§ Mr. Nigel Waterson (Eastbourne)
I beg to move amendment No. 2, in page 91, line 48, leave out 'three' and insert 'six'.
§ Madam Deputy Speaker
With this, it will be convenient to discuss also the following amendments: No. 3, in page 92, line 23, leave out 'three' and insert 'six'.
No. 4, in clause 88, page 96, line 28, leave out 'three' and insert 'six'.
No. 5, in page 96, line 37, leave out 'three' and insert 'six'.
No. 6, in page 96, line 47, leave out 'three' and insert 'six'.
§ Mr. Waterson
As I did in Committee, I declare a sort of interest, in that I am a solicitor who, for many years, has specialised in maritime law. Sadly, the number of British clients for whom I have worked over the years has steadily declined.
The original announcement by my right hon. and learned Friend the Chancellor was much welcomed, not only by myself and other hon. Members who support the cause of British shipping, but by all the major British shipping organisations. It is, however, important to get the details right and ensure that roll-over relief is as available as possible to a wide cross-section of British shipping.
I pay tribute to the efforts of my right hon. Friend the Member for Worthing (Sir T. Higgins), who is in his place, and my hon. Friends the Members for Pudsey (Sir G. Shaw), for Dover (Mr. Shaw) and for Croydon, South (Mr. Ottaway)—the latter is also in his place—for putting forward the arguments for British shipping, not only this year but in previous years, and to all other right hon. and hon. Members who take a similar view.
The amendment that I originally proposed in Committee sought to make roll-over relief available for a period of seven years. That has become a period of six years in the amendments before us. In any case, it is designed to be a significant improvement on the original period of three years announced by my right hon. and learned Friend the Chancellor. His announcement was that capital allowance balancing charges for ships would be allowed to roll over for a period of up to three years from 1567 the date on which a ship was disposed of, and that that would be set off against subsequent expenditure on ships within that period. He said:competitively, tax measures available overseas put our ship owners at a particular disadvantage".I echo those words today.
Most ships have a long and useful working life, in some cases significantly more than 20 years. When an owner trades a ship on the charter market, particularly the spot market, commercial success in the long run often depends on the crucial decision of when to buy or sell that asset. By introducing roll-over relief in this form, the Government recognised the need to help British shipowners to make rational decisions of that sort—when to buy and when to sell—based not on the need to avoid taxes but on commercial considerations and market expectations.
That is the nub of the issue. At three years, the period of the relief was simply not long enough to allow a totally rational decision to be made based on the state of the market at that time. In some circumstances, it would encourage British shipowners to make tax avoidance decisions rather than profit-maximising and investment decisions.
Cycles in the shipping market extend well beyond three years. To recognise the harsh realities of the international shipping market, UK shipowners must be allowed to exploit shipping cycles in exactly the same way as their major competitors in other countries, such as Greece, do year in, year out, and invest in ships when the market dictates rather than prematurely because of those considerations. I am delighted that, as a result of those discussions and representations, my right hon. Friend the Financial Secretary has listened and is prepared to accept the amendments.
May I put down a marker for two related issues, which were touched on in Committee and may be matters for on-going discussions with the Chamber of Shipping and in the House in future years? The first is group relief. Modern shipping is based on groups of companies and lending institutions' need for so called "clean" companies, or when new buildings are bought via their original owning company. Currently, only the same company that has sold a vessel is permitted to use roll-over relief for new investment. That is unduly restrictive.
The second issue is that of foreign connected parties. International groups are typical in shipping. Naturally, robust precautions are necessary against abuse, but to force a shipowner to invest in unconnected tonnage when his group has something more commercially desirable to do would be unproductive and uncommercial—in short, a distortion.
British shipping is not a sunset industry looking for handouts from the taxpayer. All it asks is the removal of unfair advantages enjoyed by its foreign competitors, or measures to match those advantages. A vibrant, successful and growing British fleet is not only an absolute good in itself but an essential underpinning for the continued success of the City of London, the British economy and Britain's defences.
§ Ms Hilary Armstrong (Durham, North-West)
I congratulate the hon. Member for Eastbourne (Mr. Waterson) on his persistence and determination to turn the 1568 Government's mind. It is interesting to note that, if the hon. Gentleman is right and the Government intend to concede, we will have managed to have concessions in almost every part of the Bill. That is remarkable for a Finance Bill. It suggests a listening Government who are slightly anxious about things.
I notice that one of the signatories to the amendment, the hon. Member for Dover (Mr. Shaw), is not in his seat. However, we read in the newspapers this morning where he would be at 6 o'clock this evening—meeting the Chancellor, arguing for tax cuts. The way in which Conservative Members cope with, on the one hand, arguing for tax cuts and, on the other hand, arguing for increased public expenditure is interesting. We welcome the hon. Member for Dover to those contradictions. Perhaps it is politic of me to say no more about that.
I congratulate the hon. Member for Eastbourne on his determination to improve the ability of shipping organisations to increase the number of ships built in this country, for which the Opposition have fought hard. We have also argued, and will continue to argue, for an increase in the number of merchant seamen who come from this country. Both those issues are important to us.
My hon. Friend the hon. Member for Stoke-on-Trent, North (Ms Walley) has argued vociferously on both those issues, as have two of my neighbours, my hon. Friends the Members for Wallsend (Mr. Byers) and for Newcastle upon Tyne, East (Mr. Brown).
My hon. Friends the Members for Wallsend and for Stoke-on-Trent, North are both in their seats. I am sorry that my hon. Friend the Member for Newcastle upon Tyne, East is not here. He spent many a long year and many a long hour on the Finance Bill, and he is beginning to wonder what on earth has happened that has meant that this year, since he ceased to be a member of the Finance Bill Committee, we have managed to wrench so many concessions out of the Government. There may be a lesson somewhere in that.
The crucial importance of these yearly debates has been that they have taken place while merchant shipping in this country has deteriorated significantly. Indeed, my hon. Friends the Members for Wallsend and for Newcastle upon Tyne, East have witnessed the real effect of the deterioration of British merchant shipping and British Navy shipping; they have witnessed the demise of shipbuilding on the Tyne in the region that they represent.
The arrival in Southampton this week of the magnificent new cruise ship, Oriana, was heralded by cries of, "Why did that ship have to be built outside the United Kingdom?" It was also heralded by statements by shipowners that they believed that never again would a ship of such size be built in British waters.
It is an incredible indictment of the Government that it is now being said that this country, which at one time was able to build the finest ships in the world and was noted for them throughout the world, will not be able to build ships of that nature in future. We have the skills and the expertise, we have the rivers, but we now no longer have the capacity in our yards to do that type of work. It is a tragedy, and the Government will for ever be indicted for that legacy.
I am delighted that the Government have conceded—I understand that the Minister is to concede—on these amendments. However, I would ask the Minister what he estimates will be the cost to the public purse of the 1569 concessions, and what the Government will do to monitor their effect. There are two criteria against which Opposition Members believe that any concessions should be judged—first, the increase in the number of ships that are built in British yards and, secondly, the increase in the number of merchant seamen who come from the United Kingdom.
Concessions from the British taxpayer are important if they are able to produce increased productivity for British shipyards and increased activity for British merchant seamen. It is important that, if we are agreeing increased money from the British taxpayer, we know that that money will be used in the right way and will be spent on meeting those ends.
What steps will the Financial Secretary take to monitor progress? In Committee, the Government argued both that such a change was not necessary and that, if those concessions were made—certainly the second one—they might amount to a tax loophole. I should be interested to know whether the Government have any other opinions that do not relate to the fact that five Conservative Back Benchers have signed the amendment, and whether it was that or the arguments that persuaded them. I am sure that it was the arguments, and I am sure that the Minister would not be tempted to admit that it was anything else.
Shipping is in a poor condition. We have an enormous amount to make up. I hope that the Government are seriously considering how they can ensure that more ships are built in British yards and that there is a resurgence in the British merchant shipping industry.
We welcome the concessions that the Minister is making, but I hope that he will monitor them to ensure that they will herald a resurgence in British shipping.
§ Sir Terence Higgins (Worthing)
I begin by congratulating my hon. Friend the Member for Eastbourne (Mr. Waterson) on the way in which he has pursued those matters in Committee and on moving the amendment. I hope that I shall be able to congratulate the Government on accepting the amendment that he has moved.
I would add a word or two about the remarks made by the hon. Member for Durham, North-West (Ms Armstrong). I spent about seven years in the shipping industry, a considerable time ago. It is important to distinguish between the shipbuilding industry and the shipping industry; the hon. Lady confused the two. Many of the problems from which the shipping industry—that is to say, the ship operators—has suffered have resulted from the extent to which the shipbuilding industry throughout the world has been subsidised and excess capacity created.
I found it extraordinary that the hon. Member for Durham, North-West should somehow seek to blame the decline in the shipbuilding industry on the present Government, because it took place a long time ago—as long ago as when I was in the ship-operating industry. The reason for the decline was largely the appalling restrictive trade practices that were to be found on the trade union side in that industry. That was what affected the industry.
As my right hon. and hon. Friends on the Front Bench will know, especially the Minister of State, Treasury, that matter has been coming up in Finance Bills year after year. It has taken us a very long time to obtain a 1570 satisfactory outcome, although I welcome the fact that the Chancellor last year announced that he was going to introduce clauses broadly on the lines of clause 86 and the subsequent clauses, which now extend for more than 11 pages of carefully drafted legislation.
I very much welcome the fact that, at that stage, the Chancellor had accepted the case for roll-over relief. I was surprised, therefore, to discover from the subsequent statements and the legislation now before us that it was restricted to three years. One knows very well, from one's own experience in the industry, that the cycle in the shipping industry—it is essentially a cyclical industry—extends for much longer than three years. Therefore, the fact that my hon. Friend the Member for Eastbourne moved an amendment to make it six years-which I understand the Government will accept—is very welcome.
A three-year arrangement would have had little effect, whereas a six-year period gives a reasonable opportunity for British shipowners to reinvest money in line with the market movements in the trade, to be able to sell at the top end of the trade and, one hopes, buy at the bottom end of the cycle.
I shall add a word or two to what has been said about group relief. I hope that my right hon. Friend the Financial Secretary will not think that, in asking for group relief, I am being like Oliver Twist and asking for more and more. If one has any regard for the structure of the British shipping industry, group relief must be an intrinsic part of roll-over relief.
In the same way that making the period three years instead of six would have greatly restricted the roll-over relief, given the industry's structure, not having group relief would greatly reduce the effectiveness of the measure, which I understand my right hon. and learned Friend the Chancellor and his colleagues now accept. Many shipping companies are one-ship companies and operate as part of a group, with various subsidies. Unless group relief is given, the general relief will be considerably restricted.
I understand that subsequent discussions with the industry have highlighted some difficult drafting points in relation to group relief. Given the length of time that the matter has been under discussion, that is extraordinary. I should have thought that the issue would have been sorted out before now. I hope that my right hon. Friend will say that he will consider the group relief aspect of what is essentially a part of the change in roll-over relief, or its effect will be greatly diminished.
There has always been another amendment related to the 100 per cent. first year allowances. I accept that it would be difficult for the Government to make that concession as the repercussions in the industry would be considerable—even though it would help the liner trade, whereas the group of amendments that we are discussing largely helps the tramp trade. But if we accept that the Government are not prepared to countenance first year allowances—I well understand the reasons for that—the Government must redouble their efforts to prevent other Governments acting to give their shipping industries a competitive advantage.
The French still have subsidies for ship investment and fleet modernisation. The Germans give considerable reliefs. In Greece—the most extreme example—shipping companies pay no corporation tax. My right hon. Friend the Financial Secretary will be as familiar as I am with 1571 the range of devices used by other countries to give their shipping companies a competitive advantage over British shipping.
I hope that my right hon. Friend will cover the group relief issue—which is very much the limit of what the Government have in mind for the shipping industry. My right hon. Friend must redouble his efforts, perhaps at the intergovernmental conference or in negotiations with other European Union countries, to get rid of the appalling discrimination that occurs in other countries, and establish a level playing field.
I congratulate my hon. Friend the Member for Eastbourne, and hope that the Financial Secretary gives us a positive response.
§ Ms Joan Walley (Stoke-on-Trent, North)
I shall be brief, as I know that other hon. Members wish to speak, and we have to make progress.
We welcome the concession that we believe the Financial Secretary is about to make. As my hon. Friend the Member for Durham, North-West (Ms Armstrong) said, if the concession is made, it will be welcomed on both sides of the House.
The amendment did not come about by accident, but because a joint campaign has been waged by the trade unions—by the National Union of Rail, Maritime and Transport Workers and NUMAST, the National Union of Marine, Aviation and Shipping Transport Officers—working in partnership with the Chamber of Shipping. The campaign also received cross-party support. It is amazing what can be achieved when there is an ever-reducing number of Conservative Members. There are still people who want to see the shipping industry take advantage of the opportunities that exist worldwide. We want the British industry to take advantage of those opportunities.
I have a sense of déjagrave vu, because, almost a year ago when we last discussed the subject, it seemed that we would never achieve a breakthrough and persuade the Government to concede the issue of roll-over relief. Those of us who were so involved in the campaign this time last year felt that what happened then was only a beginning.
If the Government make a concession today, it will be welcome, but just as we have made progress on last year, we should now ensure that there is a close partnership, including not just the Treasury but the Department of Trade and Industry, where there are opportunities to assist new shipbuilding, the Department of Employment, where there are opportunities to create new jobs for British seafarers, and the Department of Transport, where there is currently a debate on transport.
We must put shipping at the centre of transport policy, and see what opportunities exist. I want the concession to be not a once-and-for-all concession, but the start of a transport policy that recognises the role of British shipping and the part that British seafarers have to play in that role.
§ Mr. Richard Ottaway (Croydon, South)
If the hon. Member for Stoke-on-Trent, North (Ms Walley) wanted to help British shipping, it is a shame that she did not support the proposal for an open register made last year.
1572 I declare an interest as parliamentary adviser to the Baltic exchange. While my hon. Friend the Member for Eastbourne (Mr. Waterson) argues largely on behalf of the Chamber of Shipping, the Baltic exchange speaks for the service sector of the British maritime sector. My right hon. Friend the Member for Worthing (Sir T. Higgins) spoke of the difference between shipowning and shipbuilding. There is a third element: the service sector, which exists behind London as a maritime centre.
While the British fleet is small—I suspect that the overall cost of the amendment would not be huge—the maritime sector in the City of London is large. It comprises brokers, bankers, lawyers, underwriters, P and I executives and a huge number of people who work in the centre of British shipping, making London the maritime centre of the world. The maritime sector earns huge invisible exports for this country.
I believe that, when discussing subsequent Finance Bills, we may have to return to the subject of the ways in which the maritime service sector can be consolidated in its position as the world's premier maritime centre. Other centres are already trying to become competitive and undermine our leading position. It is essential that we consolidate our position at the centre of world shipping.
It is clear that we need a viable home fleet. I know that I speak for the service sector in the City of London in supporting the amendments.
§ Sir George Young
I pay tribute to my hon. Friend the Member for Eastbourne (Mr. Waterson) who, throughout the passage of the Finance Bill, has tirelessly championed the cause of the shipping industry. I agree with what he said this afternoon, particularly on the strategic importance of the shipping industry.
I take very much on board what my right hon. Friend the Member for Worthing (Sir T. Higgins) said about the need to look at the discrimination and anti-competitive pressures that exist in other countries. I shall certainly ensure that my right hon. Friend the President of the Board of Trade and other Ministers read his speech and take appropriate action. Bobbing in the wake of my right hon. and hon. Friends are Opposition Members, and we are, of course, grateful for their support.
We have debated roll-over relief for shipping extensively in Committee, so my remarks can be brief. As my right hon. Friend the Member for Worthing said, the hon. Member for Durham, North-West (Ms Armstrong) spoke as much about the shipbuilding industry as the shipping industry. We provide financial support to the shipbuilding industry, under the shipbuilding intervention fund and the home shipbuilding credit guarantee scheme. But the measures before the House involve the shipping industry.
The point of roll-over relief is to encourage reinvestment in the merchant fleet in the face of competition from other countries, a number of which provide extensive tax subsidies to their shipping fleets. It is important, with a measure such as roll-over relief, to get the period right. The period must be long enough to ensure that the timing of the investment is not distorted or dominated by the mere ticking of a clock.
However, if the period is set too long, the measure goes beyond facilitating investment. By encouraging calculation about future price movements to dominate, it can cause commercially justified and economically desirable investment to be delayed. There is no magic 1573 formula for the right period. It is a matter of judging the right balance in the particular circumstances of this unique industry.
In Committee, the eloquence of my hon. Friends convinced me that our original proposal for a three-year roll-over period is too short by a significant margin. It carries too great a chance that, in too many cases, investment would be forced by the expiry of the roll-over period and would be below par in economic terms, so the Government have concluded that a substantial increase in the period is needed, and a doubling of the roll-over period is warranted. The Government are therefore content to accept the amendments proposed by my hon. Friend the Member for Eastbourne, and we commend them to the House.
My right hon. and hon. Friends put down some markers. They threw some buoys overboard, which are bobbing in the water to be picked up or not by the Finance Bill Committee when it cruises past next year. We will, of course, monitor carefully the effect of the amendments.
I was asked about the cost. The cost of the measure as it now stands in the Bill peaks at £20 million in 1996–97, and starts to decline in 1998–99. The amendments mean that the peak costs would continue until 2001-02. I commend them to the House.
§ Amendment agreed to.
§ Amendment made: No. 3, in page 92, line 23, leave out 'three' and insert 'six'.—[Mr. Waterson]