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Ms Hewitt: Of course I accept that the gradation of sentences according to the severity of the offence provides part of the framework for the sentencing process. However, does my hon. Friend support, as I do, the recommendation of the North report that the

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    In that way, in an offence such as careless driving, the consequences can be taken into account.

Mr. O'Brien: We have to look at the issue of consequences and intention. We must be aware that a judge may have to consider whether a person is to be sentenced for unforeseen and clearly unintentional consequences. The courts have to balance that carefully when they make a decision in such cases. The prosecution will have to decide at the beginning of the process how it is to view the case, and ensure that the court is able to make the right judgment on the appropriate penalty.

The "causing death" offences were first introduced in 1956 because there were concerns that juries were unwilling to convict drivers for manslaughter. The offences were redefined in 1972 and again in 1988. In 1991, a new offence of causing death by careless driving while under the influence of drink or drugs was created. In 1993, the maximum penalties for causing death by dangerous driving or while under the influence of drugs or alcohol were doubled from five to 10 years' imprisonment.

The current framework is broadly based on the North report, which addressed in great depth concerns that the law relating to road traffic accidents had not developed in a satisfactory manner. A number of factors were given detailed consideration, including the possibility of a new offence of causing death by careless driving. The report concluded that it would be wrong to visit on a driver severe penalties for unforeseen tragic consequences if his or her actions were careless.

Mr. Ben Bradshaw (Exeter): My hon. Friend talks about unforeseen consequences. Surely, as my hon. Friend the Member for Leicester, West said, a motor vehicle is a lethal weapon. How can my hon. Friend call the possible fatal consequences of bad driving unforeseen? Every driver should be aware that such a consequence is foreseen if they drive badly.

Mr. O'Brien: My hon. Friend misunderstands me. Any driver of a motor vehicle has to be aware that he is driving a potentially lethal weapon. If consequences occur that are the result of him behaving in a way that could cause

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death, that must be taken into account by the court. Sometimes, circumstances occur that are unforeseen, and we must be wary of the way in which we impose obligations on the court and constrain judges in their ability to impose sentences. The judge must be given a level of discretion that enables him to tailor the sentence to the circumstances.

I am a little wary of going as far as some hon. Members have suggested in constraining judges in the sentences that they can impose. I know from my practice in the courts that each case is very individual. Many different factors have to be taken into account by judges, and I am anxious to ensure that that occurs in driving cases where people are injured or killed as much as in other circumstances.

The Government's aim is to ensure that we have provisions that enable the court to deal with cases in the best way possible. We need to ensure that the Crown Prosecution Service and the police are able to put forward appropriate charges. We are seeking to provide a balance of various levels of charging and appropriate sentencing, which the courts and the prosecuting authorities can consider and tailor to the circumstances of individual cases.

It is relevant in this debate to remind hon. Members of the important provisions in the Crime and Disorder Bill, which will place a new statutory duty on the Court of Appeal to consider improving existing sentencing guidelines when cases come before the court, and to establish the principles that guidelines take into account. The Bill will establish the new sentencing advisory panel to provide advice on sentencing to the Court of Appeal and to help inform guidelines. The panel will provide the court with statistical information and will consult a wide range of interested parties, including, importantly, victims' groups. We believe that those provisions will lead to more comprehensive sentencing guidelines, which will ensure greater consistency in sentencing.

I have listened carefully to this debate. I shall liaise with my colleagues in other Departments to ensure that we get it right in tackling these serious and important issues. They need to be dealt with very sensitively and to be given the importance that they deserve, and we are determined to ensure that they are. I am grateful to my hon. Friend for providing hon. Members and the Government with an opportunity to debate these important issues today.

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Aviation (Capital Allowances)

1.29 pm

Mr. John Wilkinson (Ruislip-Northwood): It is a great privilege to introduce this debate on the impact on the long-life assets capital allowance provision on British aviation. The subject may sound arcane, but it is of real concern to business owners and operators of civil aircraft in this country, and to those who manufacture or lease them, or provide equipment for their operation, assembly and maintenance--indeed, to many thousands who earn their livelihoods in the British civil aviation industry, not least my constituents who work at Heathrow airport.

I declare an interest as chairman of a very small aviation consultancy company. However, I assure the House that my desire to raise this topic was driven entirely by the strength of the public interest case against the long-life assets provision and my desire not to see British aviation, which is broadly competitive and successful internationally, hobbled by an impost, the inherent contradictions and negative consequences of which have not been appreciated by those responsible for the formulation of fiscal policy.

Parliament's role is to assist British industry and commerce, not to damage it through imperfect knowledge or lack of intellectual rigour. The origins of this overtly discriminatory and selective tax provision go back to the Finance Act 1996, in which the annual rate of capital allowances on types of plant and machinery with a working life of 25 years or more were cut from 25 to6 per cent. per annum, with the notable exception of ships and railway assets. The provision applied only to businesses that spend more than £100,000 on such assets in any eligible year with effect from Budget day 1996.

Let me anticipate immediately the Minister's reply: that it was a Conservative measure, that the previous Government are to blame for the consequences and that it is hypocritical of me to demand repeal of the provision by the present Government. Such an attitude denies the possibility of improving legislation by parliamentary scrutiny and of governmental rectification of past errors.

A year and a half has passed since the effective date of the measure, during which representatives of the industry, the Society of British Aerospace Companies, the British Air Transport Association, the Aerodrome Owners Association, the General Aviation Manufacturers and Traders Association, and leasing institutions have come together under that repository of professional excellence, the Royal Aeronautical Society, to present their case against the long-life assets provision in meetings with the Inland Revenue and, most notably, with the Secretary of State for Trade and Industry.

To date, there has been not so much a meeting of minds as a comprehension gap between those who work in the industry and those whose job is to try to make illogical tax legislation workable. Nevertheless, I believe that logic should prevail and the Government should introduce the necessary amendment to rescind that damaging provision in the Committee stage of this year's Finance Bill. In a letter dated 7 April to Mr. Roy McNulty, chairman of

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Short Brothers, the Secretary of State for Trade and Industry not only encouraged the industry to continue to talk to the Inland Revenue, but stated:

    "It also goes without saying that my own officials"--

in the Department of Trade and Industry--

    "will be pleased to continue to discuss the details of your case with you and your colleagues whenever you wish."

Begotten in distortion and anomaly, the measure was brought forth in inconsistency and illogicality. Indeed, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) claimed in his Budget speech in the House on 26 November 1996 that it would end

    "unjustifiable distortion in the tax system in favour of particular types of business and investment."

However, he added:

    "Ships and railways will . . . be exempt".--[Official Report,26 November 1996; Vol. 286, c. 166.]

That was a remarkable non-sequitur.

Explaining that groups spending less than £100,000 a year on such assets will be exempt, my right hon. Friend asserted that it meant that the vast majority of small companies would not be affected. In aviation, that is more fantasy than mere traditional Budget hyperbole. A light training aircraft or helicopter, fully equipped, usually costs more than £100,000, so the tiniest aviation business will be affected. A civil airliner costs tens of millions of pounds, so even the smallest airline will be affected in a big way.

Aviation in Britain is already suffering discriminatory taxation in the form of airport passenger tax, from which ferry and Eurostar railway passengers are exempt. The adverse effects of the European Union's proposed abolition of the duty-free concession, which we were discussing with the Financial Secretary only last week, will not be felt by Eurostar, to which it is not extended. It will be felt by airlines and airport operators and, to a lesser extent, by ferry operators. The railways also receive generous state subsidies, which put them in a favoured position.

The present Chief Secretary to the Treasury grasped the central point at issue during the Committee stage of the Finance Bill on 22 January 1997. He said

Quite so. Unfavourable tax regimes in Britain in the post-war decades contributed to the mass migration of the British merchant marine to flags of convenience in the Isle of Man, Panama and Liberia--hardly a happy precedent for British civil aviation in such circumstances.

There is no reason why British owners and operators of civil aircraft should remain within the British fiscal jurisdiction. One need not see the expensive graffiti on the tail of a British Airways aeroplane to realise how international and mobile the airline business is. While the British rate of capital allowances was 25 per cent. on non-time-limited assets, we could compete with, for example, Sweden and Denmark's maximum rate of30 per cent. Italy's 20 to 25 per cent., which sometimes rises, in inimitable Italian style, to eight times that figure, Belgium's 33.3 per cent., France's 25 per cent. and

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Germany's rate of up to 25 per cent., to take but six European Union examples. At 6 per cent., it will be very hard for the British to compete. Our rate is way below the global norm in industrialised countries.

A competitive capital allowance rate in the United Kingdom was critical because of the huge subsidies, amounting to hundreds of millions of pounds, disbursed by European Governments to their state carriers, such as Air France, Iberia, Air Portugal, Olympic and Alitalia. We must recognise that long-life aviation assets are not just aircraft. They include the most sophisticated computer-controlled design equipment and machine tools, simulators, air traffic control radars, radio beacons, instrument landing systems--a vast range of items. Revenue officials could be asked to make a judgment, which they are technically not qualified to make, on the life of such assets, which, by virtue of type, utilisation and technical specification, can vary enormously.

An item is a long-life asset if it is reasonable to expect that the machinery or the part will have a useful economic life of at least 25 years. But what is "reasonable"? Are Inland Revenue officials to become prophets? Of 25 main airliner types in the Price Waterhouse and Airclaims report of December 1997, only four had more than50 per cent. still in service after more than 25 years. The Government have those figures, because they were in a recent submission by the Royal Aeronautical Society to the Secretary of State for Trade and Industry.

Certain consequences are clear. British aviation companies that operate aircraft can move to other EU countries and still serve the United Kingdom market, but from another jurisdiction. Is that what we want to happen? The soundest airlines commercially, which usually have the best safety record, are those with the most modern fleets, such as British Airways, Lufthansa and KLM in Europe, and Singapore Airlines and Cathay Pacific in Asia. The provisions will be a financial disincentive for British airlines to re-equip. We know the dangers of operating geriatric aircraft because of the fatal incidents involving an ALOHA 737 over the Pacific and a United Airlines 747 200, both of which suffered fuselage structural failure. Passengers were sucked into the air in flight. The other recent example is damage to fuel tank wiring found in many high-time 737s following the inspections required after the fatal mid-air explosion of a Trans World Airlines jumbo jet off New York.

An aeroplane's age is not measured in calendar years or in tax years, but in fatigue life and flight cycles. Is the Revenue to measure those? If so, how? Will it carry out an integrity audit on aircraft structures? Will it differentiate between short-haul and long-haul operations on the same type of aircraft, for example Boeing 757s and 767s, which can perform both? What would happen if a carrier interchanged between the two route sectors? It appears that the Revenue will categorise aero-engines as short-life assets, but aircraft are usually bought with engines installed. The value of the power plants is aggregated in the price, although occasionally power can be bought by the hour and individual engines have to be replaced.

The provisions appear to be an incentive to buy an aircraft almost in kit form for assembly by the airline and to claim higher capital allowances on evidently short-life items--not only engines, but tyres, interior seating and furnishings, windscreen wipers and many others. Only the

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basic structure can be expected to last 25 years, but even that is over-optimistic: many systems are replaced or upgraded during that time and the value of the aeroplane is written down and, under British aviation accounting practice, depreciated in the books over 10, 12, 15 or20 years--never over a longer period. To base tax allowances on guesstimates of an item's future life is inherently inequitable. The provisions are wholly inimical not only to small aviation businesses--the tiniest flying school will be affected--but to business aviation and manufacturing.

Even the Government's stated objective of fruitful European industrial co-operation could be prejudiced. There have been repeated arguments in Airbus Industrie about the location for the building of airbus wings, which is currently performed by British Aerospace at Chester. Such manufacturing investment and location decisions in Europe are finely balanced. If Britain will not give the balance of fiscal advantage to the British aircraft industry, the nature of aerospace co-operation will ensure that the work ends up in another partner's country, with a consequent loss of revenue and jobs in Britain.

I hope that the Government will rectify a clearly damaging provision. Since it was introduced, British manufacturing industry has moved officially into recession, but the budget deficit has greatly narrowed, so surely we need greater investment incentives. Fiscally, we can afford them. For employment, commercial and competitive reasons, we should be honest and recognise that the effect of the long-life assets provision is damaging in practice and dangerous in principle, inasmuch as it will institutionalise subjective decision making by the Revenue, as its bulletins on the subject show. Revenue officials are no more technically qualified to take such decisions than aerospace engineers are technically or professionally qualified to comment on fiscal and taxation matters, and why should they be?

There is bound to be much litigation, and aviation business will be lost to this country. If the Financial Secretary does not believe me, she should read the Royal Aeronautical Society paper of November 1997 on the implications for the United Kingdom aviation industry of the fiscal changes of November 1996 to July 1997. It is a brilliant paper of irrefutable logic, and, if she will allow me, I shall hand it to her at the conclusion of the debate. If she read it in its entirety, she could only be convinced that what I have argued is borne out by a full examination of the facts, and that the Government should put the situation right forthwith.

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