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Session 2007 - 08
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Finance Bill

Finance Bill

The Committee consisted of the following Members:

Chairmen: Frank Cook, Mr. Jim Hood, † Sir Nicholas Winterton
Atkins, Charlotte (Staffordshire, Moorlands) (Lab)
Blackman-Woods, Dr. Roberta (City of Durham) (Lab)
Blizzard, Mr. Bob (Waveney) (Lab)
Bone, Mr. Peter (Wellingborough) (Con)
Breed, Mr. Colin (South-East Cornwall) (LD)
Browne, Mr. Jeremy (Taunton) (LD)
Cable, Dr. Vincent (Twickenham) (LD)
Chapman, Ben (Wirral, South) (Lab)
Eagle, Angela (Exchequer Secretary to the Treasury)
Efford, Clive (Eltham) (Lab)
Field, Mr. Mark (Cities of London and Westminster) (Con)
Gauke, Mr. David (South-West Hertfordshire) (Con)
Greening, Justine (Putney) (Con)
Hall, Patrick (Bedford) (Lab)
Hammond, Mr. Philip (Runnymede and Weybridge) (Con)
Hands, Mr. Greg (Hammersmith and Fulham) (Con)
Hesford, Stephen (Wirral, West) (Lab)
Hoban, Mr. Mark (Fareham) (Con)
Hosie, Stewart (Dundee, East) (SNP)
Joyce, Mr. Eric (Falkirk) (Lab)
Kennedy, Jane (Financial Secretary to the Treasury)
Morden, Jessica (Newport, East) (Lab)
Newmark, Mr. Brooks (Braintree) (Con)
Palmer, Dr. Nick (Broxtowe) (Lab)
Penrose, John (Weston-super-Mare) (Con)
Pound, Stephen (Ealing, North) (Lab)
Pugh, Dr. John (Southport) (LD)
Sharma, Mr. Virendra (Ealing, Southall) (Lab)
Simon, Mr. Siôn (Birmingham, Erdington) (Lab)
Thornberry, Emily (Islington, South and Finsbury) (Lab)
Todd, Mr. Mark (South Derbyshire) (Lab)
Ussher, Kitty (Economic Secretary to the Treasury)
Viggers, Peter (Gosport) (Con)
Wright, David (Telford) (Lab)
Alan Sandall, James Davies, Committee Clerks
† attended the Committee

Public Bill Committee

Tuesday 3 June 2008


[Sir Nicholas Winterton in the Chair]

Finance Bill

(Except clauses 3, 5, 6, 15, 21, 49, 90 and 117 and new clauses amending section 74 of the Finance Act 2003)

4.30 pm
The Chairman: It seems a lifetime since I was last in the Chair for this Committee, but with regard to parliamentary sittings it has been merely a week. We have had a week’s break, and since I was last with you I have visited Taiwan and Northern Ireland. After that I sadly caught a very bad cold, from which I am just recovering, but I am sure that the rapid passage of business today will ensure that my cold goes just as fast.
Mr. Mark Todd (South Derbyshire) (Lab): The weather in Cheshire?
The Chairman: The weather in Cheshire is no better than the weather here, sitting on the north bank of the Thames.

Schedule 24

Annual Investment Allowance
Amendments made: No. 146, in schedule 24, page 288, line 34, at end insert—
‘( ) In determining whether expenditure is AIA qualifying expenditure, any effect of section 12 on the time at which it is to be treated as incurred is to be disregarded.’.
No. 147, in schedule 24, page 290, leave out lines 15 to 17.—[Angela Eagle.]
Schedule 24, as amended, agreed to.

Clause 72

First-year allowance for small and medium-sized enterprises discontinued
Mr. Philip Hammond (Runnymede and Weybridge) (Con): I beg to move amendment No. 204, in clause 72, page 39, line 5, leave out ‘and (3)’ and insert ‘to (4)’.
Thank you for calling me to speak, Sir Nicholas. I hope that you will not find this too taxing, as you have one additional colleague’s name to try to recall in the future. I am grateful for your opening remarks. I was slightly out of breath, having run up from my office thinking that I might be late for the Committee, but of course I had not reckoned on an account of your recess activities, which neatly gave me time to regain my composure.
The Exchequer Secretary to the Treasury (Angela Eagle): Tantalising.
Mr. Hammond: Tantalising indeed. I was also thinking how clever you were, Sir Nicholas, to have selected amendment No. 204 from Taiwan so that the Committee could consider it today.
The Chairman: Order. The Chairmen’s Panel is very competent, and communication is one of the things in which its members are experts.
Mr. Hammond: I know, Sir Nicholas, that you are an aficionado of the latest technology and no doubt had your BlackBerry to hand in Taiwan, which was probably where it was made in the first place.
Clause 72(5) intends to ensure that the effect of abolition of first-year allowances for small companies is felt only in future years “after the relevant date”, which is in April 2008. It is a welcome and common-sense clarification that the measure is not intended to be retroactive and will not undo the provision that was in force in previous years. However, the provisions of subsection (5), which confirms that limitation, apply only to subsections (2) and (3). Subsection (4) deals with the original legislation that set the rates of first-year allowances for small companies for 2004-05, 2005-06 and 2006-07. It abolishes the reference to those provisions in the existing statute. It is not immediately obvious why there is a need to abolish those provisions, which set rates for previous years. Those are rates for years that have gone by, so this is a piece of history. I do not want to over-egg the pudding, but it seems slightly Stalinist to try to erase the provisions from existence when they cannot have any effect on periods after April 2008.
However, if the provisions are to be abolished, it also needs to be made clear that the abolition of the rates for those years is not retrospective. There will be claims outstanding in respect of those previous years, particular the most recent one, 2006-07. Surely if we are to abolish the provisions that set the rates, subsection (5)—which limits the effect to future periods only—needs to apply to subsection (4) as well as to subsections (2) and (3). It has been suggested to me that that is simply a drafting error, but perhaps there is a more complex explanation for the treatment applied to the changes in subsections (2) and (3) compared with that applied to those introduced in subsection (4). The amendment simply seeks to extend the protection offered by subsection (5) to the changes made by subsection (4).
The Chairman: Ideally succinct. I call Maria Eagle.
Angela Eagle: Sir Nicholas, I would like to make it clear, as I did this morning, that I am Angela, not Maria.
The Chairman: I do apologise. I know the Minister so well.
Angela Eagle: You are not the first person, even today, to make that mistake, and you will not be the last. Obviously I also forgive you for all such slips in future.
Before turning to the Opposition’s amendment, I should explain that the clause seeks to repeal certain first-year allowances, following the introduction of the annual investment allowance—which we debated this morning—from 1 April this year for corporation tax, and from 6 April for income tax. It removes from the legislation the spent time limit of the higher rate of first-year allowances for small enterprises only. The hon. Member for Runnymede and Weybridge moved an amendment that I believe is based on a misconception. He wondered about the removal of the allowances, and he asked whether there was a reason for that that was not apparent to him in the Bill, or whether there was a mistake in drafting the Bill.
There was not a mistake in drafting the Bill. Essentially, the reason is that this is what I would call the “Monty Python’s parrot” clause. The allowances no longer exist; they have expired; they are no longer. They expired in their own way, and the clause removes them from legislation so as not to have a load of spent provisions clogging up tax law.
Mr. Hammond: I entirely understand that, and I sympathise with the intention. However, will there not be outstanding cases, relating to those periods, that have not yet been settled or finally agreed? If we do not put in the saving provision that subsection (5) introduces, those cases will be gone, expunged—I do not want to drop into the hon. Lady’s language. They will never have been part of the legislation. There will therefore be nothing to refer back to. That is the concern. The treatment of the changes made by subsections (2) and (3), that is that they are limited by subsection (5) to future periods only after April 2008, seems entirely sensible, and it would seem entirely sensible to do the same with subsection (4).
Angela Eagle: The provisions were time limited on their introduction, and the legislation that introduced them provided for their natural expiry on given dates. Those dates have now all passed, so it is not appropriate or necessary to include a relevant date for their repeal, as the amendment seeks. I do not think that there is an issue; there is certainly no drafting error. We have checked. Obviously, when we saw the hon. Gentleman’s amendment, we checked whether there was a technical issue or problem. We do not believe that there is, so I hope that with those reassurances, he will withdraw his amendment.
Mr. Hammond: I accept what the hon. Lady says, but I still cannot see it in the Bill, and there could be concerns about outstanding claims. Those who have raised the issues will have heard what she has said this afternoon. If necessary, we will come back to the Minister at a later stage, but I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Chairman: May I formally, on my feet, apologise to the Minister for getting her Christian name wrong? It was an error on my part, and I do genuinely apologise.
Clause 72 ordered to stand part of the Bill.
Clause 73 ordered to stand part of the Bill.

Clause 74

Cars with low carbon dioxide emissions
Justine Greening (Putney) (Con): I beg to move amendment No. 160, in clause 74, page 40, line 12, leave out subsection (3).
The Chairman: With this it will be convenient to discuss amendment No. 161, in clause 74, page 40, line 16, leave out subsections (5) and (6).
Justine Greening: I am delighted to speak to amendments Nos. 160 and 161 to clause 74 on capital allowances and cars with low carbon dioxide emissions. Under section 45D of the Capital Allowances Act 2001, 100 per cent. first-year allowances have been made for expenditure on cars with low carbon dioxide emissions between 17 April 2002 and 31 March 2008. Clause 74 extends that period for a further five years to 31 March 2013. I support extending the period, because it makes sense to lengthen the time over which the tax incentives will be in place, but I question the Government’s change in definition of a low carbon dioxide emission car.
In the same clause the Government’s approach demonstrates the contradiction of their overall problems with green taxation. On the one hand, the clause contains something that is welcome: an extension of the fiscal measure for a further five years. On the other hand, the very same clause contains measures that change the definition of a low-CO2 car to make it harder for cars to qualify for the same provision. It reduces the CO2 emissions figure that cars must not exceed in order to qualify from 120 g to 110 g per kilometre driven.
I understand that a transitional rule will also operate for car leasing contracts entered into before the CO2 reduction comes into effect on 1 April 2008 so that those contracts will be unaffected, which seems sensible. I do not understand, however, why the Government are making it harder and reducing companies’ incentives to use lower emission cars. It just seems contradictory: we are extending the period of a fiscal measure while weakening the measure intrinsically. It seems somewhat of an oxymoron, albeit in the form of a clause in the Finance Bill.
I should better understand the second aspect of the clause, which changes the definition of a low carbon emission car from 120 g to 110 g per kilometre driven, if there was already evidence, for example, that consumers and companies were making great strides towards lower emission cars—in other words, if we had had an initial target, there had been progress towards it, and it therefore seemed sensible to the Treasury to recreate the stretched target effect and encourage a further, new step. The Treasury’s projections for car emissions over the coming years do not seem to reflect that expected movement. I am not clear why the Treasury is now making the fiscal incentive harder to reach, rather than keeping it at the current level.
4.45 pm
Mr. Peter Bone (Wellingborough) (Con): Does my hon. Friend agree that this seems to be one of those occasions on which the Government put raising more money above their green credentials?
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