Finance Bill

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Mr. Ottaway: Is not the point about leasing that the lessee derives some benefit from leasing? If that benefit is 50 per cent. and we add 100 per cent. allowances on top, the lessee will receive 150 per cent. I would understand that. Will the Minister confirm that that is the thinking?

Miss Johnson: I shall go over the devolution point once more, although I shall not say any more than I did before. The schedule provides for the certificates to be issued by the Secretary of State or—as an alternative, not a mandatory requirement—by the devolved assemblies. All the bodies will use the same criteria, in any event.

Mr. Ottaway: The schedule does not use the word ``or''. Perhaps an amendment is required to add it at the end of proposed new section 45B(3)(a). The Minister might like to return to that on Report.

5.30 pm

Miss Johnson: I shall bear that in mind, and if we discover problems with the drafting, we will be grateful for the hon. Gentleman's support in dealing with them on Report.

I forgot to talk about second-hand equipment being used for demonstration. Demonstration equipment would not be treated as second-hand. That meets the demands that the right hon. Member for Fylde sketched out, drawn from his life before he entered the House.

Several Opposition Members made another point. The provision is designed to help users in the industry to adapt to the levy, to be as energy efficient as they can, and to contribute as much as they can. It was alleged that to give lessors allowances could help lessees' payments. What is important is energy-saving equipment, and the aim of the allowances is to help capital investment in energy-saving plant by the users of the equipment. That is the point. They are not designed to help more widely.

Mr. Jack: Is there a difference in definition between the user of a piece of equipment that he has bought outright, and the user who leases it?

Miss Johnson: I have just answered that question by pointing out that the focus of the policy is to help those who use equipment in the industry to adapt. Those going through leasing arrangements do not make a capital investment, so they do not meet the criteria for the scheme.

Mr. Burnett: If the aim of the policy is to encourage the purchase and use of energy-saving plant and machinery, why exclude the many assets—I cannot give a percentage, but let us say half the total—that will be purchased on hire purchase or lease?

Miss Johnson: I have already explained why we are not doing that. There is not much to be gained by my repeating the reason, probably ad nauseam. The scheme is designed to support the costs for those who have to make up-front capital payments to invest in equipment. Leasing, which has other forms of financial structure, does not require the same pattern of investment and will be helped in a variety of other ways through the tax system. It does not need the same assistance as capital investment by the companies and businesses that we are trying to help with the scheme. That is why leasing arrangements are excluded.

Mr. Letwin: Is the Economic Secretary talking about tax-based leasing? Does she mean to exclude it specifically from the provisions?

Miss Johnson: What I am talking about is what we have been talking about all along. The hon. Gentleman is drawing me into a conversation that he was having with the hon. Member for Croydon, South. Assets for leasing are excluded.

Mr. Jack: The Economic Secretary seemed at one point to challenge the idea of using of any kind of capital allowance structure in the context of leasing. She almost gave the impression that virtuous investment—in this context, for example, energy-saving combined heat and power systems—is good if one puts 100 per cent. of one's own money up front, but bad if one finances it by any other mechanism. Companies are concerned about their outgoings. A brand new start-up company in an energy-intensive business might not, in the first instance, have any profits against which it could use the capital allowance—the subject of the schedule—because it might take some years to build up enough profitability to take advantage of the scheme. However, in the context of leasing, if the capital cost of the energy-saving equipment could be lowered, so giving companies that lease such capital allowances would seem to be an advantage.

Mr. Burnett: It was laudable that the Economic Secretary referred to cash flow. Does the right hon. Gentleman agree with me that there can be no greater assistance with cash flow than for the company, individual or business that is the lessee to be able to pay significantly lower lease charges or rent, while the lessor receives a 100 per cent. capital allowance?

Mr. Jack: The hon. Gentleman, who has considerable experience in these matters, demonstrates the purpose of leasing and the usefulness of transferring the capital allowance from the user to the leasing company, which can use it to reduce the charge for the equipment to the person who leases it. I thought that that was the purpose of capital allowances in the context of lease arrangements. To make an artificial distinction is illogical. If the objective is to have a high take-up of energy-saving schemes, does it matter how they are financed? The fact that lessors are excluded seems to militate against the start-up company that may not have any profits in the first year against which to claim the 100 per cent. capital allowance. A lease arrangement might therefore be entirely to the advantage of that company, and of the Government, because it would achieve the energy-saving objective.

I should be grateful if the Economic Secretary would have one further go at clarifying this. Otherwise, it will be on the record that the Government cannot explain why an important element of business finance cannot be used to further their energy-saving objectives.

Miss Johnson: I am happy to make one comment in response to the right hon. Gentleman. First, there is a clear distinction between capital investment and leasing. It is not a fancy distinction; it is made in 101 other contexts. Secondly—

Mr. Burnett: Will the Minister give way on that point?

Miss Johnson: I am trying to respond. We are not making progress. First, there is a clear distinction. Secondly, Opposition Members may find it difficult to accept the fact, but we want to target the scheme. I know that I am not allowed to return to this morning's debate, but I wish to refer to it. The right hon. Gentleman made a point about virtue and said that some things are regarded as virtues and others are not. That is not the case; the Bill is not about virtues. It is about focusing, targeting our actions and responding in an appropriate manner to incentivise and help certain groups.

In this case, capital investment requires up-front investment and does not have the same advantages. Obviously, leasing has a different pattern of arrangements. It is for that reason that we have focused on it and devised the scheme in the way that we have. I appreciate that our decisions might not be the same as those that the right hon. Gentleman would make if he were in Government, but he is not in Government, and we have made those decisions.

Mr. Jack: I forget whether I am in the Cabinet. I am a humble Member of Her Majesty's Opposition, but I receive regular representations from the Finance and Leasing Association, which goes out of its way to emphasise the contribution that it makes to help capital investment in business.

The Chairman: Order. I see out of the corner of my eye certain literature that should not be read in Committee.

Mr. Peter Luff (Mid-Worcestershire): I apologise, Mr. O'Hara, but this is a piece of mail that I received from the Labour party, not a newspaper.

The Chairman: Order. It is literature that is not germane to the business of the Committee.

Mr. Jack: An interesting observation came to mind during that helpful interregnum. If a company were running a fleet of leased cars and decided that it wanted to take advantage of the new regimes that we discussed earlier in the Bill, it might choose a more environmentally efficient fleet of cars by virtue of leasing arrangements. Those arrangements would benefit from the transfer of the capital allowance to the lessor organisation. The objective of diminished environmental outputs from motor vehicles would be assisted by the leasing facility that the Government are happy to put a tick beside, but the Economic Secretary says that we are focusing—that is the word that she used. I want to examine the word ``focusing'' for a moment. We are focusing on those companies that are in the fortunate position of having enough money to buy a piece of energy-saving equipment. They are making a profit and can, therefore, use all of the capital allowance under the schedule at one fell swoop.

However, the Economic Secretary is aware that many parts of British manufacturing industry are showing the opposite characteristics. They are making a loss and struggling to stay in business. They might want to deal with the impact on their businesses of the climate change levy by purchasing energy-saving equipment, but they might need to spread the purchase over time through hire purchase. That was the term used by the hon. Member for Torridge and West Devon; leasing is the more modern terminology for such an arrangement. Discrimination has crept in: unless a company is an up-front, 100 per cent. purchaser, it will not receive an allowance from the Government for acquiring energy-saving equipment.

I do not expect that the Economic Secretary will bother to reply to those points. We have now teased out from the Government the fact that there is discrimination against those who want to use lease finance. I hope that the Finance and Leasing Association will read these proceedings and correspond with the Economic Secretary, because they might do a better job of persuading the Government to re-examine the issue than I have this afternoon.

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