Industrial Re-Equipment: Plant and Machinery

– in the House of Commons on 25th April 1944.

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The main class of expenditure in modernisation and re-equipment will be on plant and machinery. Under the existing law, as hon. Members know, the cost of plant and machinery is normally written off throughout its life by an annual wear-and-tear allowance and by an obsolescence allowance, which is given when the plant and machinery are replaced, to cover any part of the original cost, less the scrap value, which has not been written off by the annual wear-and-tear allowance. I propose that there should be given, apart from these allowances, a special initial allowance of 20 per cent. of the cost of new plant and machinery. An allowance of this kind, which will allow one-fifth of the actual expenditure on plant and machinery in any year to be written off forthwith against the profits of that year, as they come under charge for taxation, will represent very substantial financial assistance to industry in carrying out its post-war re-equipment. The change will mean, of course, that there will normally be a smaller obsolescence allowance to be given in those cases in which the plant has not been fully written off during its life, and, to that extent, it will diminish the force of the complaint made by industry for many years that no obsolescence allowance is at present given where plant and machinery are not replaced.

I am, however, ready to meet that grievance so far as it still remains. I propose as part of the post-war policy that in the case of a continuing business the obsolescence allowance shall be given when plant and machinery are scraped whether the particular piece of plant or machinery is replaced or not. It may happen, on the other hand, that a trader may sell plant and machinery at a price in excess of the written-down value, and I must obviously attach to my proposal with regard to obsolescence a provision to recover the excess allowance in such cases.