Clause 12

Finance (No. 3) Bill – in a Public Bill Committee at 3:00 pm on 12th May 2011.

Alert me about debates like this

Question proposed, That the clause stand part of the Bill.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I assure you, Mr Gale, that I will be brief. Clause 12 will increase the period over which expenditure on plant or machinery can be given short-life asset treatment from four to eight years. If a qualifying asset in the pool is disposed of before the end of the period, some of the expenditure can be offset against tax, and the extension from four to eight years is therefore generally beneficial for businesses.

I just want to get a flavour from the Minister of something that I think I know: how much the extension could save businesses. We believe that it could save them some £170 million, even at the end of the period. Can he confirm that figure? Compared with the cuts of about £2.8 billion that we have already agreed and discussed, this is a fig-leaf to try to deflect criticism of the cuts to capital expenditure.

Existing provisions in the Capital Allowances Act 2001 allow certain assets to be elected into an SLA pool. The benefit is that such assets—typically those with short lives, such as computer equipment—can often benefit from accelerated capital allowances if they are disposed of before the four-year cut-off point. Clause 12 will simply extend the cut-off point from four years to eight years for new expenditure. A greater number of assets could therefore benefit from SLA elections. In particular, businesses that purchase a significant amount of assets with expected lives of five to nine years are most likely to benefit.

We will not oppose the clause, and from my perspective—dare I say it?—we will not spend too much time on it. However, I would welcome a definitive figure  from the Minister on how much businesses could save because of the extension from four to eight years. We could then balance that against the cuts in other clauses.

Photo of David Gauke David Gauke The Exchequer Secretary

Let me address this as swiftly as the right hon. Gentleman has done. He is right: the Exchequer impact for 2015-16 will be some £170 million, which is how much businesses will save by that year. We have heard much about the EEF today, but it is worth noting that its chief executive, Terry Scouler, has said:

“Extending the short-life asset election is a simple way of recognising the true cost of modern machines with shorter lives. This will make the tax system more efficient and remove in part barriers to investment.”

We believe that the effective extension of the short-life asset regime to assets with longer useful lives may lead to an increase in business investment in plant and machinery. It will serve to align the capital allowances regime more closely with economic depreciation, thereby enhancing the competitiveness of the UK tax system and supporting enterprise and growth.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clause 13 ordered to stand part of the Bill.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

On a point of order, Mr Gale. Are we not debating clause 13?

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

I have already dealt with it: the hon. Lady needs to be fast on her feet. I cannot go back.

Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury)

It is a completely different topic.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

I have dealt with the clause. No amendment was tabled. If hon. Members do not seize the moment, I have no option but to put the Question. I am sorry, I have ruled; I cannot go back.