Clause 62 - First year allowances for expenditure wholly for a fence trade
Finance Bill
4:30 pm
Mr Edward Davey (Kingston and Surbiton, Liberal Democrat)
I support the amendment. I am glad that we have the opportunity not only to rehearse arguments heard prior to the intermission, but to develop further ones. I learnt from my hon. Friend the Member for Gordon (Malcolm Bruce) during the intermission that he knows of several companies that are not going ahead with investment. He feels that the level of activity will fall.
This morning, the Government said that they had heard of no examples of people not going ahead with investment. It may be that they have not heard of any because of the fact that investment has not gone ahead. It would be difficult for the Treasury to, shall we say, prove a negative. However, in the United States many small business that would otherwise undertake exploration and consider drilling in marginal fields are not doing so. The word is that Britain no longer has a stable tax regime, or one that enables a profitable return, so investment decisions are not going ahead. Amendment No. 111 would therefore be appropriate. By the end of the year, we would be able see real figures rather than those dreamt up. We are not allowed to see the evidence for the figures.
That takes me back to the point about leasing, which I made in an earlier intervention on the Minister. It has come to my attention that a large section of the industry, which is exploited by small and medium-sized enterprises, depends on the leasing of assets. That does not appear to have been taken into account in the Government's modelling and tax proposals. Some companies use capital leasing, by which they depend on a non-oil company having bought an asset, which they lease from it. Of course, such a non-oil company will not be able to benefit from the allowance that the Government propose in the clause, and will have to pass the extra cost down the line. A small business that is leasing will get no benefit from the allowance because it is leasing an asset from a non-oil company. It will therefore be hit by the charge and there will be no compensation to it.
The Government say that they will promote that important, marginal, growth sector through their structure, but they will cause real damage. They are trying to persuade the Committee that the structure on which they have landed will produce a spurt of investment and increase returns, but the hon. Member for Arundel and South Downs (Mr. Flight) and I have quoted examples that suggest that the opposite will be the case. Although the amendment is in many ways a device to help provoke debate, if they were to accept it, they would call our bluff and that of the industry. We could make an analysis, which would be available to the House of Commons by the end of the year, to drill down to the measure's monetary effects. Some people suspect that the Government will not reach their revenue estimates because they will do too much damage to investment in the oil industry.