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Clause 60 - Extension of capital allowances

Finance (No. 2) Bill – in a Public Bill Committee at 11:00 am on 13th May 2014.

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

Photo of Shabana Mahmood Shabana Mahmood Shadow Minister (Treasury)

The clause gives the Treasury the power to extend, by Treasury order, the duration of four 100% first-year capital allowances—the enhanced capital allowance schemes. Those are expenditure on cars with low carbon dioxide emissions; expenditure on zero-emission goods vehicles; expenditure on plant or machinery for gas refuelling stations; and expenditure on plant and machinery for use in designated assisted areas. The clause also extends the fourth ECA scheme for expenditure on plant and machinery for use in designated assisted areas—namely, enterprise zones—which is due to expire on 31 March 2017, for an additional three years to 31 March 2020. In effect, therefore, if someone buys equipment that qualifies, they can write off 100% of the cost against that year’s taxable profits.

We introduced the ECA schemes in 2001 and we support them. In addition, one of the enterprise zones affected by the measure is in my constituency, and I welcome that, too. On enterprise zones, will the Minister explain what the anticipated cost is of expanding the ECA scheme for the additional three years? What level of take-up is the Minister expecting of that ECA scheme in those different enterprise zones? What impact assessment has been made on businesses that are ineligible for ECA due to their location outside an enterprise zone? What impact assessment has been made on the effectiveness of the ECA scheme on the growth of small businesses in those designated areas?

On the other three ECA schemes affected by the clause, what is the Government’s expectation of the impact on incentivising businesses to invest in cars with the lowest carbon emissions? How much progress do the Government expect will be made towards helping businesses to reduce their carbon emissions and encourage a shift to cleaner goods vehicles?

Photo of David Gauke David Gauke The Exchequer Secretary

Clause 60, as we have heard, extends the enhanced capital allowance scheme in enterprise zones by three years. Currently, a company must invest in a designated site by 31 March 2017 in order to claim enhanced capital allowances. The clause extends that period, so companies will be eligible provided that they invest before 31 March 2020. It also enables the Government to extend the ECA scheme, and those applying to low-emission cars, zero-emission goods vehicles and gas refuelling stations, through statutory instrument, rather than primary legislation in future. That will mean that Finance Bill space will not be required to implement such measures, saving parliamentary time—although possibly disappointing some members of the Committee.

The enterprise zones introduced by the Government are supporting regional growth. So far, enterprise zones have created more than 9,000 jobs and have attracted more than £1.2 billion of private sector investment. To give just one example, the Committee will welcome the announcement made by Siemens in March that it would invest £160 million in the Humber enterprise zone. A further £150 million will be invested by Associated British Ports in the Green Port Hull development. That combined investment will create 1,000 jobs directly. We want to see the success continue; that is why we are extending the financial incentives offered in enterprise zones for a further three years.

Enhanced capital allowances in enterprise zones allow businesses locating on designated ECA sites to claim a 100% allowance on investments made in new plant and machinery. There are currently seven enterprise zones in England with enhanced capital allowance sites—in the black country, the Humber, Liverpool, London, the north-east, Sheffield and the Tees valley. The scheme is designed to support very large, capital-intensive investments, which can take several years to finalise. Extending the end date of the scheme to 2020 will give the local enterprise partnerships that run enterprise zones more scope to land major investments.

The extension to the deadline for ECAs in enterprise zones will also apply to the three zones in Scotland and the three zones in Wales, which offer ECAs in addition to incentives in the gift of the Scottish Government and the Welsh Government. As well as extending enhanced capital allowances, we announced at the Budget that business rate discounts in enterprise zones will also be extended by three years. We will legislate for that separately in the Non-Domestic Rating (Rates Retention) Regulations.

Photo of Ian Swales Ian Swales Liberal Democrat, Redcar

As an MP with one of the enterprise zones to which the Minister referred in my constituency, I can certainly bear out the need for the extension. For example, we are currently working on an investment wherein, if a spade was put in the ground tomorrow, the project would take four years to complete. I therefore very much welcome the change.

Photo of David Gauke David Gauke The Exchequer Secretary

I am grateful to my hon. Friend for his intervention. I know that he provides a strong voice for businesses in Redcar and does a great deal of work to ensure that his local economy is successful.

I was asked about the cost to the Exchequer, and can assure the Committee that the measure is not expected to have Exchequer impact. In terms of the impact assessment for ineligible businesses, it is too early to say. On the level of take-up and the effectiveness of the schemes in encouraging SMEs in the use of low-carbon transport, again, it is too early to say exactly as tax returns for 2012-13 have only just been submitted and have yet to be analysed by HMRC.

It is worth pointing out that we are seeing significant investment on ECA sites. For example, Vantec, a subsidiary of Nissan, recently opened a new logistics centre in the north-east enterprise zone. That £240 million investment is part of the local supply chain for Nissan and will create 230 jobs. Air Products is currently nearing completion on the construction of its first energy-from-waste facility in the Tees Valley enterprise zone, with which I know my hon. Friend will be familiar. It broke ground on a second plant in the enterprise zone in April this year. The first plant will secure 50 new jobs and employ 700 construction workers.

I hope that those points are helpful to the Committee and that the clause can stand part of the Bill.

Question put and agreed to.

Clause 60 accordingly ordered to stand part of the Bill.