HC Deb 02 August 1912 vol 41 cc2551-60

(1) As from the passing of this Act the persons entitled under Sub-section (1) of Section eighty-five of the Finance (1909–10) Act, 1910, to the repayment or allowance of the whole of the duty paid in respect of motor spirit under that Act shall, in addition to the persons therein mentioned, be deemed to include any person using motor spirit for the purpose of supplying motive power for a motor omnibus while it is standing or plying for hire, and Section eighty-five of the said Act shall be construed accordingly.

(2) Nothing contained in this Section shall operate to entitle any person to the repayment or allowance of any duty under the Finance (1909–10) Act, 1910, in respect of motor spirit used by him prior to the date of the passing of this Act.

(3) The provisions of Section eighty-five of and Part I. (2) and (3) of the Fifth Schedule to the Finance (1909–10) Act, 1910, so far as they entitle a person using motor spirit for the purpose of supplying motive power to a motor omnibus standing or plying for hire to a return of one-half the amount of the duty paid under the said Act shall cease to have effect.

Mr. PETO

I beg to move "That the proposed Clause be read a second time."

I base my claim that motor omnibuses should be entirely free from the Petrol Tax on two main grounds. The first is, I maintain, the principle that underlies this tax was that it was never intended it should be a tax upon trade; it was intended for altogether different purposes. The second is that in this Motor Spirit Tax you are taxing the motive power—that, I think, is the proper word to use in this connection—of a particular trade, and that it is obviously extremely unfair to select one particular competitor in a competitive trade for the transport and conveyance of the public for taxation and to leave absolutely untouched the motive power of other competitors in that trade. What justification can there be for a tax upon spirit consumed by motor onmibuses, while you do not think it right to tax coal in the electric stations which supplies the power for working the underground railways? You are interfering by administering the tax, as it is at present administered, with one competitor in a particular branch of industry and not with others, and you are handicapping to an enormous extent one particular competitor.

The next ground of objection on broad principle is that the tax was intended to be a tax upon motor cars for the conveyance of people who can afford the luxury of individual motor cars. It is true that half the tax is remitted in the case of taxicabs and motor vehicles that ply for power, but even so, is there any justification for putting on a tax which must inevitably tend to keep up fares on the poorest of the travelling public and to cut down the wages of drivers and conductors who attend those motor omnibuses? There is no question that if you put a heavy tax upon an industry you tend to put that charge upon the on-cost of the industry, and you keep down the pay of all those who are employed in it. You cannot do it without squeezing wages or without increasing the cost of conveyance to the public. The charge that can be made for the conveyance of the public is regulated by close competition between the various parties, one of whom has to pay the Motor Spirit Tax and the others of whom have not to pay any corresponding tax. Then, again, the cost of collecting this tax is excessive and the cost of recovering the part which is remitted is still more excessive. When you come to charge a duty of 3d. per gallon, and then return half by way of remission in favour of a certain number of consumers, and when you have to collect the whole tax, and then when the payers of the tax have again to collect the half which is remitted, you have about as cumbersome a form of collecting taxation as could be devised. What does this half of the extra tax amount to? I have here a report of a conference on motor-car taxation held last year, representative of the mtor-cab trade and motor-omnibus trade, and I have the minutes particularly as affecting the London General Omnibus Company, in which the following information is set forth:— The cost to the company on the basis of the consumption of petrol during the year ending the 30th September, 1910— I have not the figures for last year, but they are, no doubt, increased— was £32,700, or £14 per omnibus. What are the other taxes which the company are already charged? They are £2 for police licences, £3 3s. under the Motor Car Act, and 15s. under the Inland Revenue Act of 1888, making £5 18s. in all per omnibus, and in addition £l per omnibus in one year to the London County Council for registration. Distributing the £l over ten years you have a yearly payment in taxes of this kind of £6 making the total up to £50 per omnibus. What is this tax levied for? The proceeds of the tax go to the Development Fund. It is specially allocated to that and the justification given for the tax was the increased charge for the maintenance and upkeep of main roads owing to the heavy motor traffic. But none of the motor omnibuses ever get off the London streets at all; neither their drivers or conductors ever see these roads for the upkeep of which they pay this enormous tax. I have here a resolution which so entirely covers the whole of the case that it is worth reading:— The imposition of a Petrol Tax upon motor omnibuses without a corresponding tax on the forage used by horses, or the coal used by railways and tramcars exposes the omnibus companies to unfair competition from their trade rivals where they have to compete with horse omnibuses, tramways, railways, and tubes. Its abolition was recommended on the ground that it is contrary to all our principles of taxation to penalise one trade. It will also be observed from the reports of the Motor Omnibus Company that the tax is so severe as to deprive the shareholders of a return for the money they have invested. That resolution was passed at a meeting of the Royal Automobile Club. It was a meeting of every one interested in the motor-car industry. I will sum up the grounds I have put forward for the complete remission of this duty. It operates unfairly between one branch of the same trade and another branch. It is a tax on the motive power, which is more important than a tax upon the raw material of an industry. That is a form of tax I do not believe anybody on either side of this House would justify under any finance scheme or system which is ever likely to be proposed. The motor omnibus is in fact the poor man's car, and it was never intended to place a tax on the conveyance of people to and from their work, to whom cheap transport facilities are of the utmost importance. If you put this great charge upon this industry it is bound to diminish the wages of those employed in it. If we remit this tax it would liberate a very large sum of money in the case of the London General Omnibus Company, who now pays under this duty £32,700 a year.

Therefore it is not a trifling matter, but it is one of considerable importance, and if you liberate that sum undoubtedly it will tend to reduce the fares and leave a larger sum available for increased wages [An HON. MEMBER: "For increased dividends to the shareholders."] That is a matter of opinion. I do not, however, put it forward from that point of view. If you have an industry in which there is no profit you may be very certain that there will be no funds from which the employés can obtain any advance in wages. On the other hand, if the industry is successful the employés do not suffer in that way. I think we can trust hon. Members below the Gangway to see that labour gets its fair share every time there is anything to share out. The only trouble we have is that sometimes these claims are put forward when it is impossible for them to succeed consistent with the success of the industry. Undoubtedly there is a large sum of money involved, and that sum forms part of a fund which goes especially to the upkeep of the main roads of the country, and these omnibuses have nothing whatever to do with the main roads and gain no benefit from them. Nevertheless they are made to contribute a very large fraction of the total amount of the revenue derived from the Petrol Tax. That is practically the whole of my case, so far as I am able to state it to the Committee, and I ask for the very serious consideration of these points by the Chancellor of the Duchy. As he was unable to accept my last little Amendment, which would have removed an obvious injustice, I ask him to deal with this Amendment in a more sympathetic spirit. It should be remembered that I am pleading for the collection of the tax from the people originally intended to pay it, and I am asking him not to interfere, as some hon. Members think we should interfere, with trade if we introduced the change we have suggested in our fiscal system; I ask him as a Free Trader not to interfere by a tax which operates unfairly between one competitor and another in the same trade.

Mr. HOBHOUSE

The hon. Gentleman who proposed this Clause has based a great deal of his argument upon the financial position of motor companies, and he made a special reference to the London General Omnibus Company. No example could have been less well adapted to his case. I remember that the London General Omnibus Company and those interested in it coming to me during the passage of this Bill and representing to me the desperate financial state of the company, and asserting that this tax would certainly kill not only the company but the motor industry, and that the whole of the inhabitants of the Metropolitan district would be put to the most dreadful and terrible inconvenience if this trade disappeared. What has happened since this tax was imposed upon this company? At that time their shares stood at £27 per £100. I know this company has since amalgamated with the Underground Railway, but before that amalgamation took place those shares were selling at £300, or ten times their original value. I am not suggesting that this tax caused that increase, but undoubtedly it did not interfere with the prosperity of the company. Let me point out that the imposition of this tax, as the hon. Gentleman fears, is not the cause of this company paying lower wages, because not only has the price of their shares increased tenfold, but instead of paying no dividend at all, as they did before the tax, they are now paying something like 10 per cent, or 15 per cent., with a bonus in addition. So that if it be true, as the hon. Gentleman suggests, that they are only able to pay very low wages to their employés in consequence of the tax, let me assure him that they have an ample margin from which they could improve the position of those people who work for them.

The hon. Member made another astounding statement. He stated that the London omnibuses never went off the Metropolitan streets. Surely the hon. Member cannot be acquainted with the destination of most of those omnibuses. He only needs to look at the names which are conspicuously placed upon them and he will see that they go out as far as Sidcup on the South-East route, and as far as Barnet on the North. The fact of the matter is that these companies are enjoying the use not merely of the Metropolitan streets, but also of the roads without contributing one halfpenny to the upkeep of those roads apart from this tax which is placed upon them so that they shall contribute something. Although they are paying a sum of £32,000 annually this company get it back many times over by using the roads and streets in the vicinity of the Metropolis, the excellent condition of which enables their omnibuses to run at a high speed, and in this way they are enabled to make those large dividends from which the shareholders derive advantage. It is not only this case. We have to look at the incidence of the tax, and at the results which the tax has contributed to bring about. No one on either side of the House will question the extraordinary improvement in the condition of the roads all over the country since the Road Improvement Board came into existence, or the substantial contribution to the fund which this tax makes to the great convenience of all travellers in every part of the country. The hon. Gentleman, in moving this Motion, said they and they alone were the persons taxed and that other companies who were their competitors did not have to pay the tax. He took the case of the tramways. The tramways not only have to contribute, through the rates, to the upkeep of the roads, but in nearly every instance I know of tramways operating along the highway they have actually to maintain the whole of the space on which the tramways travel. They contribute through their rates towards the maintenance of that portion which the public use, and they have to pay for the maintenance of the whole of that part on which the tramway travels. Not only therefore is the statement inaccurate that the omnibus company is unable to pay this tax, and that they and they alone contribute to this taxation, and their competitors are free, but, as a matter of fact, they are actually making use of that part of the roads the sole upkeep of which rests on their competitors. For these reasons the Government are unable to accept the proposal.

Lord ROBERT CECIL

I have always disliked this tax, and I believe it rests on a thoroughly unsound fiscal basis. The right hon. Gentleman referred to the great prosperity of the London General Omnibus Company. I know nothing at all about the affairs of that company, and I will take it from him they are prosperous, but he seems to forget that if they are prosperous it is because they are discharging a duty of the greatest possible good to the people of the Metropolis, and discharging it well. If they are unduly prosperous, I am amazed at the right hon. Gentleman making that a subject of complaint against them.

Mr. HOBHOUSE

I made no complaint. On the contrary, I congratulated them on their prosperity; but that is no reason why they should escape taxation.

Lord ROBERT CECIL

Certainly not. It has nothing to do with it whether they are prosperous or not. The point is whether the tax is a good one and is likely to be of advantage to the public. It is perfectly irrelevant whether one particular company is prosperous or not. This affects an immense number of companies all over the country, and it certainly has nothing to do with the merits of the tax that one particular company in London is so ably discharging its duties that it is making a large profit. There is, as a matter of fact, another consideration. If they are making this large profit, they will shortly no doubt in a country where there is free competition have competitors who will deprive them of a certain proportion of their profit. Otherwise, there is no justification for the industrial system under which we live.

Mr. PETO

I beg to remind the Committee that I only referred to the London General Omnibus Company for one reason. It was only from their figures I could tell the Committee what was the amount of this tax per year. There was nothing in my argument as to whether they were prosperous or unprosperous.

Lord ROBERT CECIL

My hon. Friend is perfectly right. I myself do not think it has any great bearing on the issue before us whether this company is prosperous or unprosperous. The only allegation I heard was that of the Chancellor of Duchy, who seemed to think that because they were doing very well that was a justification for the tax. My objection to the tax is that it rests on the theory that you can separate your fiscal system into watertight compartments, that you can have a tax on petrol which is to be applied to the upkeep of roads, and that in that way you are taxing a source of revenue which would not be open to you if you put the tax on some other commodity. I believe that to be altogether untrue. I do not think you gain anything by making it a tax upon petrol. It comes to be paid by the population of the country wherever you put it on in the first instance. Take this particular case. I always think it an extremely good illustration. You put a tax on petrol, and the result is that pro tanto you raise the fares or diminish the wages, or the other working expenses. I do not think in this particular case it has the effect of diminishing wages, but I do think it raises the fares. Anyone who has had, as I have had, the opportunity of comparing the services of the motor omnibuses and the tramways will be quite well aware that one of the great allegations made by their rivals is that the fares of motor omnibuses are too high for them to be of service or of sufficient service to the poorer classes of the country. There is no doubt an element of truth in that, and one of the things which contributes to keep up the fares is undoubtedly this tax. Anyone who has any knowledge of economics must, of course, admit that.

You have a general tax on the motor omnibuses of the country, and unquestionably that keeps up the fares to some extent. You are taxing the people—and that is the thing you have to recollect—who travel by motor omnibuses, or else you are preventing them from travelling by them, which is the same thing as taxing them. Therefore instead of taxing a bloated company which the Government persistently thinks it is capable of doing, it is really taxing the working men, as always happens with all their taxation. You may single out a particular company which is prosperous, and which has not put any part of the tax on the working man, but that company is in competition with all the other companies, and the thing which really settles the rate of fare is the least prosperous companies. You must therefore consider what the effect of the tax will be on the least prosperous company to see what is the economic effect of the tax. I believe it is a most unsound form of taxation, for this reason. It really discourages locomotion, and locomo- tion is the real and only solution in my judgment of the housing problem in great towns. I believe there has been a great mistake made in all our legislation in penalising too much railways, tramways, and other forms of locomotion coming into the great towns. Ail that legislation which is so dear to hon. Gentlemen opposite providing for the re-erection of houses for the displaced working-classes I believe to be a pure delusion. It has done no good whatever to the working classes. It has been a fetter on locomotive enterprise, and it has handicapped the housing problem in the Metropolis. I object to this tax because, in my judgment, as far as motor omnibuses are concerned, it is really a tax on locomotion, and that, I believe, to be a thoroughly unsound subject for taxation in our existing form of civilisation. I believe you ought to do everything you can to promote the free passage of a member of the community from one part of it to another, and, for that reason, if my hon. Friend goes to a Division, I shall support him.

Question, "That the proposed Clause be read a second time," put, and negatived.