HC Deb 11 July 1984 vol 63 cc1315-9

Amendments made: No. 46, in page 161, line 11, at end insert 'except that—

  1. (a) expenditure shall not be treated for the purposes of those sub-paragraphs as having been incurred after the date on which it was in fact incurred by reason only of section 1(6) of that Act (expenditure incurred before a trade begins); and
  2. (b) expenditure falling within subsection (1)(b) of section 5 of that Act (purchase price of building or structure bought unused) shall be treated for the purposes of those sub-paragraphs as having been incurred at the latest time when any expenditure falling within subsection (1)(a) of that section (expenditure on the construction of the building or structure) was incurred.'

No. 49 in page 161, line 30, at end insert 'or by a person whose contractual obligations that person has assumed with a view to entering into leasing arrangements. (2A) For the purposes of sub-paragraph (2)(b) above, a person incurring expenditure on the provision of machinery or plant (in this sub-paragraph referred to as "the lessor") shall be taken to have assumed, with a view to entering into leasing arrangements, the contractual obligations of persons who entered into a contract for the provision of that machinery or plant (in this sub-paragraph referred to as "the lessee") if, and only if,—

  1. (a) arrangements exist under which the lessor will lease the machinery or plant to the lessee, and
  2. (b) the obligations of the lessee under the contract either have been taken over by the lessor or have been discharged on the lessor's entering into a new contract for the provision of the machinery or plant concerned; 1316 and, where there is such a new contract as is referred to in paragraph (b) above, sums paid under that contract shall be treated for the purposes of sub-paragraph (2)(b) above and Part II of this Schedule as paid under the contract referred to in that sub-paragraph.' .

No. 50, in page 161, line 31, leave out 'and (2)' and insert 'to (2A)'.

No. 53, in page 162, line 9, at end insert 'except that expenditure falling within sub-paragraph (1)(b) of paragraph 8 of that Schedule (purchase price of building bought unused) shall be treated for the purposes of those sub-paragraphs as having been incurred at the latest time when any expenditure falling within sub-paragraph (1)(a) of that paragraph (expenditure on the construction of the building) was incurred. — [Mr. Moore.]

Amendment proposed: No. 161, in page 162, line 24, leave out from 'State' to end of line 25 and insert 'in the period beginning on 1st April 1980 and ending on 13th March 1984 or in respect of which a written offer of financial assistance was made in that period by the Highlands and Islands Development Board'.—[Mr. Moore.]

Mr. Speaker

With this it will be convenient to take Government amendment No. 162

Mr. Hirst

I welcome these amendments, especially amendment No. 161, which relates to offers of selective assistance to businesses in the Highlands and Islands Development Board area. As my hon. Friend the Financial Secretary knows, vigorous representations were made by Scottish Conservative Members from that area who felt that offers of financial assistance from the HIDB should be put on a footing similar to those made by the Industry Department in Scotland. In the light of interest in this matter in much of Scotland, will my hon. Friend explain the purpose of amendments Nos. 161 and 162 and the irrelevance to Scotland?

Mr. Moore

I know that the House wishes to make progress, and I shall be as brief as possible. The amendments are complicated and I realise their importance to the Highlands and Islands and Northern Ireland.

Paragraph 12 contains the provisions for the capital allowance reforms, including the phased withdrawal of the first-year allowance for machinery and plant and the initial allowance for industrial buildings and assured tenancies. Those changes, as the House will know were generally welcomed and took effect from Budget day, 13 March. Expenditure incurred after that date generally qualifies for a lower rate of first year, or initial, allowance.

There are provisions, however, to protect certain projects where commitments had been entered into before Budget day. In those cases, the original rates of allowance are to remain available, even though the expenditure is not incurred until after 13 March. Paragraph 4 of schedule 12 is concerned with certain regional projects which fall into this category. These are projects in development areas in respect of which offers of selective financial assistance have been made during the past four years. These projects will have been proceeded with, on the basis of financial calculations which have assumed the availability of the old rates of allowance in conjunction with the assistance that has been offered. Selective assistance offers are pitched at the minimum necessary for a project to go ahead. Without continuation of the allowances, such a project's continuance would be put in jeopardy, and we do not think that would be right, especially as these schemes tend to be in the poorest areas. Similar arrangements were announced for regional development grants when they were altered last December.

As to the scope of this provision, I should mention that the European Commission has raised the question whether this paragraph is notifiable as a state aid under the European treaty. We are discussing the matter with it and expect to resolve any difficulties.

In its present form, paragraph 4 covers the main provisions under which selective financial assistance is available—that is the Industrial Development Act 1966 and, in Northern Ireland, the industrial development order.

These amendments would extend the protection to two further classes of project for which selective assistance is available. The first consists of projects in the Highlands and Islands, where offers of assistance are made by the Highlands and Islands Development Board. The cost would be relatively small — about £0.5 million in 1985–86 and £0.25 million in 1986–87. The second consists of small firm projects in Northern Ireland, where offers of assistance are made indirectly by the Local Enterprise Development Unit rather than by the Northern Ireland Government itself. Again the cost would be relatively small—less than £1 million in both 1985–86 and 1986–87.

These are minor relieving amendments and I hope that my explanation has been helpful.

Amendment agreed to.

Amendment made: No. 162, in page 162, line 36, leave out from 'Ireland' to end of line 37 and insert `in the period beginning on 1st April 1980 and ending on 13th March 1984 or in respect of which a written offer of financial assistance was made in that period by the Local Enterprise Development Unit'.—[Mr. Moore.]

Mr. John Heddle (Mid-Staffordshire)

I beg to move amendment No. 54, in page 162, line 46, at end insert: `(4) The provisions of Part 1 of this Schedule do not apply to so much of any capital expenditure incurred before 1st April 1989 on an old industrial building situated in a textile closure area as defined in Article 2(e) of the Council of the European Communities Regulation (EEC) 219/84 and which was constructed before 1st June 1934.'.

Amendment No. 54 extends capital allowances in respect of old textile mills in the north of England—in red and white rose country—that are covered by the textile closure area as defined by an EEC regulation.

The buildings have a useful life in providing small workshop accommodation for people who want to start up business on their own. There is no incentive for the mills to be converted—there is 30 million sq. ft. of them—unless capital allowances are extended until 1989. The allowances should refer especially to buildings that were built before 1 June 1934. They would preserve industrial work space where such workshop accommodation is desperately needed. I believe that, without any real loss to the Treasury, extension of the allowances would greatly benefit the economy, the region and the people who want to start up in business on their own

Mr. Gary Waller (Keighley)

I shall be as brief as my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle).

The problem of these old textile areas is that the mills are multi-storey, outdated premises. There is now an excess of floor space, and the people who used to work there are in many cases now unemployed. There are 300,000 unemployed in the two areas of Greater Manchester and West Yorkshire, many of whom used to work in the textile industry. There is still a relative excess of people working in manufacturing, compared with which the area particularly lacks strong services and commercial sectors.

The conversion of these old mills would be an excellent way to provide floor space for which there is undoubtedly a demand. At present, it is not occurring at a sufficient level to deal with either the amount of surplus space or the high level of unemployment, but a study by consultants has shown that the older industrial buildings represent a potentially valuable source of new space, and could generate substantial additional economic activity.

The disadvantages are that there is a generally poor market perception of the buildings, and in many cases there is a need to overcome the backlog of repairs. A strategy providing financial assistance for investment for a limited period— say, five years—would allow this problem to be largely overcome. That is why my hon. Friend the Member for Mid-Staffordshire and I have tabled this amendment

Mr. Moore

I shall try to be as brief as my hon. Friends the Members for Maid-Staffordshire (Mr. Heddle) and for Keighley (Mr. Waller). They have made an important point.

I recognise the significant role that these old buildings can play in the economic life of the closure areas once they have been brought up to modern standards and adapted for new uses. We support the initiative to refurbish them. That is why, in addition to the assistance from the Community of £60 million, which is being provided over the five-year life of the scheme, the Government are providing selective financial assistance aimed at generating new small business activity. I understand that £30 million of the EEC aid is specifically earmarked for conversion projects to be undertaken by local authorities in these areas.

Despite the effective speeches made by my hon. Friends, it would not be right to make additional exceptions to the new capital allowances system. I hope that my hon. Friends will not seek to press their amendment

Mr. Heddle

Premises in textile closure areas are a special case, but, in view of what my hon. Friend the Financial Secretary has said, I shall seek leave to withdraw the amendment and perhaps return to it this time next year at a more reasonable hour. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 55, in page 163, line 2, after `Where', insert `in circumstances falling within paragraph 7A below'.

No. 56, in page 163, line 13, leave out 'paragraph' and insert 'Part of this Schedule'.

No. 57, in page 163, line 36, leave out 'in the financial year' and insert 'on 1st April'.

No. 58, in page 163, line 45, leave out 'in the financial year' and insert 'on 1st April'.

No. 59, in page 164, line 2, at end insert `except that—

  1. (a) expenditure shall not be treated for the purposes of this paragraph as having been incurred after the date on which it was in fact incurred by reason only of section 1(6) of that Act; and
  2. (b) expenditure falling within subsection (1)(b) of section 5 of that Act shall be treated for the purposes of this paragraph as having been incurred at the latest time when any expenditure falling within subsection (1)(a) of that section was incurred.'.

No. 60, in page 164, line 3, after 'Where', insert 'in circumstances falling within paragraph 7A below'.

No. 61, in page 164, line 9, after 'on', insert 'or before'.

No. 62, in page 164, line 17, leave out 'paragraph' and insert 'Part of this Schedule'.

No. 63, in page 164, line 42, leave out 'in the financial year' and insert 'on 1st April'.

No. 64, in page 165, line 6, leave out 'in the financial year' and insert 'on 1st April'.

No. 65, in page 165, line 8, at end insert 'except that expenditure shall not be treated for the purposes of this paragraph as having been incurred after the date on which it was in fact incurred by reason only of so much of section 50(4) of that Act as relates to expenditure incurred before a trade began'.

No. 66, in page 165, line 9, after 'Where', insert 'in circumstances falling within paragraph 7A below'.

No. 67, in page 165, line 19, leave out 'paragraph' and insert 'Part of this Schedule'.

No. 68, in page 165, line 42, leave out 'in the financial year' and insert 'on 1st April'.

No. 69, in page 166, line 3, leave out 'in the financial year' and insert 'on 1st April'.

No. 70, in page 166, line 5, at end insert 'except that expenditure falling within sub-paragraph (1)(b) of paragraph 8 of that Schedule shall be treated for the purposes of this paragraph as having been incurred at the latest time when any expenditure falling within sub-paragraph (1(a) of that paragraph was incurred.'.

No. 71, in page 166, line 5, at end insert— '7A. —(1) The circumstances referred to in sub-paragraph (1) of each of paragraphs 5 to 7 above is that the sole or main benefit which (apart from this Part of this Schedule) might have been expected to be gained by incurring the expenditure at the time at which it was incurred was either—

  1. (a) the securing of an initial allowance or first-year allowance in respect of the expenditure, rather than a writing-down allowance; or
  2. (b) the securing of a higher rate of initial or first-year allowance in respect of the expenditure.
(2) In sub-paragraph (1) above—

No. 72, in page 166, leave out lines 23 to 27 and insert— '9. —(1) Where, by virtue of paragraph 5(4), paragraph 6(5) or paragraph 7(4) above, a portion of any expenditure which is incurred by any person in the financial year 1984 is deemed to be incurred on 1st April 1985, so much of that expenditure as is not deemed to be incurred on that date shall be apportioned to the chargeable periods or their basis periods which begin or end in the financial year 1984 on a time basis according to the respective lengths of those periods which fall within that financial year. (2) Where, by virtue of paragraph 5(5), paragraph 6(6) or paragraph 7(5) above, a portion of the aggregate of any capital expenditure incurred and deemed to be incurred by any person in the financial year 1985 is deemed to be incurred on 1st April 1986, so much of that aggregate expenditure as is not deemed to be incurred on that date shall be apportioned to the chargeable periods or their basis periods which begin or end in the financial year 1985 on the like time basis as is specified in sub-paragraph (1) above. '. —[Mr. Moore.]

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