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1.46 pm

The Financial Secretary to the Treasury (Dawn Primarolo): I congratulate the hon. Member for Ruislip-Northwood (Mr. Wilkinson) on securing this important debate, but he was quite wrong in his forecast of what I would say. I am glad that he pointed out that the measures were introduced by the previous Government: there was a debate on the Floor of the House and many of the points that he raised were covered, although I regret that he was not able to participate.

I share the hon. Gentleman's interest in the aviation industry, beyond my ministerial responsibilities. He will be aware of the importance of the industry to Bristol, for which I am a Member of Parliament. I concede, however, that my knowledge is not as detailed as his--he has

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personal experience of the industry. I concur with his points about its importance to the United Kingdom economy and in terms of the development of technology.

I am aware of the United Kingdom aviation industry's concerns about the impact of the long-life assets legislation. The Government have received numerous representations from bodies such as the Royal Aeronautical Society, the British Air Transport Association and the General Aviation Manufacturers and Traders Association.

At the end of the debate, I shall be happy to take the submission offered by the hon. Gentleman. We probably already have it, but, in the spirit of co-operation, I shall respond positively to his suggestion on that matter. I met representatives of the bodies I mentioned in January this year to discuss this matter and I understand that the industry has several distinct areas of concern. These have to be addressed in a logical order.

The first area is the nature of the test to be applied in determining whether the long-life asset rate of 6 per cent. of capital allowance applies. The legislation applies to any asset with an expected useful economic life as an asset of any business of 25 years or more. I listened to the hon. Gentleman's points about the practice of British aircraft companies and how long they would keep an aircraft in operation, but he knows full well that that is not necessarily the end of that aircraft's working life, because the company will sell it on. Therefore, asset life reflects several decisions that the company will make.

Outside the aviation industry, most long-life assets are likely to remain in service in the hands of one owner throughout their economic lives, so the test is easy to apply in most cases. The accounting policy of the business will have to take into account the expected service life of the asset in that particular business; in such cases, the tax treatment will follow whatever accounting treatment is reasonably applied. However, aeroplanes are different: they are likely to be sold in working order and will still have a stretch of useful economic working life after they have left the hands of their first owner. Not only will the expected length of service with the first owner have to be taken into account, but expected subsequent useful life will have to considered.

I entirely accept that the test is a new one imposed by the legislation to which the hon. Gentleman referred, which may create uncertainty and may involve additional costs. However, there is a potential way round those problems of uncertainty and additional compliance costs. The Inland Revenue has been negotiating with

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representatives of the industry with a view to arriving at an industrywide agreement that would set out which categories of aircraft should be treated as being within the long-life asset rules and which should continue to receive 25 per cent. allowance as before. The most recent meeting held to discuss that was held on 6 May.

As a first step in those negotiations, the industry submitted a claim, supported by a report examining evidence on existing aircraft lives, that no commercial passenger plane can be reasonably expected to have a useful economic life exceeding 25 years. The Inland Revenue is currently discussing that claim with the industry. If the industry is right--this relates to the hon. Gentleman's point about possible amendments to Finance Bills--and an industrywide agreement is reached that no commercial aircraft come within the long-life asset rules, the long-life assets capital allowance rules will have no effect on the British aviation industry. It is incredibly important that that point is first settled by agreement between the Government and the industry.

However, if it turns out that the industry is wrong and the facts do not support the claim that aircraft are not long-life assets, then, and only then, the aviation industry's other areas of concern, on which the hon. Gentleman has touched today and which have been detailed in submissions to the Inland Revenue and in discussions with me, will come into play.

I do not want to prejudge the issue, but, in recognition of the seriousness of the hon. Gentleman's points and my own keen interest in the subject, I have asked the Inland Revenue to press on with its negotiations with the industry to establish whether aircraft do come within the long-life asset rules. Only when we have an answer to the questions whether aircraft are long-life assets and, if so, how many are involved will we be able to gauge the real impact of these provisions on the aviation industry and deal with the other issues raised by the industry.

I assure the hon. Gentleman that, although the rules were inherited from the previous Government and were passed without criticism from Conservative Members at the time, the matter is one which we take seriously. We are pursuing it actively with the industry to ensure a satisfactory conclusion. If, at a later stage, the hon. Gentleman wishes to pursue the matter in correspondence with me, I shall be happy to respond as positively as I can and keep him informed of developments.

It being before Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

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Oral Answers to Questions


The Secretary of State was asked--

Killyleagh Yarns

1. Mr. John D. Taylor (Strangford): When she was advised by Killyleagh Yarns that it had financial difficulties; when the Industrial Development Board offered a rescue package to Killyleagh Yarns; when she was told of the decision to close the factory in Killyleagh; and what proposals she has made to attract new jobs to Killyleagh. [40679]

The Minister of State, Northern Ireland Office (Mr. Adam Ingram): Herdmans, the company that owns Killyleagh Yarns, has kept the Industrial Development Board informed of the developing international market conditions that led to the decision on 27 April to announce the closure of Killyleagh and Mossley mills. No financial rescue package was offered to the company, as it was considered that that would not have stopped or averted the closure decision. Killyleagh will continue to be marketed as a suitable location for new IDB investment opportunities when they arise.

Mr. Taylor: Over the past 10 days, I have been to Killyleagh twice. As the Minister will appreciate, the village and its people are devastated by the decision. It is a rural village in the southern part of County Down, although it is in the Strangford constituency.

Will the Minister confirm that the closure took place without any prior consultation with trade unions? Will he also confirm that his Department will make every effort to claw back any grants that are due to it for plant and equipment provided for the factory? Will he further confirm that he will make every effort--on the international scene and through the IDB--to attract another company to the premises in Killyleagh, as the present owners are obviously making no effort whatever?

Mr. Ingram: Of course we recognise the impact of the closure on Killyleagh and the surrounding area. It is an important employer, and the loss of any employer of that size clearly has an impact on such a community. Consultation with trade unions is a matter for the company, but I suggest to the company that it is important to consult the work force and the unions. As for grant clawback, if there has been any breach of conditions relating to support given to the company in relation to the closure, we will consider it.

The right hon. Gentleman's last question--an important question--concerned how we would continue to market the area, and try to attract new investment. The initiative announced by the Chancellor yesterday begins the search for new ways to encourage growth in the Northern Ireland economy. If we achieve the right result on 22 May, peace and prosperity can go hand in hand, as the Chancellor said. I am sure that that will offer the best future for areas such as Killyleagh.

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Peace Process

2. Mr. Bill O'Brien (Normanton): If she will make a statement on the contribution of the European Community to an outcome in the peace negotiations in Northern Ireland. [40680]

10. Mr. David Hanson (Delyn): What discussions she is having with the European Union with regard to measures to assist the peace process. [40689]

The Secretary of State for Northern Ireland (Marjorie Mowlam): The European Union played an essential part in the process that led to the agreement on Good Friday. More than £1.3 billion has been given to Northern Ireland from the structural funds, the International Fund for Ireland and the peace and reconciliation programme, allowing 10,000 community groups across the divide to build confidence and trust between them.

Mr. O'Brien: I thank my right hon. Friend for that reply, and join her in thanking the EU for its contribution to the development of peace and prosperity in Northern Ireland. Does she share my view that a substantial number of people in the EU--as in the United Kingdom--want a substantial yes vote in the referendum that will be held in the very near future? Will she tell us a little more about how the EU can develop the prosperity of Northern Ireland, and the peace accord?

Marjorie Mowlam: I join my hon. Friend in acknowledging European support, and I hope and believe that there is a chance for a peaceful future for the people of Northern Ireland and the island of Ireland.

I could go into great detail about the EU's impact, but I will choose just two examples. The money has been given via district partnerships, of which there are 26 in Northern Ireland. Political parties, community groups, trade unions and businesses from both sides of the political divide have sat down to allocate that money, which has proved an important confidence-building measure.

Good examples of how the money has been used are the sort of groups that were represented this morning at the launch of Sir Kenneth Bloomfield's report on victims, entitled "We Will Remember Them". Several such groups, such as WAVE and Lifeline, have been funded by the European Union.

Mr. William Ross (East Londonderry): We are grateful for the sums received from the Common Market, especially the money spent at grass-roots level. We are equally grateful for the expenditure announced by the Chancellor yesterday. But does the Secretary of State also recall that agriculture, the most important industry in Northern Ireland, is suffering grievously from the high value of the pound and the lack of movement on the green pound issue? May we shortly expect an announcement to resolve some of agriculture's financial difficulties?

Marjorie Mowlam: I thank the hon. Gentleman for acknowledging the importance and value of the Chancellor's package, which has been six to eight months in the making. It includes an acknowledgement of the

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need to help the beef industry in Northern Ireland-- £2 million for the marketing of beef--in the hope that, when the Commission's report and conclusions are eventually published, this crucial market for Northern Ireland can be restored.

Mr. Hanson: Does my right hon. Friend agree that the European Union is in a unique position to support the efforts of the British and Irish Governments to maintain and develop the peace process? Can she give us any details of how the latest 100 mecu announced by the EU will be used in 1999 to support the peace process after the referendum?

Marjorie Mowlam: The 100 mecu which President Santer announced on a recent visit is a welcome and important package--although it is still going through the European Parliament, so nothing is definite yet. The groups funded by the EU are considering how to make community groups sustainable without being dependent on external resources, if the money does not continue to flow in ad infinitum.

Mr. Michael Fabricant (Lichfield): I welcome the EU's financial contribution, which is much needed, but will the right hon. Lady also acknowledge that it is the unique position of the United States of America, which shares a common language, heritage and understanding of the English legal system, that put it in a position to co-chair the peace talks?

Marjorie Mowlam: It is important to acknowledge the significance both of America and the EU--it does not help to play one off against the other. Both have helped tremendously, in terms of markets, investment and direct financial help, to build communities and communication from the bottom up.

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