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Mr. John Wilkinson (Ruislip-Northwood): The hon. Gentleman is making an important point and a significant speech because the long-life asset provisions of the Finance Act 1997 are damaging the offshore rig industry, and so on, and also doing considerable damage to the air transport industry. He will be aware that I introduced an Adjournment debate on that subject. I hoped that the Liberal Democrat party might have pursued that area of interest, which is crucial not just for air transport, but for the air manufacturing industry.

11 pm

Mr. Burnett: I am grateful to the hon. Gentleman for making that point. He is correct, and I am delighted to associate myself and my party with his concerns about further problems in relation to the aircraft industry; but the new clause relates to sea-going industries. If he wishes to table an amendment--I am afraid that it is probably too late now, but it might be possible for next year's Finance Bill--I am sure that we will see fit to support it.

The Institute for Fiscal Studies has cast doubt on whether the projected yields from the introduction of long-life assets would ever be achieved. In any event, the new clause will account only for a small fraction of the anticipated revenue. I hope that the House will support it.

Dr. Norman A. Godman (Greenock and Inverclyde): I offer my compliments to the hon. Member for Torridge and West Devon (Mr. Burnett). Speaking as an ex-shipyard worker, a shipwright by trade, I confirm that the yard in his constituency, Appledore, is first class. Unfortunately, from time to time, it has won orders at the expense of shipyards in my neck of the woods--the lower and upper Clyde--but it is an important new clause.

30 Jun 1998 : Column 262

My hon. Friend the Economic Secretary knows well the two yards on the Clyde that the hon. Member mentioned--Ferguson on the lower Clyde and Kvaerner in Govan, Glasgow; some of her constituents work in both yards. I reckon that some several hundred of my constituents, highly skilled workers, are employed at Ferguson and Kvaerner. For that constituency reason, I am keen to offer my sympathy to the new clause.

It is important that owners of offshore supply vessels such as those that the hon. Member for Torridge and West Devon mentioned, are given support because, in fairness to them, they almost always place their orders in UK shipyards, unlike many other UK vessel owners, who go overseas, where there are often hidden subsidies that enable those yards to secure orders against our yards. Those offshore support vessel owners have a fine record in placing their orders in our constituencies. I wish that they would place more orders in mine than in the hon. Gentleman's, but we defend our own corners.

The hon. Gentleman mentioned 17 such vessels. Kvaerner, which is notable for its specialist skills in the building of liquefied petroleum gas tankers, is now building these vessels. If I had had the opportunity, I would have tabled an amendment to the new clause to the effect that no support should be given to shipowners who place their orders overseas. The House will have to forgive me for being ethnocentric about this, but I think that we should look after our own shipyards. Whenever I have met shipowners, I have told them that, if they are seeking our assistance to argue the case in the House for the kind of financial help that they receive in other countries--especially the Scandinavian countries--they have to give us an assurance in return that they will make every attempt to place their orders in our yards.

The new clause refers to

The hon. Gentleman mentioned Harland and Wolff in Belfast, which is an important employer in that bedevilled Province. It employs about 1,800 men and women, I think. In my constituency, UIE of Clydebank is converting such a vessel--and it is a vessel. The hon. Gentleman is right to say that it is more than a production platform. I hope that my hon. Friend the Minister will take that on board--I should not have said that, but I hope that the House will forgive the pun--because these contracts are superb contracts to win. Let me give an example. The vessel being built now in Greenock is employing upwards of 1,000 highly skilled men. I hope that UIE of Clydebank will secure more of those orders.

I can see that the Government Whip is getting a bit anxious. Perhaps he is gloomy because his team went down tonight. I cannot do anything about that, being a Scots Member of Parliament, but he has my commiserations.

Surely some sympathy must be shown to shipowners who place their orders in UK shipyards. We all benefit if they do. It should be emphasised that it is not only maritime communities that benefit from these orders but communities miles away from the coastline--for example, the communities that provide the electronic equipment that goes into making these vessels. I simply plead for sympathy from the Minister, and I hope that my brief speech pleases the grumpy Whip.

30 Jun 1998 : Column 263

Mrs. Liddell: This has been a brief but very interesting debate. I commend the hon. Member for Torridge and West Devon (Mr. Burnett) for raising this issue. I especially commend my hon. Friend the Member for Greenock and Inverclyde (Dr. Godman) for his contribution. As he knows, I live but two miles from the Ferguson yard in Port Glasgow and about six miles from the Kvaerner yard in Govan. My constituents do indeed work in both yards.

The first few years of my working life were connected with trying to secure the long-term future of shipbuilding on the Clyde. As a young economist, and with my right hon. Friend the Secretary of State for Defence, I spent probably two to three years dealing with the problems being experienced on the Clyde as a consequence of the rundown of shipbuilding and with the problems of Upper Clyde Shipbuilders. I therefore approach the issue with some sympathy, but I am not able to accept the new clause. [Interruption.] I hope that hon. Gentlemen will allow me to finish this serious point. I am not able to accept the new clause, but I hope that I may be able to provide some information that is of comfort to the hon. Member for Torridge and West Devon and to my hon. Friend the Member for Greenock and Inverclyde.

The aim of the long-life asset measure was to improve the neutrality of the tax system by bringing the tax treatment of such assets more closely into line with the actual rate of depreciation. Ships and railways were both exempted until 2010 because of the special circumstances in each of those sectors. Long-life assets qualify for capital allowances at a rate of 6 per cent. a year, whereas, as the hon. Gentleman said, other plant and machinery qualify for allowances at a rate of 25 per cent. a year.

The exclusion was aimed at the merchant shipping sector, and it would be very difficult to extend it to cover floating production storage and off-take units or drilling rigs. Annual capital allowances at 25 per cent. would write off nearly half the cost of an asset in the first two years, and three quarters of the cost in the first five years--which clearly is not neutral treatment for assets that have a working life of more than 25 years. The capital allowances would outstrip by far the actual depreciation rate.

If a floating production storage and off-take unit or a drilling rig has an expected economic life of more than 25 years, it is clearly right that it should not qualify for the 25 per cent. capital allowances. Conversely, if the asset has an expected economic life of less than 25 years, it will already be outside the scope of the long-life asset rules.

This may be where I can give the hon. Member for Torridge and West Devon some comfort. We have not seen any current evidence that the provisions are discouraging investment in the North sea. However, the Inland Revenue has made it clear to the oil industry that it is prepared to agree in advance the economic life of assets that are used in the industry, and that each asset will be considered individually, to arrive at a reasonable estimate of expected economic life. Given the overall aim of the long-life asset rules, that is an appropriate way of dealing with the units that he mentioned--floating production storage and off-take units and drilling rigs.

30 Jun 1998 : Column 264

I hope that, with that comfort, the hon. Gentleman might choose to withdraw his new clause. If not, I regret to say that I shall have to ask the House to resist it.

Mr. Burnett: Liberal Democrat Members are grateful for the Minister's comments. The problem is that, even using my amended capital allowance system, it would take a considerable time--eight years--to ride out for tax purposes the cost of an asset. That is a long time. Even with my amendment, the allowances available in the United Kingdom compared with those available abroad put us right at the back of queue. We do not sufficiently encourage our shipbuilding and shipping industries. It is with regret that we have to force the matter to a vote.

Question put, That the clause be read a Second time:--

The House divided: Ayes 37, Noes 272.

Division No. 321
[11.12 pm


Allan, Richard
Baker, Norman
Ballard, Jackie
Brake, Tom
Brand, Dr Peter
Bruce, Malcolm (Gordon)
Burnett, John
Campbell, Menzies (NE Fife)
Chidgey, David
Cotter, Brian
Davey, Edward (Kingston)
Ewing, Mrs Margaret
Fallon, Michael
Foster, Don (Bath)
George, Andrew (St Ives)
Hancock, Mike
Harris, Dr Evan
Harvey, Nick
Heath, David (Somerton & Frome)
Hughes, Simon (Southwark N)
Jones, Nigel (Cheltenham)
Kirkwood, Archy
Livsey, Richard
Llwyd, Elfyn
Michie, Mrs Ray (Argyll & Bute)
Moore, Michael
Morgan, Alasdair (Galloway)
Öpik, Lembit
Rendel, David
Russell, Bob (Colchester)
Sanders, Adrian
Smith, Sir Robert (W Ab'd'ns)
Swinney, John
Tyler, Paul
Wallace, James
Webb, Steve
Welsh, Andrew

Tellers for the Ayes:

Mr. Andrew Stunell and
Mr. Donald Gorrie.


Adams, Mrs Irene (Paisley N)
Ainger, Nick
Ainsworth, Robert (Cov'try NE)
Alexander, Douglas
Anderson, Janet (Rossendale)
Armstrong, Ms Hilary
Ashton, Joe
Atkins, Charlotte
Austin, John
Banks, Tony
Beard, Nigel
Begg, Miss Anne
Bennett, Andrew F
Benton, Joe
Bermingham, Gerald
Berry, Roger
Betts, Clive
Blears, Ms Hazel
Blizzard, Bob
Boateng, Paul
Borrow, David
Bradley, Keith (Withington)
Bradley, Peter (The Wrekin)
Bradshaw, Ben
Brinton, Mrs Helen
Brown, Rt Hon Nick (Newcastle E)
Brown, Russell (Dumfries)
Browne, Desmond
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Byers, Stephen
Caborn, Richard
Campbell, Alan (Tynemouth)
Campbell, Mrs Anne (C'bridge)
Campbell, Ronnie (Blyth V)
Cann, Jamie
Caplin, Ivor
Casale, Roger
Chapman, Ben (Wirral S)
Chaytor, David
Chisholm, Malcolm
Clapham, Michael
Clark, Rt Hon Dr David (S Shields)
Clark, Dr Lynda
(Edinburgh Pentlands)
Clark, Paul (Gillingham)
Clarke, Charles (Norwich S)
Clarke, Tony (Northampton S)
Clelland, David
Coaker, Vernon
Coffey, Ms Ann
Cohen, Harry
Coleman, Iain
Connarty, Michael
Cook, Frank (Stockton N)
Corbyn, Jeremy
Corston, Ms Jean
Cousins, Jim
Cranston, Ross
Crausby, David
Cummings, John
Cunliffe, Lawrence
Cunningham, Jim (Cov'try S)
Dalyell, Tam
Davey, Valerie (Bristol W)
Davidson, Ian
Davies, Rt Hon Denzil (Llanelli)
Davies, Rt Hon Ron (Caerphilly)
Davis, Terry (B'ham Hodge H)
Dawson, Hilton
Dean, Mrs Janet
Denham, John
Dismore, Andrew
Dobbin, Jim
Donohoe, Brian H
Doran, Frank
Dowd, Jim
Drew, David
Eagle, Angela (Wallasey)
Eagle, Maria (L'pool Garston)
Ellman, Mrs Louise
Ennis, Jeff
Etherington, Bill
Field, Rt Hon Frank
Flint, Caroline
Flynn, Paul
Foster, Rt Hon Derek
Foster, Michael J (Worcester)
Foulkes, George
Galbraith, Sam
Gapes, Mike
Gardiner, Barry
George, Bruce (Walsall S)
Gibson, Dr Ian
Gilroy, Mrs Linda
Godman, Dr Norman A
Goggins, Paul
Golding, Mrs Llin
Gordon, Mrs Eileen
Grant, Bernie
Griffiths, Jane (Reading E)
Griffiths, Nigel (Edinburgh S)
Grogan, John
Gunnell, John
Hain, Peter
Hall, Mike (Weaver Vale)
Hamilton, Fabian (Leeds NE)
Hanson, David
Heal, Mrs Sylvia
Henderson, Ivan (Harwich)
Heppell, John
Hewitt, Ms Patricia
Hill, Keith
Hinchliffe, David
Hoey, Kate
Home Robertson, John
Hoon, Geoffrey
Howarth, Alan (Newport E)
Howarth, George (Knowsley N)
Hoyle, Lindsay
Hughes, Ms Beverley (Stretford)
Hughes, Kevin (Doncaster N)
Humble, Mrs Joan
Hutton, John
Iddon, Dr Brian
Illsley, Eric
Jackson, Ms Glenda (Hampstead)
Jackson, Helen (Hillsborough)
Jamieson, David
Jenkins, Brian
Jones, Mrs Fiona (Newark)
Jones, Dr Lynne (Selly Oak)
Jones, Martyn (Clwyd S)
Keeble, Ms Sally
Keen, Alan (Feltham & Heston)
Keen, Ann (Brentford & Isleworth)
Khabra, Piara S
Kidney, David
Kilfoyle, Peter
King, Andy (Rugby & Kenilworth)
Kingham, Ms Tess
Kumar, Dr Ashok
Ladyman, Dr Stephen
Lepper, David
Leslie, Christopher
Lewis, Terry (Worsley)
Liddell, Mrs Helen
Linton, Martin
Livingstone, Ken
Lloyd, Tony (Manchester C)
Lock, David
Love, Andrew
McAllion, John
McAvoy, Thomas
McCabe, Steve
McCafferty, Ms Chris
McCartney, Ian (Makerfield)
McDonagh, Siobhain
McDonnell, John
McFall, John
McGuire, Mrs Anne
McKenna, Mrs Rosemary
McLeish, Henry
McNulty, Tony
MacShane, Denis
Mactaggart, Fiona
Mahon, Mrs Alice
Mandelson, Peter
Marsden, Gordon (Blackpool S)
Marsden, Paul (Shrewsbury)
Marshall, David (Shettleston)
Marshall, Jim (Leicester S)
Marshall-Andrews, Robert
Martlew, Eric
Maxton, John
Meacher, Rt Hon Michael
Meale, Alan
Merron, Gillian
Michael, Alun
Milburn, Alan
Miller, Andrew
Mitchell, Austin
Moffatt, Laura
Morgan, Ms Julie (Cardiff N)
Morgan, Rhodri (Cardiff W)
Morris, Ms Estelle (B'ham Yardley)
Mudie, George
Mullin, Chris
Murphy, Jim (Eastwood)
O'Brien, Bill (Normanton)
O'Brien, Mike (N Warks)
Olner, Bill
O'Neill, Martin
Organ, Mrs Diana
Osborne, Ms Sandra
Palmer, Dr Nick
Pearson, Ian
Pendry, Tom
Pickthall, Colin
Pike, Peter L
Plaskitt, James
Pope, Greg
Pound, Stephen
Powell, Sir Raymond
Prentice, Ms Bridget (Lewisham E)
Prentice, Gordon (Pendle)
Primarolo, Dawn
Prosser, Gwyn
Purchase, Ken
Quin, Ms Joyce
Quinn, Lawrie
Radice, Giles
Rammell, Bill
Reed, Andrew (Loughborough)
Reid, Dr John (Hamilton N)
Robertson, Rt Hon George
(Hamilton S)
Roche, Mrs Barbara
Ross, Ernie (Dundee W)
Rowlands, Ted
Roy, Frank
Ruddock, Ms Joan
Russell, Ms Christine (Chester)
Ryan, Ms Joan
Salter, Martin
Savidge, Malcolm
Sedgemore, Brian
Shaw, Jonathan
Sheerman, Barry
Short, Rt Hon Clare
Simpson, Alan (Nottingham S)
Singh, Marsha
Skinner, Dennis
Smith, Rt Hon Andrew (Oxford E)
Smith, Miss Geraldine
(Morecambe & Lunesdale)
Smith, Llew (Blaenau Gwent)
Soley, Clive
Southworth, Ms Helen
Spellar, John
Squire, Ms Rachel
Steinberg, Gerry
Stevenson, George
Stewart, Ian (Eccles)
Stoate, Dr Howard
Stott, Roger
Strang, Rt Hon Dr Gavin
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Gerry
Taylor, Rt Hon Mrs Ann
Temple-Morris, Peter
Thomas, Gareth R (Harrow W)
Timms, Stephen
Touhig, Don
Trickett, Jon
Truswell, Paul
Turner, Dennis (Wolverh'ton SE)
Turner, Dr Desmond (Kemptown)
Twigg, Derek (Halton)
Vaz, Keith
Vis, Dr Rudi
Walley, Ms Joan
Wareing, Robert N
Watts, David
White, Brian
Whitehead, Dr Alan
Wicks, Malcolm
Williams, Alan W (E Carmarthen)
Winnick, David
Wood, Mike
Woolas, Phil
Wright, Anthony D (Gt Yarmouth)
Wright, Dr Tony (Cannock)

Tellers for the Noes:

Jane Kennedy and
Mr. Jon Owen Jones.

Question accordingly negatived.

30 Jun 1998 : Column 266

Further consideration adjourned.--[Mr. Robert Ainsworth.]

Further still to be further considered tomorrow.

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