§ 56. Mr. David Steelasked the Secretary of State for Trade and Industry if he will publish a table comparing the discounted value to industry of the old and new investment incentives, as a percentage of the cost of the investment, separating ordinary and development areas and distinguishing between new plant and machinery, secondhand plant and machinery, and industrial buildings, assuming a one-year delay in payment of grants and tax, sufficient profits to claim all allowances, a 10-year life for plant and machinery, a 10 per cent. discount rate and a 15 per cent. initial allowance for industrial buildings in non-development areas.
§ Mr. RidleyYes. The information is immediately available on slightly different assumptions which I hope will be satisfactory to the hon. Member and it is contained in the following table. I must add, however, that the table alone will not be a fully adequate basis for comparison since the question ignores, e.g. the benefit of the cut in Corporation Tax and much of the improved LEA assistance.
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of the new incentive. This shows most clearly in the figures for industrial buildings outside special areas where the rate of allowance remains unaltered, but the apparent incentive value of the allowances is reduced, solely because there is now less tax to be saved. The more flexible use of the powers to make loans under the Local Employment Acts. The increase in the administrative limits regulating the amount the L.E.A. assistance that may be given under the Local Employment Acts. The wider use of grants for infrastructure and clearing derelict land. B. Footnotes (1) Between 15 and 20 per cent. of manufacturers' investment in plant and machinery was ineligible for investment grant (e.g. vehicles, office, canteen and welfare equipment and items costing less than £25). (2) More plant and machinery in Development Areas will attract the new 100 per cent. writing down allowance than attracted investment grant (e.g. office machinery used in industrial buildings, welfare and canteen equipment and items costing less than £25) and more taxpayers will be eligible (e.g. some wholesalers, laundries, warehouse keepers, etc., excluded from grant as service industries). (3) The two figures are for the lowest (15 per cent.) and highest (25 per cent.) of the old writing down allowances. There was an intermediate rate of (20 per cent.). The average rate was about 17 or 17½ per cent., and the lower figure is therefore more typical. C. Differences from the Assumptions in the Question (1) Delay. An 18-month delay was assumed for tax (but not for grant), instead of 12. (2) Life of asset. 9 years was assumed for assets subject to 25 per cent. writing down allowance, and 19 years for those subject to 15 per cent., instead of 10 years for all. D. Other Assumptions (1) Life of asset. Industrial buildings have been assumed to have a life in excess of 22 years. (2) Bringing into use of assets. It has been assumed that all assets have been brought into use in the year in which expenditure has been incurred, (3) Balancing allowance. The undepreciated balance at the end of the assets life was taken. (4) Type of plant and machinery. The figures given are for ordinary plant or machinery. There were or are special arrangements for some assets, e.g. motor cars, computers, assets used for scientific research. (5) Initial Allowance for Buildings. The question assumed a pre-April, 1970 or post-April, 1972 rate in non-Development Areas. The same assumption is made for all areas.