Finance (No. 2) Bill — Capital allowances for sea going vessels — 30 Jun 1998

On this melancholy evening, I beg to move, That the clause be read a Second time.

The object of the new clause is to remove the uncertainty and discrimination that have impacted on the British shipping industry and our shipyards since the Finance Act 1997--the last Conservative Finance Act. That Act reduced from 25 to 6 per cent. the rate of writing-down allowances on what are defined as long-life assets.

I am delighted to declare a constituency interest. My constituency is fortunate enough to contain Appledore Shipbuilders. The company has a skilled and dedicated management and work force; it is a company of not just regional but national and, indeed, international importance. The House will be surprised to learn that it is one of only two medium-sized shipyards left in the country, the other being Ferguson in Port Glasgow. I am happy to see that the hon. Member for Greenock and Inverclyde (Dr. Godman) is present: he has a great interest in, and much knowledge of, the shipbuilding industry, and many of his constituents work at Ferguson.

British shipyards need orders, and they need them now. In February 1997, when he was shadow Minister for energy and industry, the current Minister for Science, Energy and Industry--the hon. Member for Leeds, West (Mr. Battle)--spoke of the Labour party's positive vision for the United Kingdom sector of the continental shelf, and of the vital industries and jobs that support that sector. One of those crucial industries is shipbuilding, which is heavily dependent on the construction of floating production storage and offtake facilities--FPSOs--and other assets such as drill ships.

The capital allowance rules in the Finance Act 1997, which reduced capital allowances for long-life assets to 6 per cent., are on machinery and plant which, when new, are expected to have a useful economic life of at least 25 years. Sea-going ships continue to qualify for the 25 percent. writing-down allowances. Unfortunately, for these purposes "sea-going ship" excludes any ship that is or would be an offshore installation under the Mineral Workings (Offshore Installations) Act 1971.

According to the previous Financial Secretary, the right hon. Member for Fylde (Mr. Jack), ships and railway assets were to be excluded from the long-life assets rule to promote investments in shipping and the rail industry.

30 Jun 1998 : Column 261

Before the Finance Act 1997, British shipyards were becoming increasingly dependent on the offshore oil and gas industry for work. Last year, Harland and Wolff was constructing one FPSO, two drill ships and two rig conversions. Appledore was constructing two offshore vessels, Ferguson four offshore vessels and Kvaerner in Govan six offshore vessels. A total of 17 offshore vessels were under construction last year in British shipyards.

That is important work, but it is in jeopardy as a result of the restricted capital allowances for offshore sea-going vessels. Under the new rules, capital allowances on long-life assets are extremely meagre--6 per cent. on a reducing-balance basis. Therefore, for every £100 invested, 6 per cent., or £6, is claimable in year one. In year two, it is not the £6 again; it is 6 per cent. of what is left over--£94. It takes an age to write off the cost of the asset for tax purposes. It is not done even on a straight-line basis--that is, 6 per cent. of the total sum in each year.

Therefore, although bringing the allowances for the offshore vessels back to the old basis would be far better, it would still be only 25 per cent. on a reducing-balance basis--in year one, for every £100 invested, £25 would qualify; in year two, 25 per cent. of the residual sum, which is £75, would qualify, and so on. With my new clause, it is still going to take at least eight years or so to write off the asset for tax purposes.

Question put, That the clause be read a Second time:--

The House divided: Ayes 37, Noes 272.

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Michael FallonSevenoaksConaye
Mrs Irene AdamsPaisley NorthLab (minister)no
Nick AingerCarmarthen West and South PembrokeshireLabno
Bob AinsworthCoventry North EastLab (minister)no
Douglas AlexanderPaisley SouthLabno
Janet AndersonRossendale and DarwenLab (minister)no
Hilary ArmstrongNorth West DurhamLab (minister)no
Mr Joe AshtonBassetlawLabno
Charlotte AtkinsStaffordshire MoorlandsLabno
John AustinErith and ThamesmeadLabno
Mr Tony BanksWest HamLab (minister)no
Mr Nigel BeardBexleyheath and CrayfordLabno
Anne BeggAberdeen SouthLab (minister)no
Mr Andrew BennettDenton and ReddishLabno
Joe BentonBootleLab (minister)no
Mr Gerry BerminghamSt Helens SouthLabno
Roger BerryKingswoodLabno
Clive BettsSheffield, AttercliffeLab (minister)no
Hazel BlearsSalfordLabno
Bob BlizzardWaveneyLabno
Mr Paul BoatengBrent SouthLab (minister)no
David BorrowSouth RibbleLabno
Mr Keith BradleyManchester, WithingtonLab (minister)no
Mr Peter BradleyThe WrekinLabno
Ben BradshawExeterLab (minister)no
Nick BrownNewcastle upon Tyne East and WallsendLab (minister)no
Russell BrownDumfriesLab (minister)no
Des BrowneKilmarnock and LoudounLab (minister)no
Karen BuckRegent's Park and Kensington NorthLab (minister)no
Richard BurdenBirmingham, NorthfieldLabno
Colin BurgonElmetLabno
Stephen ByersNorth TynesideLab (minister)no
Richard CabornSheffield CentralLab (minister)no
Alan CampbellTynemouthLab (minister)no
Mrs Anne CampbellCambridgeLabno
Ronnie CampbellBlyth ValleyLab (minister)no
Mr Jamie CannIpswichLabno
Mr Ivor CaplinHoveLabno
Mr Roger CasaleWimbledonLabno
Ben ChapmanWirral SouthLabno
David ChaytorBury NorthLabno
Malcolm ChisholmEdinburgh North and LeithLabno
Michael ClaphamBarnsley West and PenistoneLabno
Dr David ClarkSouth ShieldsLab (minister)no
Ms Helen ClarkPeterboroughLabno
Dr Lynda ClarkEdinburgh PentlandsLab (minister)no
Paul ClarkGillinghamLabno
Charles ClarkeNorwich SouthLabno
Mr Tony ClarkeNorthampton SouthLabno
David ClellandTyne BridgeLab (minister)no
Vernon CoakerGedlingLabno
Ann CoffeyStockportLabno
Harry CohenLeyton and WansteadLabno
Mr Iain ColemanHammersmith and FulhamLabno
Michael ConnartyFalkirk EastLabno
Frank CookStockton NorthLabno
Jeremy CorbynIslington NorthLabno
Ms Jean CorstonBristol EastLabno
Jim CousinsNewcastle upon Tyne CentralLabno
Professor Ross CranstonDudley NorthLabno
David CrausbyBolton North EastLab (minister)no
John CummingsEasingtonLabno
Mr Lawrence CunliffeLeighLabno
Jim CunninghamCoventry SouthLab (minister)no
Mr Tam DalyellLinlithgowLabno
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Ian DavidsonGlasgow PollokLab (minister)no
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Mr Ron DaviesCaerphillyLab (minister)no
Mr Terry DavisBirmingham, Hodge HillLabno
Mr Hilton DawsonLancaster and WyreLabno
Janet DeanBurtonLabno
John DenhamSouthampton, ItchenLab (minister)no
Andrew DismoreHendonLabno
Jim DobbinHeywood and MiddletonLabno
Brian H DonohoeCunninghame SouthLab (minister)no
Frank DoranAberdeen CentralLabno
Jim DowdLewisham WestLab (minister)no
David DrewStroudLab (minister)no
Angela EagleWallaseyLab (minister)no
Maria EagleLiverpool, GarstonLab (minister)no
Louise EllmanLiverpool, RiversideLab (minister)no
Jeff EnnisBarnsley East and MexboroughLabno
Bill EtheringtonSunderland NorthLabno
Frank FieldBirkenheadLab (minister)no
Caroline FlintDon ValleyLab (minister)no
Paul FlynnNewport WestLabno
Mr Derek FosterBishop AucklandLab (minister)no
Michael FosterWorcesterLabno
Mr George FoulkesCarrick, Cumnock and Doon ValleyLab (minister)no
Sam GalbraithStrathkelvin and BearsdenLab (minister)no
Mike GapesIlford SouthLabno
Barry GardinerBrent NorthLab (minister)no
Bruce GeorgeWalsall SouthLabno
Ian GibsonNorwich NorthLabno
Linda GilroyPlymouth, SuttonLabno
Dr Norman GodmanGreenock and InverclydeLabno
Paul GogginsWythenshawe and Sale EastLabno
Mrs Llin GoldingNewcastle-under-LymeLab (minister)no
Mrs Eileen GordonRomfordLabno
Mr Bernie GrantTottenhamLabno
Ms Jane GriffithsReading EastLabno
Nigel GriffithsEdinburgh SouthLab (minister)no
John GroganSelbyLab (minister)no
Mr John GunnellMorley and RothwellLabno
Peter HainNeathLab (minister)no
Mike HallWeaver ValeLabno
Fabian HamiltonLeeds North EastLab (minister)no
David HansonDelynLabno
Sylvia HealHalesowen and Rowley Regiswhilst Labno
Mr Ivan HendersonHarwichLabno
John HeppellNottingham EastLabno
Patricia HewittLeicester WestLabno
Keith HillStreathamLabno
Mr David HinchliffeWakefieldLabno
Kate HoeyVauxhallLabno
John Home RobertsonEast LothianLabno
Geoff HoonAshfieldLab (minister)no
Mr Alan HowarthNewport EastLab (minister)no
George HowarthKnowsley North and Sefton EastLab (minister)no
Lindsay HoyleChorleyLab (minister)no
Beverley HughesStretford and UrmstonLab (minister)no
Mr Kevin HughesDoncaster NorthLab (minister)no
Joan HumbleBlackpool North and FleetwoodLabno
John HuttonBarrow and FurnessLabno
Brian IddonBolton South EastLabno
Eric IllsleyBarnsley CentralLabno
Glenda JacksonHampstead and HighgateLab (minister)no
Mrs Helen JacksonSheffield, HillsboroughLabno
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Brian JenkinsTamworthLabno
Fiona JonesNewarkLabno
Mr Jon Owen JonesCardiff CentralLab (minister)tellno
Lynne JonesBirmingham, Selly OakLabno
Martyn JonesClwyd SouthLabno
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Alan KeenFeltham and HestonLabno
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Jane KennedyLiverpool, WavertreeLab (minister)tellno
Piara S KhabraEaling, SouthallLabno
David KidneyStaffordLabno
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Mr Andy KingRugby and KenilworthLabno
Ms Tess KinghamGloucesterLabno
Ashok KumarMiddlesbrough South and East ClevelandLabno
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Martin LintonBatterseaLabno
Ken LivingstoneBrent Eastwhilst Labno
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Mr David LockWyre ForestLabno
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Gordon MarsdenBlackpool SouthLab (minister)no
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Siobhain McDonaghMitcham and MordenLabno
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Anne McGuireStirlingLabno
Rosemary McKennaCumbernauld and KilsythLabno
Henry McLeishCentral FifeLab (minister)no
Tony McNultyHarrow EastLabno
Michael MeacherOldham West and RoytonLab (minister)no
Alan MealeMansfieldLabno
Gillian MerronLincolnLabno
Alun MichaelCardiff South and PenarthLab (minister)no
Alan MilburnDarlingtonLab (minister)no
Andrew MillerEllesmere Port and NestonLabno
Austin MitchellGreat GrimsbyLab (minister)no
Laura MoffattCrawleyLabno
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George MudieLeeds EastLab (minister)no
Chris MullinSunderland SouthLabno
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Mike O'BrienNorth WarwickshireLab (minister)no
Mr Martin O'NeillOchilLab (minister)no
Bill OlnerNuneatonLabno
Mrs Diana OrganForest of DeanLabno
Sandra OsborneAyrLab (minister)no
Nick PalmerBroxtoweLabno
Ian PearsonDudley SouthLabno
Mr Tom PendryStalybridge and HydeLabno
Mr Colin PickthallWest LancashireLabno
Mr Peter PikeBurnleyLabno
James PlaskittWarwick and LeamingtonLabno
Greg PopeHyndburnLab (minister)no
Steve PoundEaling NorthLab (minister)no
Mr Raymond PowellOgmoreLabno
Bridget PrenticeLewisham EastLab (minister)no
Gordon PrenticePendleLabno
Dawn PrimaroloBristol SouthLab (minister)no
Gwyn ProsserDoverLabno
Ken PurchaseWolverhampton North EastLabno
Ms Joyce QuinGateshead East and Washington WestLab (minister)no
Mr Lawrie QuinnScarborough and WhitbyLabno
Mr Giles RadiceNorth DurhamLab (minister)no
Bill RammellHarlowLabno
Andy ReedLoughboroughLabno
John ReidHamilton North and BellshillLab (minister)no
Mr George RobertsonHamilton SouthLab (minister)no
Mrs Barbara RocheHornsey and Wood GreenLab (minister)no
Mr Ernie RossDundee WestLabno
Mr Ted RowlandsMerthyr Tydfil and RhymneyLab (minister)no
Frank RoyMotherwell and WishawLab (minister)no
Joan RuddockLewisham, DeptfordLab (minister)no
Christine RussellCity of ChesterLabno
Joan RyanEnfield NorthLabno
Martin SalterReading WestLabno
Mr Malcolm SavidgeAberdeen NorthLabno
Mr Brian SedgemoreHackney South and ShoreditchLabno
Jonathan R ShawChatham and AylesfordLabno
Barry SheermanHuddersfieldLabno
Clare ShortBirmingham, LadywoodLab (minister)no
Alan SimpsonNottingham SouthLabno
Marsha SinghBradford WestLabno
Dennis SkinnerBolsoverLab (minister)no
Andrew SmithOxford EastLab (minister)no
Geraldine SmithMorecambe and LunesdaleLabno
Mr Llew SmithBlaenau GwentLabno
Mr Clive SoleyEaling, Acton and Shepherd's BushLab (minister)no
Helen SouthworthWarrington SouthLabno
John SpellarWarleyLab (minister)no
Rachel SquireDunfermline WestLabno
Mr Gerry SteinbergCity of DurhamLabno
Mr George StevensonStoke-on-Trent SouthLabno
Ian StewartEcclesLabno
Howard StoateDartfordLabno
Mr Roger StottWiganLabno
Gavin StrangEdinburgh East and MusselburghLab (minister)no
Graham StringerManchester, BlackleyLab (minister)no
Gisela StuartBirmingham, EdgbastonLab (minister)no
Gerry SutcliffeBradford SouthLabno
Mrs Ann TaylorDewsburyLab (minister)no
Mr Peter Temple-MorrisLeominsterwhilst Labno
Gareth ThomasHarrow WestLab (minister)no
Stephen TimmsEast HamLabno
Don TouhigIslwynLabno
Jon TrickettHemsworthLabno
Paul TruswellPudseyLabno
Mr Dennis TurnerWolverhampton South EastLab (minister)no
Desmond TurnerBrighton, KemptownLabno
Derek TwiggHaltonLabno
Keith VazLeicester EastLabno
Rudi VisFinchley and Golders GreenLabno
Joan WalleyStoke-on-Trent NorthLab (minister)no
Robert WareingLiverpool, West DerbyLabno
Dave WattsSt Helens NorthLab (minister)no
Mr Brian WhiteNorth East Milton KeynesLabno
Alan WhiteheadSouthampton, TestLab (minister)no
Malcolm WicksCroydon NorthLabno
Dr Alan WilliamsCarmarthen East and DinefwrLabno
David WinnickWalsall NorthLab (minister)no
Mike WoodBatley and SpenLabno
Phil WoolasOldham East and SaddleworthLabno
Anthony D WrightGreat YarmouthLabno
Tony WrightCannock ChaseLabno
Mr Richard AllanSheffield, HallamLDem (front bench)aye
Norman BakerLewesLDem (front bench)aye
Mrs Jackie BallardTauntonLDemaye
Tom BrakeCarshalton and WallingtonLDem (front bench)aye
Dr Peter BrandIsle of WightLDemaye
Malcolm BruceGordonLDem (front bench)aye
Mr John BurnettTorridge and West DevonLDemaye
Menzies CampbellNorth East FifeLDem (front bench)aye
Mr David ChidgeyEastleighLDem (front bench)aye
Mr Brian CotterWeston-Super-MareLDem (front bench)aye
Edward DaveyKingston and SurbitonLDem (front bench)aye
Don FosterBathLDem (front bench)aye
Andrew GeorgeSt IvesLDem (front bench)aye
Donald GorrieEdinburgh WestLDemtellaye
Mike HancockPortsmouth SouthLDem (front bench)aye
Evan HarrisOxford West and AbingdonLDemaye
Nick HarveyNorth DevonLDemaye
David HeathSomerton and FromeLDem (front bench)aye
Simon HughesNorth Southwark and BermondseyLDem (front bench)aye
Mr Nigel JonesCheltenhamLDem (front bench)aye
Mr Archy KirkwoodRoxburgh and BerwickshireLDem (front bench)aye
Mr Richard LivseyBrecon and RadnorshireLDem (front bench)aye
Mrs Ray MichieArgyll and ButeLDemaye
Michael MooreTweeddale, Ettrick and LauderdaleLDem (front bench)aye
Lembit ÖpikMontgomeryshireLDemaye
Mr David RendelNewburyLDemaye
Bob RussellColchesterLDem (front bench)aye
Adrian SandersTorbayLDem (front bench)aye
Robert SmithWest Aberdeenshire and KincardineLDemaye
Andrew StunellHazel GroveLDem (front bench)tellaye
Mr Paul TylerNorth CornwallLDem (front bench)aye
Jim WallaceOrkney and ShetlandLDemaye
Steve WebbNorthavonLDem (front bench)aye
Elfyn LlwydMeirionnydd Nant ConwyPC (front bench)aye
Margaret EwingMoraySNPaye
Alasdair MorganGalloway and Upper NithsdaleSNPaye
John SwinneyNorth TaysideSNPaye
Andrew WelshAngusSNPaye

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