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Agricultural Building Allowance

The question is why it is sensible to subsidise one kind of building in rural areas. Why should we subsidise agricultural buildings rather than commercial buildings or science parks? We have done that in the past and the evidence is that it distorts investment decisions in a way that is not in the interests of rural areas or communities. There is no economic sense in providing a selective tax subsidy for some buildings but not for others. The majority of commercial buildings in rural areas did not and do not receive allowances. The existence of allowances has distorted property decisions by providing tax relief that is not available for other purposes. The ABA has long been recognised as imposing a significant compliance burden because the system is complicated. It featured in responses to the corporation tax reform consultation of 2002-05 and in the administrative burdens advisory board's list of priority irritants in the tax system. To leave ABAs in place would have meant retaining that complexity for up to 25 years. There were therefore strong simplification arguments in favour of withdrawal. It is important to consider the withdrawal of the allowance and the Government's treatment of the agriculture sector in the context of the other forms of tax relief and Government support that are available. The Government and the devolved Administrations provide a range of direct support for agriculture. For example, farming in Scotland receives about £500 million in support from the Scottish Executive every year. The single farm payment is worth over £400 million a year, the less favoured areas support scheme more than £60 million a year and the Scottish beef calf scheme about £20 million a year. In June, the Scottish Cabinet Secretary announced increases in less favoured areas support scheme payments for the "fragile" and "very fragile" land categories—which equate broadly to the highlands and islands—of 19 per cent. for 2009 and 38 per cent. from 2010. Over two years, that should deliver an additional £15 million to active farmers in those regions. More broadly, the Scotland rural development programme budget is more than £1.5 billion for 2008-13. Such support is more appropriate than the rather ill-targeted tax relief that the allowances provided. Some tax reliefs still exist, such as lower duty on diesel, which the hon. Gentleman mentioned, the agricultural inheritance tax and capital gains tax reliefs, the special averaging entitlements for calculating taxable profits and loss relief.