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Mr. Jack: On a point of order, Sir Nicholas, now that the amendment has been proposed by my hon. Friend the Member for Arundel and South Downs, I seek your guidance on whether its terms and the way in which it has been proposed are narrow enough subsequently to allow a stand part debate on schedule 30. The Chairman: I have yet to hear the ministerial reply. Although the hon. Member for Arundel and South Downs has spoken, I had not yet proposed the Question that the amendment be moved formally so that it could be subject to debate. I am now proposing the Question. Mr. Djanogly: Various questions arise following an examination of the schedule. I agree with my hon. Friend the Member for Arundel and South Downs about the lack of definition. I am sure that the Treasury has a good reason, but it seems bizarre that the qualification of expenditure will not apply if the equipment is second-hand. We are discussing environmentally friendly equipment and it is ironic that the green allowance system rejects recycling as a qualification. What is the reasoning behind the system? Can the Economic Secretary explain the process by which the Treasury would order the certificate of environmental benefit? How would it make a judgment and would that judgment be based on reports? Does it intend to use a panel of experts? Has it already decided which items will comply or will the process be ongoing? That question applies not only to whether the equipment works but to the definition of a friendly environment. Would the allowance apply to building an incinerator from which power could be generated? There are a few questions relating to the subject matter and I shall be interested to hear the Economic Secretary's response. Mr. Jack: I want to pursue the same point as my hon. Friend. The equipment that qualifies for the allowance must be unused and not second-hand. If a Column Number: 173 manufacturer of a qualifying piece of equipment had a demonstrator, took it round to various users of the equipment, convinced them of its efficacy and subsequently sought to sell it, it would not qualify for the allowance because of paragraph 1(a). As far as the company is concerned, however, it would be an entirely new purchase because the company would have been convinced by its effectiveness and would therefore want to purchase it.If someone took a demonstrator back in-house to undertake some rudimentary refurbishment用erhaps a new coat of paint葉hey could claim that it was new. They could tell a potential user, ''You know it's the demonstrator and I know it's the demonstrator. We have put a new coat of paint on the outside so it looks new and we will give you a discount.'' We could have a wholly artificial situation in which a used, second-hand piece of equipment would technically qualify for the allowance although it was not what it purported to be. Our discussions of avoidance were interesting. There may be a rational explanation of the provision but it has defeated my understanding, particularly when it comes to encouraging the uptake of environmentally important equipment. For example, margins are tight in the horticulture industry. If people want to move from a less environmentally friendly regime to a more environmentally friendly regime, they might only be able to afford second-hand or refurbished equipment. My hon. Friend the Member for Huntingdon made an excellent point about not encouraging recycling. I am concerned about not encouraging artificiality when the objective is to introduce new types of equipment. On suggested new section 45H(1)(c), what is the reasoning behind
A new pipe system that did not leak might be installed to replace a leaky system. Pipes are a long-life asset and have a separate and special tax regime. There may be a rationalisation of why an enterprise that seeks to minimise water loss should be penalised because an item is a long-life rather than a short-life asset and I shall be grateful if the Economic Secretary will explain it. New section 45I(3) deals with the certification arrangements. I note that there are separate arrangements for certification for each of the devolved or assemblied parts of the United Kingdom. How will the measure ensure consistency? If there are different certification mechanisms north and south of the Scottish border, there are the usual arguments about what happens to an enterprise that straddles the border. Would such an enterprise get a better deal on one side of the border than the other? I do not want to labour the point because I am sure that the Economic Secretary understands it. Finally, paragraph 4 of schedule 30 deals with first-year allowances. Is there a carry-forward provision because a new enterprise may not have any profits in year one against which to use them? It would be helpful to know whether they can be carried forward. John Healey: The discussion has been interesting. I shall try to deal with the important points, finishing Column Number: 174 with those raised by the hon. Member for Arundel and South Downs.The right hon. Member for Fylde and the hon. Member for Huntingdon asked why second-hand equipment does not qualify for the particular tax treatment. Members of the Committee will recall that I placed clause 166 in the context of the green technology challenge, which the Government launched in 2001. The scheme, which covers water technologies, cleaner vehicles and fuels and energy-saving technologies, aims to encourage businesses to invest in state-of-the-art, environmentally beneficial technologies that are innovative and have yet to achieve market penetration. It is not designed for long-life assets, as the right hon. Member for Fylde argued, or reused assets, as the hon. Member for Huntingdon argued. In the same way as the existing first-year allowance schemes, it applies to new and unused equipment葉o do otherwise would dilute its focus. The hon. Member for Huntingdon also asked about heat-generating equipment. I have tried to explain葉he explanatory notes make this clear葉hat clause 166 deals with water technologies, so the answer to his question is no. As we do with other schemes, we shall keep the operation of this provision and the scheme for water technologies closely under review. We shall consider extending or amending the list of qualifying technologies, if there is evidence to show that there is a case for doing so.
6.45 pmMr. Jack: I am grateful for the Economic Secretary's attempt to clarify, but I come back to the point that I made. Could he deal with the prototype situation? If a prototype of a state-of-the-art piece of equipment that qualifies for the allowance has been in use for six months as part of a trial experiment, it cannot be determined as new. How is such a piece of equipment dealt with under the clause? John Healey: It is dealt with in the following way. The manufacturer of the equipment will assess, according to the criteria that DEFRA will publish over the summer, whether it believes that the technology fits the criteria and warrants this special relief. The manufacturer would then apply to DEFRA for an assessment and the issue of the certificate. Mr. Jack: I am sorry to press the Economic Secretary on this point. I understand his point about the novelty of the technology, but if the equipment was a prototype that had been used for six months, by definition it could not be determined as new. To my understanding, new means unused. Could the Economic Secretary deal with that, because in the world of new technology, he has only one piece of equipment? John Healey: The terms that the right hon. Gentleman uses do not enable the Committee to shed further light on his question. Mr. Jack: It is the Economic Secretary who should be shedding light, not the Committee. Column Number: 175 John Healey: If the equipment and the technology are a prototype, that implies that they are still new. The only answer to the right hon. Gentleman's question is, as I explained, that the manufacturers of the equipment will consider the criteria to be issued by DEFRA over the summer and decide whether they believe it meets the criteria. They would then submit an application for certification under this scheme to DEFRA, which would make the judgment. Mr. Flight: If I understand what the Economic Secretary has just said, he was giving a definition of new which was not ''This is in no way second hand'' but, ''This equipment has a technological aspect to it which puts it into a new category, so it has nothing to do with ownership''. John Healey: I am not trying to define the term ''new''. I was explaining, in response to direct questions, that this is not a scheme devised to support assets that are necessarily reused or long-life. The definition and then the judgment of what will constitute a qualifying technology will be produced by DEFRA and will be the conclusion of a detailed set of discussions and consultations about the qualifying criteria and the types of technology that should be supported. Those discussions and consultations have been held with a broad range of manufacturers, users and other Government regulatory agencies. That is the point at which to encourage manufacturers of such technologies to examine the published criteria and decide whether it would be appropriate to submit an application for such a certificate. Mr. George Howarth (Knowsley, North and Sefton, East): Surely the problem with the question put by the right hon. Member for Fylde is that he was describing a demonstration model, not a prototype. If it was a demonstration model in the car industry, inevitably it would be sold as a car that had been used for demonstration purposes, which is entirely different from a prototype. John Healey: My hon. Friend adds a further dimension to our debate, to demonstrate how tricky will be the decisions, and the questions that DEFRA is currently weighing in consultation with a range of interests, and makes the case that the Bill is not the appropriate place in which to legislate for and specify such definitions. That is not what we are doing in the clause or the schedule.
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