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The House divided: Ayes 205, Noes 269.
Division No. 153]
[7.37 pm



AYES


Afriyie, Adam
Alexander, Danny
Amess, Mr. David
Arbuthnot, rh Mr. James
Atkinson, Mr. Peter
Bacon, Mr. Richard
Baker, Norman
Baldry, Tony
Barker, Gregory
Baron, Mr. John
Barrett, John
Bellingham, Mr. Henry
Benyon, Mr. Richard
Bercow, John
Beresford, Sir Paul
Blunt, Mr. Crispin
Bone, Mr. Peter
Brady, Mr. Graham

Brazier, Mr. Julian
Breed, Mr. Colin
Brokenshire, James
Brooke, Annette
Browning, Angela
Bruce, rh Malcolm
Burns, Mr. Simon
Burrowes, Mr. David
Burstow, Mr. Paul
Burt, Alistair
Butterfill, Sir John
Cable, Dr. Vincent
Campbell, rh Sir Menzies
Carswell, Mr. Douglas
Cash, Mr. William
Clark, Greg
Clifton-Brown, Mr. Geoffrey
Conway, Derek
Corbyn, Jeremy
Cox, Mr. Geoffrey
Crabb, Mr. Stephen
Davey, Mr. Edward
Davies, Mr. Dai
Davies, David T.C. (Monmouth)
Davies, Philip
Djanogly, Mr. Jonathan
Dorrell, rh Mr. Stephen
Dorries, Mrs. Nadine
Drew, Mr. David
Duddridge, James
Duncan Smith, rh Mr. Iain
Dunne, Mr. Philip
Ellwood, Mr. Tobias
Fabricant, Michael
Fallon, Mr. Michael
Farron, Tim
Featherstone, Lynne
Foster, Mr. Don
Francois, Mr. Mark
Fraser, Mr. Christopher
Garnier, Mr. Edward
Gauke, Mr. David
Gillan, Mrs. Cheryl
Goldsworthy, Julia
Goodman, Mr. Paul
Goodwill, Mr. Robert
Gove, Michael
Grayling, Chris
Greening, Justine
Grieve, Mr. Dominic
Hammond, Stephen
Hands, Mr. Greg
Harper, Mr. Mark
Harvey, Nick
Hayes, Mr. John
Heald, Mr. Oliver
Heath, Mr. David
Heathcoat-Amory, rh Mr. David
Hemming, John
Hendry, Charles
Herbert, Nick
Hermon, Lady
Hoban, Mr. Mark
Hogg, rh Mr. Douglas
Hollobone, Mr. Philip
Holloway, Mr. Adam
Holmes, Paul
Horam, Mr. John
Horwood, Martin
Hosie, Stewart
Howarth, David
Howarth, Mr. Gerald
Hughes, Simon
Huhne, Chris
Hurd, Mr. Nick
Jack, rh Mr. Michael
Jackson, Mr. Stewart
Johnson, Mr. Boris
Jones, Mr. David
Kawczynski, Daniel
Keetch, Mr. Paul
Key, Robert
Kirkbride, Miss Julie
Knight, rh Mr. Greg
Kramer, Susan
Lamb, Norman
Lansley, Mr. Andrew
Laws, Mr. David
Leech, Mr. John
Leigh, Mr. Edward
Letwin, rh Mr. Oliver
Lewis, Dr. Julian
Liddell-Grainger, Mr. Ian
Lidington, Mr. David
Llwyd, Mr. Elfyn
Loughton, Tim
Mackay, rh Mr. Andrew
Maclean, rh David
MacNeil, Mr. Angus
Main, Anne
Maples, Mr. John
May, rh Mrs. Theresa
McIntosh, Miss Anne
McLoughlin, rh Mr. Patrick
Mercer, Patrick
Miller, Mrs. Maria
Milton, Anne
Mitchell, Mr. Andrew
Moore, Mr. Michael
Moss, Mr. Malcolm
Mulholland, Greg
Mundell, David
Murrison, Dr. Andrew
Neill, Robert
Newmark, Mr. Brooks
O'Brien, Mr. Stephen
Öpik, Lembit
Osborne, Mr. George
Ottaway, Richard
Paice, Mr. James
Paterson, Mr. Owen
Pelling, Mr. Andrew
Penning, Mike
Penrose, John
Price, Adam
Pritchard, Mark
Pugh, Dr. John
Randall, Mr. John
Redwood, rh Mr. John
Reid, Mr. Alan
Rennie, Willie
Robathan, Mr. Andrew
Robertson, Hugh
Robertson, Mr. Laurence
Rogerson, Dan
Rosindell, Andrew
Rowen, Paul
Ruffley, Mr. David
Russell, Bob
Sanders, Mr. Adrian
Scott, Mr. Lee
Selous, Andrew

Shapps, Grant
Shepherd, Mr. Richard
Simmonds, Mark
Simpson, Alan
Smith, Sir Robert
Soames, Mr. Nicholas
Spicer, Sir Michael
Spink, Bob
Spring, Mr. Richard
Stanley, rh Sir John
Streeter, Mr. Gary
Stuart, Mr. Graham
Stunell, Andrew
Swinson, Jo
Syms, Mr. Robert
Tapsell, Sir Peter
Taylor, Matthew
Teather, Sarah
Thurso, John
Tyrie, Mr. Andrew
Vara, Mr. Shailesh
Viggers, Peter
Villiers, Mrs. Theresa
Walker, Mr. Charles
Wallace, Mr. Ben
Waterson, Mr. Nigel
Watkinson, Angela
Webb, Steve
Whittingdale, Mr. John
Widdecombe, rh Miss Ann
Wiggin, Bill
Williams, Hywel
Williams, Mark
Williams, Mr. Roger
Willis, Mr. Phil
Willott, Jenny
Wilson, Mr. Rob
Wilson, Sammy
Winterton, Ann
Winterton, Sir Nicholas
Wishart, Pete
Wright, Jeremy
Yeo, Mr. Tim
Young, rh Sir George
Younger-Ross, Richard
Tellers for the Ayes:

Mr. David Evennett and
Mr. Mark Lancaster
NOES


Abbott, Ms Diane
Ainger, Nick
Ainsworth, rh Mr. Bob
Allen, Mr. Graham
Anderson, Mr. David
Anderson, Janet
Atkins, Charlotte
Austin, Mr. Ian
Bailey, Mr. Adrian
Baird, Vera
Balls, Ed
Banks, Gordon
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Bayley, Hugh
Begg, Miss Anne
Bell, Sir Stuart
Benn, rh Hilary
Benton, Mr. Joe
Betts, Mr. Clive
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blears, rh Hazel
Blizzard, Mr. Bob
Blunkett, rh Mr. David
Borrow, Mr. David S.
Bradshaw, Mr. Ben
Brennan, Kevin
Brown, Lyn
Brown, rh Mr. Nicholas
Browne, rh Des
Bryant, Chris
Burden, Richard
Burgon, Colin
Burnham, Andy
Butler, Ms Dawn
Byrne, Mr. Liam
Cairns, David
Campbell, Mr. Alan
Campbell, Mr. Ronnie
Caton, Mr. Martin
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clapham, Mr. Michael
Clark, Ms Katy
Clarke, rh Mr. Tom
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Cook, Frank
Cooper, Rosie
Cooper, Yvette
Cousins, Jim
Crausby, Mr. David
Cryer, Mrs. Ann
Cummings, John
Cunningham, Mr. Jim
Cunningham, Tony
Curtis-Thomas, Mrs. Claire
Darling, rh Mr. Alistair
Davidson, Mr. Ian
Dean, Mrs. Janet
Denham, rh Mr. John
Devine, Mr. Jim
Dhanda, Mr. Parmjit
Dismore, Mr. Andrew
Dobbin, Jim
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Dunwoody, Mrs. Gwyneth
Eagle, Angela
Ellman, Mrs. Louise
Ennis, Jeff
Farrelly, Paul
Fisher, Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Flint, Caroline
Follett, Barbara
Foster, Mr. Michael (Worcester)
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Gapes, Mike

George, rh Mr. Bruce
Gerrard, Mr. Neil
Gibson, Dr. Ian
Gilroy, Linda
Godsiff, Mr. Roger
Goggins, Paul
Goodman, Helen
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. David
Hamilton, Mr. Fabian
Hanson, rh Mr. David
Harman, rh Ms Harriet
Harris, Mr. Tom
Havard, Mr. Dai
Healey, John
Hendrick, Mr. Mark
Hepburn, Mr. Stephen
Heppell, Mr. John
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hill, rh Keith
Hillier, Meg
Hood, Mr. Jim
Hope, Phil
Hopkins, Kelvin
Howarth, rh Mr. George
Howells, Dr. Kim
Hoyle, Mr. Lindsay
Hughes, rh Beverley
Humble, Mrs. Joan
Hutton, rh Mr. John
Iddon, Dr. Brian
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, rh Alan
Johnson, Ms Diana R.
Jones, Helen
Jones, Mr. Kevan
Jones, Lynne
Jones, Mr. Martyn
Joyce, Mr. Eric
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Keen, Alan
Keen, Ann
Kemp, Mr. Fraser
Khan, Mr. Sadiq
Kidney, Mr. David
Knight, Jim
Kumar, Dr. Ashok
Ladyman, Dr. Stephen
Lammy, Mr. David
Lazarowicz, Mark
Lepper, David
Levitt, Tom
Lewis, Mr. Ivan
Love, Mr. Andrew
Lucas, Ian
Mackinlay, Andrew
Malik, Mr. Shahid
Mann, John
Marris, Rob
Marsden, Mr. Gordon
Marshall-Andrews, Mr. Robert
Martlew, Mr. Eric
McAvoy, rh Mr. Thomas
McCabe, Steve
McCarthy, Kerry
McCarthy-Fry, Sarah
McCartney, rh Mr. Ian
McDonnell, John
McFadden, Mr. Pat
McFall, rh John
McGovern, Mr. Jim
McGrady, Mr. Eddie
McGuire, Mrs. Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
McNulty, Mr. Tony
Meacher, rh Mr. Michael
Merron, Gillian
Miliband, Edward
Miller, Andrew
Mitchell, Mr. Austin
Moffat, Anne
Moffatt, Laura
Mole, Chris
Moon, Mrs. Madeleine
Moran, Margaret
Morden, Jessica
Morgan, Julie
Morley, rh Mr. Elliot
Mountford, Kali
Mudie, Mr. George
Mullin, Mr. Chris
Munn, Meg
Murphy, Mr. Denis
Murphy, Mr. Jim
Murphy, rh Mr. Paul
Osborne, Sandra
Owen, Albert
Palmer, Dr. Nick
Plaskitt, Mr. James
Pope, Mr. Greg
Pound, Stephen
Prentice, Bridget
Primarolo, rh Dawn
Prosser, Gwyn
Purchase, Mr. Ken
Purnell, James
Raynsford, rh Mr. Nick
Reed, Mr. Andy
Reed, Mr. Jamie
Robertson, John
Robinson, Mr. Geoffrey
Rooney, Mr. Terry
Roy, Mr. Frank
Ruane, Chris
Ruddock, Joan
Russell, Christine
Ryan, Joan
Salter, Martin
Seabeck, Alison
Sheerman, Mr. Barry
Sheridan, Jim
Simon, Mr. Siôn
Singh, Mr. Marsha
Skinner, Mr. Dennis
Slaughter, Mr. Andy
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Smith, rh Jacqui
Smith, John
Snelgrove, Anne
Soulsby, Sir Peter

Southworth, Helen
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stoate, Dr. Howard
Strang, rh Dr. Gavin
Stringer, Graham
Sutcliffe, Mr. Gerry
Tami, Mark
Taylor, David
Thomas, Mr. Gareth
Timms, rh Mr. Stephen
Tipping, Paddy
Todd, Mr. Mark
Touhig, rh Mr. Don
Trickett, Jon
Turner, Dr. Desmond
Turner, Mr. Neil
Twigg, Derek
Ussher, Kitty
Vaz, rh Keith
Walley, Joan
Waltho, Lynda
Ward, Claire
Wareing, Mr. Robert N.
Watts, Mr. Dave
Whitehead, Dr. Alan
Wicks, Malcolm
Williams, rh Mr. Alan
Wills, Mr. Michael
Winnick, Mr. David
Winterton, rh Ms Rosie
Wood, Mike
Woodward, Mr. Shaun
Woolas, Mr. Phil
Wright, David
Wright, Mr. Iain
Wright, Dr. Tony
Wyatt, Derek
Tellers for the Noes:

Jonathan Shaw and
Huw Irranca-Davies
Question accordingly negatived.
26 Jun 2007 : Column 230

26 Jun 2007 : Column 231

26 Jun 2007 : Column 232

26 Jun 2007 : Column 233

Clause 35


Industrial and agricultural buildings allowances

Julia Goldsworthy: I beg to move amendment No. 39, page 27, line 2, leave out clause 35.

The intention behind the amendment is to raise concerns about the impact of changes to the industrial and agricultural buildings allowances on particular businesses. I want to highlight the comments of the Institute of Chartered Accountants in England and Wales, which said at the outset:

However, it goes on to say:

The key concern is that there does not appear to have been sufficient consultation on the impact of the changes. Although there is a consensus that there is a need for reform to the tax system, questions have been raised about the motivation for the proposal we ended up with in this year’s Finance Bill. Was it a considered attempt to reform the tax system or was it something included at the last minute to try to make the corporation tax proposals as a whole add up?

The allowance or charge for businesses on disposing of agricultural and industrial buildings is being withdrawn for disposals taking place after 20 March 2007. I understand that in next year’s Finance Bill the annual writing-down allowance will be phased out. If the move was a considered one, it is certainly not regarded in that light by businesses directly affected by the changes. Like other members of the Public Bill Committee, I have been contacted by an organisation called Towngate Estates Ltd, which will be greatly affected by the changes.


26 Jun 2007 : Column 234

The person who wrote the letter wanted to highlight the impact that the changes would have on his business and, in particular, he wanted to highlight the lack of consultation. He writes:

In his comments, he quotes the August 2003 paper, which says:

As he goes on to say, there was no reference to the fact that IBAs would be stopped altogether. In fact, the language is about extending and reforming the existing allowance, rather than about getting rid of it. The same goes for the December 2004 paper. Again, the paper suggests that the allowance could be extended. The person writing the letter concludes by saying that, in 2011, the proposals

That is a real example of what I am talking about. There has not been adequate consultation.

My other concern is how the change will impact on different sectors. One of the concerns raised by the Institute of Chartered Accountants is that it is more likely to impact on a number of UK business sectors, including manufacturing, farming and capital intensive sectors such as the hotel trade, which is currently anticipating the need for capital investment prior to the forthcoming Olympics. My concern is that people involved in those businesses will be affected by the changes on the basis of decisions that they may have made up to 24 years previously. In that respect, the change has a retrospective impact. That relates to the comments we made yesterday about how the small business rate increases would impact on different sectors and regions of the economy, depending on how they were weighted in terms of how capital intensive they were, the size of the business and what it was focusing on.

That concerns me, because I have businesses in my constituency that will be affected. There is a farm in my constituency—like most farms in Cornwall, it is very small—that made one of the first commercial objective 1 grant applications for European funds that were available to try to help develop the economy in some of the poorest parts of Europe. The farm made use of that allowance to diversify into cheese production and it qualified for agricultural buildings allowance. The farm has an ABA residue of only about £15,000; the dairy, which is newer and has been more heavily invested in, has a residue of more than £300,000. The point is that decisions to invest were made in good faith and jobs have been created as a result, but now that is being placed under threat because of a decision taken at a much later date. I am sure that there are similar examples all over the country.

I am reminded of the merits of the new clause tabled by the right hon. Member for Birkenhead (Mr. Field), which we discussed yesterday. He talked about the need for real clarity in terms of the impact of personal taxation changes on particular groups. This is another classic example of where we need to understand the interrelated impact of lots of taxation decisions in the
26 Jun 2007 : Column 235
Finance Bill on different business sectors in different regions. Businesses also need to understand how all the proposals interact.

As I bring my remarks to a close, I want to highlight again the concerns of the Institute of Chartered Accountants. There are concerns that there has not been sufficient time for detailed consultation and consideration and there is a feeling that the Government should withdraw the clause at this point in order to undertake more consultation and consideration. If they will not do that, will they grandfather existing assets so that companies such as the farm in my constituency do not face a much more uncertain tax future?

Mr. Drew: I rise to support what the hon. Lady has said. I have a farmer in my constituency, Rob Warren of Moreton Valence, who has undertaken a major capital project that involves building a new milking parlour. The cost of the whole project comes to something over £1 million. Part of the proposal to undertake that work was predicated on getting the agricultural buildings allowance, which, as far as I understand, is tapered down over a period of time. To lose that allowance at this time is, at the very least, problematic to his farm and his business. Without the allowance, it would have been much more difficult for him to develop his proposal—certainly at this time.

I have sat down with Mr. Warren at his table in his kitchen—as most of us do when we meet farmers—and I am the first to accept that we are talking about something that is hideously complicated. My simple economist’s brain went no way towards grasping the fine mesh by which the measure has been working over the years. Nevertheless, it seems to have worked in the sense that Mr. Warren and various other people in the agricultural industry have been encouraged to undertake major improvements to increase the efficiency of their businesses—as the hon. Lady said— and, in the case of Mr. Warren’s business, to achieve a greater milk yield. I have seen Mr. Warren’s impressive operation.

8 pm

Will my right hon. Friend the Chief Secretary explain why the proposed change was brought forward? While there has been a reduction in corporation tax, the measure will not help business planning in this particular industry. Indeed, it will create a disincentive because farmers who were thinking about making major capital investment have probably reconsidered that. I hope that my right hon. Friend will be able to persuade me and Mr. Warren that the Government have alternative plans so that such important projects can be brought forward. I hope that the measure has not been rushed through, given that it could damage the agricultural trade, which has taken advantage of the allowance. The industry might be peculiar in that it has had a special arrangement with the Treasury. However, it would not be helpful if that arrangement was lost at a time when the agriculture sector is in difficulty and the milk business, especially, is in a somewhat parlous position. I hope that my right hon. Friend will give me some good news and that he can reassure Mr. Warren that his investment was worth while and that the Government are helping him.


26 Jun 2007 : Column 236

Mr. James Paice (South-East Cambridgeshire) (Con): I want to address the way in which the agricultural buildings allowance affects tenant farmers. I am sure that my hon. Friend the Member for Fareham (Mr. Hoban) will cover the wider aspects of the amendment. However, I doubt that the Treasury talked to the Department for Environment, Food and Rural Affairs about the matter and examined the agricultural holdings legislation.

Some 40 per cent. of farmers in this country are tenants who do not own the land on which they farm. Agricultural holdings legislation—tenancy legislation—allows them, with the permission of the landowner, to construct buildings on the land, but they never own the buildings. The ownership reverts to the landowner either at the end of the tenancy, or at the end of any fixed period agreed between the landowner and the tenant.

In the past, the agricultural buildings allowance has been the only form of return for tenant farmers constructing such buildings, apart from the benefit of the buildings. They have no capital asset to sell or let because they are not the owners of the land. The retrospective nature of clause 35 means that they will lose the ABA and have nothing. As the hon. Members for Stroud (Mr. Drew) and for Falmouth and Camborne (Julia Goldsworthy) said, the measure will hit all farmers, but it will hit especially hard those tenant farmers who do not own the land on which a building is constructed.

I appreciate the Chief Secretary’s interest in my speech. I suspect that what I am saying is news to him and that he did not know about the agricultural holdings legislation. It would be a tremendous gesture if he were to agree that the approach in the Bill is not sensible, at least until he has talked to DEFRA officials about the impact that the measure will have on the 40 per cent. of farmers in this country who do not own their farms and rely on the ABA as the only way of getting back the capital that they have invested in a farm building that will never be theirs to dispose of, or to benefit from in any other way.

I support the gist of the amendment. I hope that the Chief Secretary will think about the damage that the measure will do to an important sector of our agricultural industry.

Mr. Peter Atkinson (Hexham) (Con): I agree entirely with my hon. Friend the Member for South-East Cambridgeshire (Mr. Paice). The change could not have happened at a worse time for the farming industry, which has gone through a funding revolution following the introduction of the single payment scheme. All sorts of new things are spinning out as a result of that. Farmers are advised to put their houses in order by farming for profit, not for subsidy. That requires structural changes to agricultural holdings, especially buildings.

As we heard from the hon. Member for Stroud (Mr. Drew), farmers have recently been investing considerably in reorganising their buildings and structures. Such investment leads not to appreciating assets, but depreciating ones. It results in metal buildings that are designed for a particular purpose, and their time will expire over the next 20 or 30 years. That is why farmers who invested large sums of capital took into consideration the fact that they would benefit from the agricultural buildings allowance. In effect, the change will bring about retrospective taxation that will cause farmers considerable problems.


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