§ Mr Higgins
asked the President of the Board of Trade if he will give examples showing the effect which the latest change in investment allowances will have on the rate of return on capital invested in a typical project or projects on a discounted cash flow basis and on a simple rate of return basis, respectively.
§ Mr. Darling
It is not possible to identify a typical project for this purpose since the proportions of expenditure on plant and machinery, on buildings, and for the provision of working capital, and also the rates of return, vary widely from case to case. The following table shows the cash recoveries from investment grants and tax reliefs in respect of £100 investment in machinery or plant which qualifies for investment grants.
Cash recoveries not discounted Cash recoveries discounted at 7 per cent. p.a. £ £ National Standard 20 per cent. rate of grant (a) on introduction 52.0 40.1 (b) when in full operation 52.0 41.4 Temporary 25 per cent. rate of grant 55.0 43.3 Development Areas Normal 40 per cent. rate of grant (a) on introduction 64.0 52.7 (b) when in full operation 64.0 55.2 Temporary 45 per cent. rate of grant 67.0 55.8
Notes on Tables:
(i) The calculations are based on 40 per cent. rate of Corporation Tax. For the purpose of calculating annual allowances against tax, it has been assumed that the plant or machinery is retained for ten years and that the annual allowance is 15 per cent. on the reducing balance.
(ii) It has been assumed that the firm earns sufficient taxable profits to take full advantage of tax allowances at the earliest possible date.
(iii) In the second column, total cash recoveries have been discounted back to the time of the investment expenditure. The figures relating to grants "on introduction", and to the temporary higher rates, assume an eighteen month interval between investment and receipt of grants. The figures relating to grants "when in full operation" are based on grants being received after six months. In all cases it is assumed that the first tax reliefs are enjoyed eighteen months after the expenditure.384W
§ Mr. Onslow
asked the President of the Board of Trade how many Departmental staff are wholly or mainly employed with the administration of investment grants; and what is the total annual cost so involved, taking into account salaries, pensions, provisions and all other overheads.
§ Mr. Darling
As my right hon. Friend explained to the hon. Member for Gloucestershire, South (Mr. Corfield) on 22nd July, 1966 about 1,200 staff will administer investment grants. Total annual staff costs will be approximately £2.3 million.—[Vol. 732, c.163.]