a staggering total of £30 billion of unused capital allowances being rolled forward from year to year because industry and commerce cannot find sufficient profit to absorb the mammoth capital allowances that it has already acquired.

Mr. Rees-Davies


Mr. Cook

If the hon. and learned Gentleman will allow me to finish my point, I will happily give way to him, although he was surprisingly reluctant to give way to hon. Members to whom he referred in his own speech.

Because of that very large sum and the tax exhaustion that it has produced, it is very difficult to believe that in those areas where there has been investment which has attracted those capital allowances the allowances played a significant part in the decision of those who decided to undertake that investment.

Mr. Rees-Davies

Is the case that the hon. Gentleman is making applicable to the tourist industry? My information is that the 20 per cent. allowances are being taken up by the tourist industry and being effectively applied. Indeed, I illustrated that in my speech. If the amount was increased, the allowances would be taken up. What the hon. Gentleman is saying about other capital allowances outside the tourist industry may well be true.

Mr. Cook

My point is that it is obvious that investment has gone ahead on the part of companies that plainly did not have sufficient taxable profits in order to set the capital allowance gained by investment against them. That suggests that for many industries and commercial concerns capital allowances were not the determining factor in making investment decisions. I should not have thought that those who ran hotels would be so different from those who make other commercial judgments.

The hon. and learned Gentleman referred to several hotels that have been constructed since 1978. He will admit—because he is fair-minded—that the difficulty in working out the extent to which the 20 per cent. capital allowance played a part in stimulating that investment is in knowing how many of those hotels would have been built if the 20 per cent. capital allowance had not been introduced. The hon. and learned Gentleman referred to the Dragonara hotel in Edinburgh. I can claim some knowledge of what goes on in Edinburgh. I drive past that site every time I return home from my constituency. It is an attractive site near a pleasant part of the centre of Edinburgh. If the Boundary Commissioners have their way, it will fall in my constituency. I am not surprised that a hotel company chose that site to develop. I can also say why it chose to do so in 1978. The building on the site burnt to the ground in 1978 and the site became available. Therefore, it is not immediately apparent that it was the introduction of a 20 per cent. capital allowance in 1978 that led to that development.

That is the nub of the problem facing the Financial Secretary. If he increases capital allowances, they will be taken up by those who will carry out developments. I should be amazed if they were not taken up by those contemplating investment. The right hon. Gentleman must address himself to the question whether an additional 10 per cent. subsidy through the increase in the capital allowance would of itself stimulate developments that would not otherwise take place.

It has been said that as a result of the reduction in the value of the pound against other currencies there might be an increase in our tourist trade. The extent of the reduction in the value of the pound was rather overstated. That reduction is primarily against the dollar. There is little sign of the necessary change between the pound and the other currencies that we must compete with. However, I accept that if there were such a reduction against other currencies there would be an increase in trade. If I were a hotelier, I would be looking for a reduction in the pound against other currencies rather than an additional building allowance. However, if I were contemplating further investment, the factor that would count would not be whether there was the prospect of an additional 10 per cent. capital allowance from the Treasury but whether I believed that additional trade was to hand to justify that investment and to give me a return on it that I could set the additional 10 per cent. capital allowance against.

Mr. Tim Eggar (Enfield, North)

Is the hon. Gentleman prepared to apply the same logic to the suggestion of a reduction in the capital allowance available to manufacturing industry?

Mr. Cook

If the hon. Gentleman consults Hansard, he will find that in Committee I expressed the same scepticism over the proposal to increase the capital allowance for industrial buildings. We did not press the matter to a Division, because there are so few scraps in the Bill to stimulate industry and construction that we were loth to turn down the one sop offered. If I were in the Financial Secretary's shoes, I would seek more efficacious ways of restimulating the economy and manufacturing industry.

2.30 am

I do not know what is in the Financial Secretary's mind about the amendment, but he did not accept the parallel amendment so ably moved by the hon. Member for Cornwall, North (Mr. Neale) in Committee. As no hon. Member has paid tribute to the work of the hon. Member for Cornwall, North, perhaps I may pay tribute to the fact that he raised this matter in Committee and spoke eloquently to it. The Financial Secaretary did not accept that amendment and I suspect that he will not be minded to accept this amendment now. If he accepts it, we should look to him to remove from our minds our doubts about whether this increase in the capital allowance will make the slightest difference to the amount of investment that we can expect in the forthcoming year.

Mr. Tim Sainsbury (Hove)

In his interesting speech the hon. Member for Edinburgh, Central (Mr. Cook) missed the point that has been made by my right hon. and hon. Friends. The amendment is concerned with discrimination against an industry. It is not equal treatment that the hotel industry should receive such an inadequate allowance, which is not increased when the allowance for the rest of industry is increased.

The tourist industry is internationally competitive. It is not just that the domestic tourist has the alternative—of which we are conscious in my constituency, where on a clear day from the higher parts one can see the mainland of Europe—of going to France or the Low Countries that are close by and in many cases as short a journey as he makes to Hove or Brighton. The international tourist has a wide-ranging choice of destinations. In addition, in these days the important and valuable conference trade has a wider choice of destinations in a number of countries. If we do not allow our hotels and conference facilities to be as up to date as those in other countries, we shall lose valuable employment and much income to areas that are in need of that help.

I hope that if my right hon. Friend is unable to provide immediate help to my right hon. and hon. Friends he will carefully consider the international comparisons that affect the hotel industry and decide whether, on an international basis, it can be said that our hotels are being treated fairly vis-a-vis their international competitors.

Mr. Robert Adley (Christchurch and Lymington)

I first declare an interest as marketing consultant to Commonwealth Holiday Inns, of Canada, and a member of the national council of the British Hotels, Restaurants and Caterers Association, which I met today in company with a number of my right hon. and hon. Friends.

It is the view of many hoteliers that capital allowances would be a helpful incentive to creating new construction in the hotel industry. We are talking about continuing the battle to win recognition for the importance of tourism within the British economy—put simply and succinctly by the chairman of the English Tourist Board in his foreword to the ETB annual report "Tourism is Jobs". To a waiter, his job is just as important as is the job of a welder to a welder.

The fact that so many of us are here at this hour in the morning—as my hon. Friend the Member for Honiton (Mr. Emery) said—should impress on my right hon. Friend the importance that many of us attach to the subject. In Committee my hon. Friend made a point about a Green Paper. My hon. Friend the Member for Bodmin (Mr. Hicks) and I received almost identical assurances from Lord Cockfield when we discussed this matter with him over a year ago.

The question that the industry asks the Government is: was it a deliberate act of policy on the part of the Government to widen the gap in investment allowances between hotels and manufacturing industries? If the answer to that is "Yes", my right hon. Friend should not be surprised [f many people in the hotel and catering industry get the impression that the Government are not specially concerned with the welfare of the industry and do not give it a particularly high priority.

The industry is not begging for handouts; it is asking for justice. We talk about the cost of industrial building allowances, but there is no cost unless the investment takes place. The Government should, in effect, be asking the industry "This project might have cost £10 million if the proposals to increase the allowances to 50 per cent. had been put forward. What can you do to see that it costs £100 million?" If it were to cost £100 million, it would mean that there was a massive increase in construction and investment in the hotel industry, and presumably we are all concerned about the need to create more jobs.

I close with a quotation from a letter that I have received today from Mr. Clive Derby, the chief executive of the British Hotels, Restaurants and Caterers Association: I find it inexpressibly sad that this Government, blessed with an industry that, given a decent level of IBAs, would find itself able and willing to invest and provide more jobs, turns its back and seeks refuge by consigning the question of IBAs to yet another Green Paper. Do they want to encourage investment and job creation, or don't they? I ask the same question of my right hon. Friend.

Mr. Andrew Bowden (Brighton, Kemptown)

The industry has done very well at a time of deep international and home recession. It now needs a positive act by the Government to show their future confidence and belief in the expansion and development of the industry. We know that there has been a significant drop in employment in manufacturing industry over the last 10 years, whereas within the hotel and tourist industry there has been a real and positive increase.

Indeed, the Prime Minister recently stressed the importance of tourism as a job creator. I know that my hon. Friend the Member for Eastbourne (Mr. Gow) is well aware that in Eastbourne alone tourism is worth £50 million to his town. It is worth even more to Brighton. The tourist industry is vital to many areas. My own town of Brighton has shown its faith and belief in the future of the industry by making a massive investment of ratepayers' money in conference centres and facilities. We ask for help and support from the Government in seeing this through in the years ahead.

Tourism and the hotel industry as a whole must be utilised to achieve maximum employment and financial benefit, for the areas concerned and for the nation as a whole. All we ask is for a little practical help from the Government.

Mr. David Gilroy Bevan (Birmingham, Yardley)

In order not to draw wrath—unlike my hon. and learned Friend the Member for Thanet, West (Mr. Rees Davies)—I wish to pay tribute to the packed Opposition Benches and not to criticise in any way whatever.

I am not a Member representing a seaside constituency. There are no beaches in Birmingham, to the best of my knowledge, although hon. Members will be fortified in the knowledge that my constituency of Yardley has the largest pub in Europe. Nevertheless, we in the West Midlands are fast becoming a most important tourist centre—and the gateway to other tourist centres.

We have an avenue of approach by air to Birmingham airport, which is being enlarged at a cost of some £50 million. We have the railway line to Birmingham International, with a fast train service from London. We are the centre of the motorway network and have the National Exhibition Centre. We serve all the central counties of England and Stratford, Warwick, Kenilworth, Malvern and places much further away.

It is essential that in the hotel business we retain the industrial aspect. If we do not ensure that the grants are on an industrial basis, we may put in jeopardy the grants that this country receives from the EEC, which could be dangerous. Therefore, it is axiomatic that the amendment should be made.Tourism is one of our greatest money-spinners, making over £4,000 million a year and bringing about 12 million visitors to Britain every year. It is growing fast all the time.

One hopes that before long the assisted areas will be spread out more evenly, that they will not be centred as they are now but will be enlarged to include other areas, especially the West Midlands, where unemployment is growing at three times the rate of anywhere else in the United Kingdom. In Birmingham, which is not used to unemployment, it is 13.4 per cent.

We are not being unreasonable in putting forward the amendment. We are not suggesting an increase to 50 per cent., although some might consider that that would be more appropriate. We suggest a modest increase in the initial stages, from 20 to 30 per cent. Surely that must be acceptable to my right hon. Friend.

Our area is desperately short of hotels and hotel rooms. It needs extra rooms, but without encouragement investment will not be channelled into this vital currency-earning and job-providing sector.

There is a case for extending this provision into self-catering, for making it apply to cottages, villas and permanent apartments. At present it applies only to hotels with 10 rooms or more. There is a case for reducing the starting point to four rooms.

Finally, the return on grants for tourism is far, far, far better than the return on grants to other industries.

Mr. Keith Best (Anglesey)

I can claim no interest, other than having had lunch—a lunch that has receded into distant history—with the British Hotels, Restaurants and Caterers Association.

In Wales tourism is the second most important industry after manufacturing. Indeed, in many parts of the Principality it is the major growth industry.

The amendment is necessary for the development of tourism. It is in line with previous legislation, and it is undoubtedly fair to tourism, which is why it has received so much support tonight.

I find it difficult to follow the logic of the hon. Member for Edinburgh, Central (Mr. Cook), who concluded that the amendment should not be supported because there was not a full take-up of certain industrial building allowances on the manufacturing side. My hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies) pointed out that that was not true of the tourist trade.

The hon. Gentleman said that if he were a hotelier he would see whether the business would justify the take-up of the building allowance for the hotel, but the very fact that the allowances are being taken up must surely mean that hoteliers see that there will be enough business. If the hon. Gentleman reflects on the matter he will see that he should support the amendment rather than pour cold water on it.

2.45 am

My hon. Friend the Member for Harrow, Central (Mr.Grant) and my hon. and learned Friend the Member for Thanet, West said that most members of the Government supported this excellent proposal in the past. I wish to refer to one who has been missed out. It would be unfair not to mention my right hon. Friend the Minister for Consumer Affairs, who said in a recent interview with British Travel News: It is vitally important in the creation of jobs throughout the country and in the contribution it makes to the quality of life, both for our own people and for visitors from abroad. The fact is that tourism must be accorded its full status as an industry of absolutely major importance. I feel that people in a country which has, in times historical, relied tremendously on manufacturing industry must now recognise that we are moving into a different world—a world in which service industries are growing and tourism itself will become increasingly important as leisure time increases. If my right hon. Friend were here, she would no doubt be arguing for more than we are asking for. We are not asking for the world; we are asking for a modest amount. We ask only that my right hon. Friend the Financial Secretary should welcome the amendment because he realises that in a full year it will cost no more than what the Government have to spend on 500 people being unemployed.

Mr. Woolmer

Conservative Members have made a number of gibes about my hon. Friends, but I recall that when we were discussing the uprating of unemployment benefits and the rebate of heavy oil duty for industry the Government Benches were virtually empty.

I agree that there is a case for treating tourism in parallel with other important parts of the economy. It is an important part of the economic system, but I remind Conservative Members that if we have no industry and no jobs tourism will be irrelevant. People will not be able to take holidays. The larger part of our tourism still consists of British people taking holidays in Britain. When a plea is made for exceptional treatment for hotels, it should be remembered that most of those using hotels are our own workers.

I would be more impressed by the arguments of Conservative Members if they pleaded to make sure that people had jobs in industry so that they could take holidays in hotels. I take the greatest exception to the gibes of Conservative Members when they do not bother to turn up to support measures to ensure that our workers are in jobs and can therefore take holidays in the hotels to which hon. Members wish to give tax help.

Our tourist has suffered the same problem as manufacturing industry—the over-valued pound. Foreign tourists have found this country extremely expensive in the past year or two. The tourist industry complains that the pound has been greatly over-valued. This has meant high hotel and meal prices and high living costs. Our own working people have taken cheaper holidays abroad not because the hotel industry lacked incentive but because of the over-valued pound.

Conservative Members who wish to encourage our own industry and who also wish to persuade our own tourists to stay at home should be supporting policy changes aimed at creating jobs that will enable workers to afford a holiday. They should also be calling for a change in the value of the pound so that people find a holiday in this country worth while. The size of the turnout on the Tory Benches at this time of night in support of a marginal change in tax allowances is sheer hypocrisy. I wish only that they had turned out in such numbers to support the Opposition's proposals on the national insurance surcharge and efforts to change the direction of Government policies. Instead, the House has heard them bleating about an issue described by the right hon. Member for Worthing (Mr.Higgins), who has previously deplored any switch in the direction of Government policy, as a small change. I find this situation remarkable.

Hon. Members know that the Minister will not support them. They should have been supporting proposals for a change of direction by the Government, a drop in the value of the pound and an increase in jobs—all moves that would have produced greater benefits for the hotel and tourist industry. If they wish to press their case they should support the Opposition on Monday night to ensure the creation of real jobs rather than indulge in synthetic anger at this time of the morning in attempt to produce phoney jobs.

Mr. John MacKay (Argyll)

I wish to add a Scottish voice in support of the amendment. Tourism is extremely important to Scotland, particularly the Highlands. Without wishing to become involved in an argument with the hon. Member for Batley and Morley (Mr. Woolmer), I can say that these jobs cannot possibly be described as phoney. They are every bit as real as jobs in any industry. The proposal put by my hon. Friends stands on its own merit. The tourist industry feels that Governments of all colours over the years have discriminated against the industry in comparison with other industries.

When we are increasing the allownace from 50 per cent. to 75 per cent. in other industries, we should increase the allowance in the tourist industry from 20 per cent. to 30 per cent. I hope that my right hon. Friend will take this matter on board. This is an important industry. It requires encouragement and support.

Mrs. Elaine Kellett-Bowman

In answer to the hon. Member for Batley and Morley (Mr. Woolmer), perhaps I may say that tourism is not confined to the South. It is extremely important to the North-West, particularly to Lancaster and Morecambe. We are very interested in getting an improvement in this regard.

Mr. Lawson

If I am a little brief, at this hour of night, in dealing with this important matter, I hope that it will not be considered a discourtesy to my hon. Friend the Member for Harrow, Central (Mr. Grant) or to those of my right hon. and hon. Friends who have spoken in the debate, all of whose speeches I have listened to most assiduously. I have taken great note of the points that they have made. Nor, I hope, will my relative brevity, which arises from a sensitivity to the hour, be misconstrued in any way as a reflection on the Government's approach to the tourist industry. We regard it as an industry of the first importance.

My hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies) said one or two things that need to be corrected. In his best forensic manner he attempted to make the case that all of us who are sitting on the Treasury Bench had already committed ourselves to everything that he was proposing. That is not so. If he rereads the Hansard report of the debates in the Committee stage of the Finance Bill in 1978, to which he referred, he will see that I, for one, made no reference to the percentage of industrial building allowance that I considered to be appropriate for hotels, and that what happened on that occasion was that my hon. Friend the Member for Eastbourne (Mr. Gow) initiated a very useful and worthwhile debate but did not press his amendment to a Division. It is right that that should be firmly on record.

At that time we welcomed the 20 per cent. industrial building allowance introduced for the qualifying hotels by the previous Government.

The problem with the amendment that is before us is one not merely of the hotel allowance; it deals with the whole question of capital allowances. My hon. and learned Friend the Member for Thanet, West said "There is something special about hotels. They are purpose-built." So are theatres and cinemas and so are most shops. So are most of the buildings in which service industries reside. My hon. Friend the Member for Anglesey (Mr. Best) pointed to the importance of service industries generally. There are many distinctions in industry at present. For example, the industrial building allowance is of particular importance to manufacturing, and it is now increased from 50 per cent. to 75 per cent. Qualifying hotels attract 20 per cent. Agricultural buildings—these have not been mentioned—attract a 20 per cent. allowance. That has not been increased in this Finance Bill. There is also a 40 per cent. initial allowance for mining works. Again, that has been kept at 40 per cent. in this Budget. So it is not true that hotels have been specially discriminated against. I utterly repudiate that.

3 am

We received many representations that manufacturing industry had suffered as a result of the recession and we were told that there was a strong case for doing something to help. We therefore decided, in advance of the Green Paper, to increase the industrial building allowance for manufacturing industry. Now we are accused of widening the gap, not merely against hotels but against all the other categories. Hotels have not been disadvantaged in any way. The whole idea of widening the gap—that if an advantage is given to one section of the economy it should automatically be given to every other section—is a rather un-Conservative attitude to the manner in which we should conduct our affairs. That is the attitude that I would expect of Opposition Members.

We accept that the whole question of capital allowances needs to be looked at fully. I said in Committee and I repeat now that we announced some time ago—it has not suddenly been dreamt up to deal with the amendment—that there is to be a Green Paper on corporation tax, and a major part of it will deal with the whole question of capital allowances. There are different rates for different kinds of buildings—and indeed, no allowance at all for commercial buildings generally.

The House may think that that is not a matter of any great controversy, but that is not true. Only a couple of years ago, in proceedings on the Finance Bill, my right hon. Friend the Member for Crosby (Sir G. Page) put forward a new clause to give industrial building allowances to the retailing industry. I believe that my hon. Friend the Member for Hove (Mr. Sainsbury) spoke eloquently in support of that amendment. Now he is talking about hotels. The issue is much wider than that, and should be considered properly in the Green Paper. That Green Paper will lead to a full discussion, on the basis of which the Government will take their decisions. It is premature to do so now. What has been said in this debate will be borne in mind by the Government.

My hon. and learned Friend the Member for Thanet, West asked me for an assurance that the Government would not do away with the industrial building allowance for hotels, following the Green Paper. I can give him that assurance. The Government have no intention of withdrawing the 20 per cent. allowance for hotels. As to whether there should be any improvement for the other categories of service industries, for which a strong case can be made, that is something that will have to await the Green Paper. I have given the only assurance that I can give at this stage. I assure the House and my right hon. and hon. Friends that these matters will be fully considered in the Green Paper and in the discussions that follow that paper. On the basis of that assurance, I therefore hope any hon. Friend will ask leave to withdraw the amendment.

Mr. Rees-Davies

I appreciate what my right hon. Friend said, but I do not think that it is sufficient. I therefore ask my right hon. and hon. Friends to vote on the amendment.

Mr. Deputy Speaker

It is up to the hon. Member for Harrow, Central (Mr. Grant) to decide, because he moved the amendment.

Amendment negatived.

Amendments made: No. 145, in page 62, line 27, leave out '; and' and insert 'and to expenditure which by virtue of section 5(1) of the said Act of 1968 (purchase of unused buildings or structures) is deemed to have been incurred after that date; but'. No. 146, in page 62, line 30, leave out from first 'of' to end of line 32 and insert 'that Act (expenditure incurred before trade begins): .—[Mr. Lawson.]

Sir William Clark

We have now been debating for over 10 hours. I am delighted that we have had audience participation at this late hour. I have no doubt that most hon. Members have been waiting for amendment No. 147. Since the Government have accepted the principle in that amendment and have tabled their own amendment No. 149, I do not intend to move amendment No. 147.

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