§ During the 19th century the industrial power of our country rested upon the basis of its wonderful coalfields; the 20th century has seen us become increasingly dependent upon imported liquid fuel, scarcely any of which is found inside the British Empire. We paid last year for oil supplies of every kind almost as much as we received for our export of coal. We used to be a source of fuel; we are increasingly becoming a sink, These supplies of foreign liquid fuel are no doubt vital to our industry, but our ever-increasing dependence upon them ought to arouse serious and timely reflection. The scientific utilisation, by liquefaction, pulverisation and other processes, of our vast and magnificent deposits of coal, 855 constitutes a national object of prime importance. Any policy which tends to promote and accelerate these scientific developments has at least one powerful argument in its favour.
§ A second series of considerations springs from the relations of road and rail transport. The immense expansion of road transport by motor vehicles is an economic advantage of measureless consequence to the whole industrial life of the nation. Its influence in enriching that internal trade, which so greatly exceeds our external trade, is of incalculable advantage, and nothing must be allowed to restrict this development, so long as it proceeds on a sound economic basis. If, on the other hand, particular classes of road vehicles were found to be receiving undue advantage so that the traffic which would naturally go by rail was artificially diverted to the roads, that would be a wasteful feature which would be eliminated from any well-managed business. We have seen in late years road transport increasingly taking many forms of traffic from the railways. If the road vehicles, which carry these forms of traffic, inflict far more injury on the roads than they pay for, the competition ceases to be fair, and an injury is done to the community at large. It is the duty of the State to hold the balance even between road and rail, and to let the best form of transport win on its merits. No one can say that the balance is even at the present time. The recent vote of the House on the Railway Powers Bills shows conclusively how widespread opinion is on this subject, and how firm and definite it is in Parliamentary circles.
§ A third set of arguments is involved in the state of the roads themselves. The Road Fund and the local authorities are spending over £50,000,000 a year upon the roads, apart from expenditure out of loans. These roads are already the best in the world, and more is being spent on them in proportion to their length than in any other country. Larger sums are forthcoming, and will be forthcoming, for their upkeep and development every year, and still larger sums are urgently needed. The heavy traffic requires the reconstruction of the whole foundations and many of the bridges of a large proportion of our roads, and the expenditure often reaches £15,000 per mile. Beyond cer- 856 tain limits and degrees, this process would grow out of proportion to the national well-being. We have only a limited fund of capital to employ every year in every direction, and it would not be in the public interest—and this is one of the foundations of my argument—to spend in the next few years several hundreds of millions of additional money upon our roads, apart from the present grants upon the roads, if the result were to render artificially and prematurely obsolete the splendid British railway systems which represent a thousand million pounds of national capital, and afford employment to nearly 700,000 men. We need both road and rail communications, and it is the task of Parliament to regulate the relations between them in a true proportion, having regard to their competing interests and to bring those competing interests into harmony with the general interest.
§ From every side the local authorities complain of the burden cast upon them by the rapidly increasing motor traffic, especially the heavy motor traffic. They appeal for ever greater assistance from the State as represented by the Road Fund and the Exchequer, and they regard the impending arrival of the railway companies upon the roads, however just that permission may be, as likely to add to their burdens. In addition to this, we have a vast, ever swelling mass of buoyant pleasure traffic, or convenience traffic, born of the delights of speed and movement, and the facilities of business and trade which are so striking a feature of the modern age. Weighing the issue between coal and oil, and weighing the issues between road and rail, and contrasting the rapidly expanding pleasure traffic with the depressed and struggling condition of our basic industries, the Government have come to the conclusion that a new duty should be imposed upon certain kinds of imported oils. The fruits of this tax are not required to pay for the ordinary expenses of governing the country. The whole yield, and more than the whole yield, will be devoted to the relief of other burdens. But the burdens will be differently and, we think, more sensibly and more justly distributed. The new tax will be upon what are called the lighter hydrocarbon oils which are imported or are derived from imported materials. I am advised that there is no difficulty in establishing a chemical frontier between the light and heavy oils. 857 The Government Chemist, assisted by other distinguished scientists, has devised a formula which will be set out textually in the Resolutions which are to be submitted to the Committee to-night, and which, I believe, will be found to be completely satisfactory. This formula will cover not only petrol but other forms of motor spirit, kerosene and white spirit. It excludes the heavy oils which are known as fuel oil, Diesel oil and gas oil. A most important reason for excluding these heavy oils is that any addition to their price, which is very low, would so greatly restrict their use as to cause economic disturbance out of all proportion to the revenue involved. The formula also excludes lubricating oils, which it would be difficult to differentiate for fiscal purposes, though they could well bear the tax, from the other heavy oils I have mentioned. Therefore we confine ourselves to the light hydrocarbon oils. In the main those are used for motor transport, for various industrial purposes, and for the lighting and heating of public places and the dwellings of all classes. The Duty will be extended to one single vegetable oil, that is to say turpentine, which is in active competition with white spirit. As the imposition of such a tax on kerosene will affect all classes of consumers I shall, before I conclude, propose a relief on another article of popular consumption which will compensate the domestic user of kerosene for the tax put upon him. But I will speak of that in its proper place.
§ To return to the main tax. A tax on the thousand million gallons of light oils now imported or derived from imported materials would amount in the first full year of collection, that is to say 1029, to about £4,500,000 for every penny on the gallon. We have been advised by high authorities whom we have consulted that to put a tax of 4d. on these light oils would not prevent the rapid progressive increase of consumption which has been a marked feature of recent years. The extraordinary fall in price which has marked the last five years, and particularly 1927, renders the moment for imposing the tax singularly opportune. In five years the retail price of Number 1 motor spirit in London has dropped from 2s. to 1s. 0½d. per gallon. Since the beginning of 1927 alone it has fallen by 5d. Even with petrol at 2s. 858 the expansion of motor traffic was continuous. I understand that about one, half the present price of petrol is represented by the cost of distribution, and there is every reason to believe that some considerable compression might easily be effected in this field. The fall in price of kerosene is not quite so marked, but nevertheless it is considerable. The wholesale price in London has fallen by 3½d. in the last five years, and by 2½d. in the last 15 months. Therefore, there is no doubt whatever that road transport in all its forms will continue to grow rapidly, and that the consumption of light oils will continue to expand in spite of the tax of 4d. a gallon which we propose to institute. In fact, we are estimating for a substantial, steady increase of consumption year after year.
§ With the sanction of the Committee the tax will be imposed as from tomorrow. Arrangements have been made by which it will apply simultaneously to all stocks held at the ports and in any of the large tank installations and in the refineries. Stocks under 10,000 gallons in the hands of garages and private individuals will escape. The tax is so devised as to make sure that the business of refining is in no way prejudiced. Refineries will be placed in bond and the duty collected on the products as they leave the premises. All forms of home production from indigenous products will be free from any countervailing excise. That is a most important decision. Thus an undoubted stimulus will be afforded to the production of Scottish shale oil and other British oils—[Interruption]—the shale miners are extremely distressed—to benzol and liquid fuel manufactured by all the new scientific processes from British coal. This advantage may rapidly produce important results. I shall say no more than that, because these processes are still in an unproved state. The addition of 4d. gives effectual protection—that is what it comes to—to this great home industry, exactly as we have done in regard to beet sugar. This 4d. will have a very great effect in bridging the gap between scientific production, which is now perfectly possible on the large scale, of oil from coal and commercial production, which has not yet been achieved. All oil used afloat in the fishing fleets, 859 whether for deep-sea or inshore fishing, will be free. Further, the tax upon light oils used in agricultural tractors, of which there are 23,000, for the purpose of tillage and only for the purpose of tillage in all its stages—not stationary engines, I cannot frank them, the leakage would be too great—will be remitted.
§ It is estimated that a duty of this character at the rate of 4d. on light oils will yield in the financial year 1928 £14,000,000, and in 1929 £17,800,000, and that thereafter the revenue from it will rise year by year by about £1,250,000 a year. These are net figures after allowing for Northern Ireland's share of the new revenue and after allowing for the exemptions I have just mentioned. The new revenue derived from this tax, together with the ordinary surplus this year, will supply the means for the rating reliefs to productive industries. I have explained those reliefs, and how they cannot come into operation before the second rate payment of 1929, that is to say, in October of that year. I am thus, and I would like the Committee to follow this, collecting the whole revenue of this year and of 1929 whereas I shall only have to pay out half of the relief in the latter year. I will return to this point later on, but I will, before I sit down, give the Committee the best estimate I have been able to make of the new revenue and of the outgoings. But there are several matters to he disposed of before that point is reached.
§ The DEPUTY-CHAIRMAN (Captain FitzRoy)
I am in the hands of the Committee. If the Committee wish to adjourn I am ready to do so.
§ Sitting suspended at Five Minutes before Six o'Clock until half after Six o'Clock.
§ On resuming—
§ Mr. CHURCHILL
A short time ago, just before the Committee were kind enough to adjourn in order to allow me an interval—and I desire to express my appreciation of their courtesy in so doing—I was explaining that this tax on light hydrocarbon oils directly affects the 860 general householder and I mentioned that I contemplated announcing later on a compensating relief on another article of popular consumption, with which I am now going to deal.