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Session 2007 - 08 Publications on the internet General Committee Debates Finance Bill |
Finance Bill |
The Committee consisted of the following Members:Alan
Sandall, James Davies, Committee
Clerks † attended the
Committee Public Bill CommitteeTuesday 3 June 2008(Afternoon)[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.
The
Chairman: The weather in Cheshire is no better than the
weather here, sitting on the north bank of the
Thames.
Schedule 24Annual
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 72First-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.
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).
Angela
Eagle: Sir Nicholas, I would like to make it clear, as I
did this morning, that I am Angela, not
Maria.
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 74Cars
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 Let me
illustrate briefly what I mean by touching upon the numbers of cars
that will be affected by the provisions. I received parliamentary
figures from
Ministers suggesting that the Government estimate that the number of
cars emitting 120 g per kilometre or less will increase from about
435,000 in 2008-09—out of a total 15.6 million cars paying
graduated vehicle excise duty—to about 674,000 by 2010-11, which
by then would be out of a total 19.6 million cars paying graduated VED.
If we retain the current definition of a low carbon emission car, that
would represent a growth of about 240,000 cars. By the
Government’s estimations, therefore, were we to reduce the level
from 120 g to 110 g per kilometre, the number of cars expected to be
affected and incentivised by the provision would fall considerably. I
estimate the number to be 140,000 rising to 214,000 by 2010-11—a
rise of about 70,000 to 75,000 cars. So it would dramatically curtail
the impact of this
policy. 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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