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Patten, Rt Hon Chris (Bath)

Patten, Rt Hon John

Pawsey, James

Peacock, Mrs Elizabeth

Porter, Barry (Wirral S)

Porter, David (Waveney)

Powell, William (Corby)

Price, Sir David

Raffan, Keith

Raison, Rt Hon Sir Timothy

Redwood, John

Renton, Rt Hon Tim

Rhodes James, Sir Robert

Riddick, Graham

Ridley, Rt Hon Nicholas

Rifkind, Rt Hon Malcolm

Roberts, Rt Hon Sir Wyn

Rossi, Sir Hugh

Rost, Peter

Rowe, Andrew

Rumbold, Rt Hon Mrs Angela

Ryder, Rt Hon Richard

Sackville, Hon Tom

Sayeed, Jonathan

Scott, Rt Hon Nicholas

Shaw, David (Dover)

Shaw, Sir Giles (Pudsey)

Shaw, Sir Michael (Scarb')

Shelton, Sir William

Shephard, Mrs G. (Norfolk SW)

Shepherd, Colin (Hereford)

Shepherd, Richard (Aldridge)

Sims, Roger

Skeet, Sir Trevor

Smith, Sir Dudley (Warwick)

Smith, Tim (Beaconsfield)

Speed, Keith

Speller, Tony

Spicer, Sir Jim (Dorset W)

Spicer, Michael (S Worcs)

Squire, Robin

Stanbrook, Ivor

Stanley, Rt Hon Sir John

Steen, Anthony

Stern, Michael

Stevens, Lewis

Stewart, Allan (Eastwood)

Stewart, Andy (Sherwood)

Stewart, Rt Hon Sir Ian

Sumberg, David

Summerson, Hugo

Tapsell, Sir Peter

Taylor, Sir Teddy

Tebbit, Rt Hon Norman

Temple-Morris, Peter

Thompson, D. (Calder Valley)

Thompson, Patrick (Norwich N)

Thorne, Neil

Thurnham, Peter

Townend, John (Bridlington)

Townsend, Cyril D. (B'heath)

Tracey, Richard

Tredinnick, David

Trippier, David

Trotter, Neville

Twinn, Dr Ian

Viggers, Peter

Wakeham, Rt Hon John

Walden, George

Walker, Bill (T'side North)

Waller, Gary

Walters, Sir Dennis

Ward, John

Wardle, Charles (Bexhill)

Watts, John

Wells, Bowen

Wheeler, Sir John

Whitney, Ray

Widdecombe, Ann

Wiggin, Jerry

Wilkinson, John

Wilshire, David

Winterton, Mrs Ann

Winterton, Nicholas

Wolfson, Mark

Wood, Timothy

Yeo, Tim

Younger, Rt Hon George

Tellers for the Noes :

Mr. David Lightbown and

Mr. John M. Taylor.

Question accordingly negatived .

New Clause 9

Capital allowances

In section 24 of the Capital Allowances Act 1990, for subsections (2)(a)(i) and (ii) there is substituted "33er cent. of the qualifying expenditure per annum.".'.-- [Mr. David Shaw.]

Brought up, and read the First time .

Mr. David Shaw (Dover) : I beg to move, That the clause be read a Second time.-- [Interruption.]

Madam Deputy Speaker : Order. Hon. Members who are leaving the Chamber should do so quietly so that the hon. Member can be heard.

Mr. Frank Haynes (Ashfield) : Buzz off.

Mr. Shaw : I thank you, Madam Deputy Speaker, and the hon. Member for Ashfield (Mr. Haynes) who has assisted in quietening the Chamber.

New clause 9 would change the rate of corporation tax allowance from a current writing down allowance of 25 per cent. on a reducing balance to a one third per annum allowance on a straight line basis. That would mean that all fixed assets purchased by business would be written off

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over a three-year period instead of the current arrangement whereby the writing down allowance goes on virtually for ever if the asset remains in the business.

The proposal would help in particular the shipping industry, which was the subject of another amendment, manufacturing industry, farming and small businesses, all of which in one way or another depend on purchasing capital items. As the proposal is worded, it would not be a subsidy to investment. The old allowance of 100 per cent. in the first year was recognised as a subsidy for certain types of investment, although in the case of shipping there was a strong argument that it would not be a subsidy. Certainly, a one third per annum allowance would not be a subsidy for investment.

The new clause is necessary because it would be an incentive to invest in the United Kingdom. We have a problem, because although we are competitive internationally in the rate of corporation tax, we are no longer competitive in the writing down allowances that are given for investment in British industry. The basis on which I rely for that statement is a research paper produced by the Federal Reserve bank of New York. It completed a considerable piece of work on comparisons between the United Kingdom, Japan, Germany and the United States of America. We were immensely competitive in capital allowances until the changes in the mid-1980s. Since then we have become less competitive. It is necessary to restore that position. One may be tempted to ask why we are uncompetitive in capital allowances. It is because of a ridiculous attitude in the Inland Revenue that goes back some years. I spent some time as an auditor in the 1970s trying to understand this. It is a strange attitude. In the United States of America the capital allowance regime works on the principle that, whatever the company decides should be its accounting depreciation rate, the Internal Revenue Service will go along with it. In some companies that means that the tax allowances are up front nearer to the time when the investment is made, and in other companies they are deferred. Industry has the option of determining its own allowances according to the conditions within the business. Any company in this country would probably enjoy that sort of tax regime and the Government should consider it, because it fits in with the free market philosophy. If a company is writing off its investments at a certain rate, surely the tax system should also accept that rate.

8.15 pm

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