HC Deb 07 July 1930 vol 241 cc70-83

The duty on vegetable turpentine anti white spirit is hereby repealed.—[Lieut.-Commander Kenworthy.]

Brought up, and read the First time.

Lieut.-Commander KENWORTHY

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

This is the first time I have ventured to intervene in the long and sometimes heated Committee proceedings on the monumental Finance Bill of my right hon. Friend the Chancellor of the Exchequer. I propose now to intervene briefly on a subject which affects 103 constituencies in this country and to present a proposal which, I know, has the support of a great many Members in all parts of the Committee. The proposed new Clause would repeal the duty on white spirit and turpentine and in submitting it I propose to reinforce myself by recalling what was said in a debate on this subject on the 23rd July, 1928. On that occasion a proposal practically similar to this was moved by the hon. Member for Leith (Mr. E. Brown), and was supported by the present Financial Secretary to the Treasury. I will only quote two of his strictures on the tax. He said: The tax, as it was originally conceived, was a bad tax. Secondly, he said: The duties are unjust and injurious to trade and employment."—[OFFICIAL REPORT, 23rd July, 1928; col. 1022, Vol. 220.] It was not surprising that after the hon. Gentleman had so eloquently charmed the House with the inequities of this tax, the Chancellor of the Exchequer voted against it. He himself voted against it, so did the Prime Minister, and so did the President of the Board of Trade. In fact, the whole of the Labour and Liberal parties voted against it, but although the Conservatives did not go into the Lobby against it, the hon. and learned Member for Moss Side (Sir G. Hurst) and the hon. Baronet the Member for North-West Hull (Sir A. Lambert Ward) very strongly supported it.

My right hon. Friend has been constrained to keep the tax on, I daresay for very good reasons, but I beg him to consider whether it could not be abandoned. The arguments briefly are that turpentine, a vegetable oil that cannot be produced in this country, is an essential raw material for paint, varnish, and colour manufacture, linoleum, wallpaper, floor polish, boot polish, and so on, and the number of people directly employed in these manufacturing processes is very great. Turpentine cannot be used for motor engines. I understand that the argument for the taxation of turpentine is because it is a competitor with white spirit for certain processes, and that it is not fair to tax white spirit and exempt turpentine, but industrial alcohol is not taxed, and it also is in competition with white spirit, and on that argument it ought to be taxed. There is no reason why the Turpentine Tax should not be dropped, but it would be far better to drop the tax both on turpentine and on white spirit. It is said that white spirit can be used with motor engines, but the best answer to that is that during all these years—and it is much cheaper than ordinary petrol and benzol—it never has been adapted for use in the internal combustion engine. You have manufacturers who use internal combustion engines importing immense quantities of white spirit, and they have never thought of trying to use it in their engines.

I think my right hon. Friend should remove this tax, the amount of which is very heavy. Of the value of white spirit, the amount of tax levied is from 40 to 50 per cent., which is a crushing burden, and on turpentine it is about 15 per cent. I admit that the duty brings in a substantial sum. For white spirit it is about £233,000 a year and for turpentine about £86,000 a year, but the fact that it brings in a substantial revenue shows that it is also a very heavy burden on the manufacturing industries concerned. Indeed, since the duty was imposed, unemployment in these industries, and especially in the paint and varnish industry, has risen, I do not say only because of the duty, but undoubtedly the duty is a contributory cause. The figures have gone up from 4 per cent. in 1927 to 6 per cent. in 1929, and, of course, that happens if you put a tax on a raw material. There is no more logic in taxing these two essential raw materials than there would be in taxing wool, or timber, or cotton. If my right hon. Friend taxed those three basic raw materials, he could raise an enormous revenue. Some of my hon. Friends opposite are talking of doing it for other purposes, but we do not get even Empire Free Trade out of this tax.

This taxation, furthermore, hampers us in the export trade, which is very considerable. It is true that rebates can be obtained, but it is not only the amount of money that enters into the question. I would draw the attention of my right hon. Friend to a short extract from a letter from a very large firm in my own constituency which is engaged in a considerable export trade and giving a great deal of employment. Messrs, Hanger, Watson and Harris, Limited, very important manufacturers in Hull, say: In our manufactures for the export trader we have to make a separate claim for practically every shipment and the clerical work and record keeping is very heavy, and for every shipment a Customs officer has to canter down here about three miles from the Customs House, and for certain goods we have to pay the cost of him coming. It is that sort of thing—the delays, the extra clerical staff required, and the actual bother involved—that is hurting the export trade. In regard to the manufactured article used in this country for house paint, for buildings and public works, there is no rebate, and therefore it is a direct tax on construction and on building the homes of the people.

It is a very vexatious tax. It was conceived by the right hon. Member for Epping (Mr. Churchill), and it was put on, I believe, with regard to turpentine, under a genuine misunderstanding. At the same time paraffin was taxed, but there was a tremendous outcry in the rural districts from the cottagers and farmers who used paraffin, and hon. Members from those districts came back from their week-ends and made such representations to the Conservative Chancellor of the Exchequer that he dropped the tax on paraffin. Paraffin can be used in internal combustion engines, but the turpentine and white spirit which my right hon. Friend taxes cannot be used in internal combustion engines. Why was the tax on paraffin taken off? It was because there was a great outcry from an electorally powerful section of the community, but in regard to turpentine and white spirit only a few manufacturers scattered about the country, and the workpeople they employ, are affected. They have not the political pull of the cottage dwellers and the farmers who use paraffin, and for that reason my right hon. Friend, who, everyone will admit, is chivalrous and the friend of the weak, is, I am sure, sympathetic to our demands.

It is just because these people have not a great, organised, political machine that they can bring to bear in the constituencies that my right hon. Friend should be particularly tender to them, and I am certain that, it is not my right hon. Friend's, desire to tax them. He is now accused, in these days when there has been much midsummer madness among bankers and others, of being an orthodox Free Trader. Let him stand by those Free Trade principles here and not tax essential raw materials which even the moat fanatical Protectionist opposite has never demanded should be penalised. Let him promise us to remove the Turpentine Tax now, and I hope also to hear from him that he can remove this impost on white spirit as well.

The CHANCELLOR of the EXCHEQUER (Mr. Philip Snowden)

My hon. and gallant Friend the Member for Central Hull (Lieut.-Commander Ken-worthy) has stated his case with great force and moderation. This Clause has placed me in a somewhat difficult position, and I should not be prepared to rebut many of the arguments which my hon. and gallant Friend has used. This is a tax that I myself would never have thought of proposing unless all the other available sources of revenue had been completely exhausted. The tax upon turpentine and white spirit was imposed as part of the motor taxation two years ago, and it was imposed, as the Committee knows, for the purpose of partly raising revenue to finance the de-rating scheme. It is a tax upon industry, and, therefore, theoretically and to a large extent practically, that is a condemnation of the tax, but the condemnation applies too to the whole of the Motor Duties, and, of course, the revenue derived from petrol is enormously larger than the revenue from these two taxes which are now under consideration. The amount of revenue involved by a sacrifice of these two taxes is not very large. The cost of the repeal of the Turpentine Tax would be about £100,000 a year and of the tax upon white spirit something like £250,000, a total of about £350,000. That is not, as I say, a very large sum, but it is a sum of very considerable importance to me when I am searching for a possible sixpence still left in the pockets of the taxpayer.

I might add this, that I think it would be very difficult to repeal these two taxes and stop there, because I think we should be compelled to extend to—and I am sure there would be a vociferous demand for the extension—to the tax upon petrol for non-road use. I think I have already indicated that in the matter of the burden of taxation, you cannot make any distinction. Take, for instance, the Petrol Tax. I am speaking from memory, but I think that about three-quarters of the revenue from petrol is paid by commercial vehicles, and nobody can deny that that is a tax upon industry. Some hon. Members who were in the last Parliament may remember that in the debates upon the Petrol Tax I produced a number of omnibus tickets, which were specially given out as the travellers' contribution to the Petrol Tax, and, therefore, the conclusion which I must for the moment regretfully announce is in no way based upon an approval of these taxes. If I were in a position to repeal them—nay, if I were in a position to repeal the whole of the Petrol Taxes—nothing would give me greater pleasure, but I very much regret to have to say that I cannot this year see my way to make even this modest remission.

I took the trouble this morning to go through the Amendments on the Paper and to calculate the cost of the various demands which are made in the various new Clauses which appear there, and the Committee may be interested to know that, if I were to accept all these proposals, the total cost to the revenue would be £237,000,000. I think the Committee would hardly expect me to shoulder that. [Interruption.] If I begin with this particular tax, it is very difficult to stop there, and, therefore, with this expression of sympathy with the object of this Clause, I am afraid I must ask the Committee to be satisfied for this year. Perhaps at some time we may sail into happier times, and then the remission of this and other taxation of this character, I can assure the Committee, will receive my favourable consideration.

Mr. GRAHAM WHITE

I am not quite certain whether I ought to thank the Chancellor on behalf of those Members who are so much interested in this proposed new Clause for the sympathy which he bestowed upon it. I must do so, although I cannot go so far as to look a gift horse in the mouth. I feel sure that the right hon. Gentleman would be quite unable to enter any defence at all for the continued existence of this impost upon a raw material. I was unable to follow him in his fear that, if he made this concession, he would be obliged to extend the area of his concessions, because I cannot understand how turpentine can be brought within the scope of this impost at all. It is not even a hydro-carbon oil; it would be far more logical to bring within the duty a substance like vaseline, which is a hydro-carbon. It cannot in any circumstances be used in an internal-combustion engine, and ought never to have been included in this duty. I have never been quite clear how it got there; I can only think that it was over-looked by the predecessor of the Chancellor. I cannot think that he was actuated by malice or animated by spite when he selected the users of turpentine and white spirits for this impost, because we have learned from the right hon. Gentleman the Member for Epping (Mr. Churchill) that these sentiments of malice and spite are things which he particularly abhors. When he was trying to defend the duty, he endeavoured to point out that there were ways by which the wind could be tempered to the lamb that was to be shorn, and he thought that no difficulty would be found in passing this impost on to the consumer. The position has changed, however, because the experience of the two years has proved that the manufacturers have not been able to pass the duty on to the consumers.

It was pointed out also that although this duty would be levied on the raw material which manufacturers use, and although it would undoubtedly increase their costs, the manufacturers would get the substantial benefit of the de-rating of their premises, to pay for which was the object of the duty. There again the situation has changed, because this relief has been proved in practice not to exist. In the case of paint and varnish manufacturers, it is found that in most instances the actual relief of rating is exceeded four times by the amount of the impost which is levied on their raw material. There is, therefore, no case for retaining this very serious duty. The right hon. Gentleman has been obliged by force of circumstances to levy increased taxation in this Budget, and this has had an unfortunate psychological effect upon industry. I had hoped that in regard to the Turpentine Duty, which would cost about £86,000 in a year, he would make a gesture to industry, which would have been evidence of his goodwill. He has spoken to us sympathetically, but I wish he had seen his way, even if he could not have taken the duty off, to have given an undertaking that he would remove it next year.

Mr. D. G. SOMERVILLE

I would like to reinforce the appeal of the hon. and gallant Member for Central Hull (Lieut.-Commander Kenworthy) for the removal of this duty, particularly in the case of turpentine. The Government are extremely interested in housing and in getting up houses for the working people. Turpentine is an article which is used in the paint on these houses. Paint is one thing which cannot be left off a house if it is to be made respectable, and turpentine is essential for every building that is painted. Every paint manufacturer or builder will tell you that the cost of painting is a serious item, and if the Chancellor could see his way to take off this duty, he would help an essential element in the building of houses. A sum of £86,000 in a Budget of the size which he has presented is a very small matter, but its remission would be a big concession. We have under consideration at the moment a slum clearance Bill, and when that goes through, there will be an enormous amount of small building to be done. That will be carried out by small contractors, who cut down their prices to the lowest possible level, and every penny on every article which they have to use in the construction of houses will count. I would make a very strong appeal to the Chancellor to be generous for once, and to remember his Free Trade origin and his professions. This is a duty on a raw material which cannot be produced in this country, and which must be obtained from abroad, and to show his genuineness of purpose, and his belief in his professions of Free Trade, he should take off this small duty. From a practical point of view, it would help housing, which is what the Government desire to do, so I appeal to him earnestly to see his way to drop this small item of £86,000.

Mr. ARNOTT

The speech of the Chancellor of the Exchequer was quite as much in opposition to the duty as any of the speeches of those attacking it. There was only one line of defence which he put up apart from the financial aspect; that is, that the duty on petrol was quite as much a tax on raw material as the duty on turpentine and white spirits. That is true, but the argument which was put up when the Petrol Duty was imposed was that there were some different considerations in respect of petrol. I do not know What the considerations were; I suppose they had something to do with penalising vehicles which consume petrol, although that could have been done by an ordinary car tax. It is certain that this duty was put on under a misapprehension. It was assumed that white spirit could be used for the purpose of running an engine. It might be under some circumstances, but it cannot be under ordinary circumstances. Therefore, there is a big distinction between imposing a duty on fuel for internal combustion engines, and imposing a duty on what is an essential material of a totally different industry. The Chancellor himself says that the duty is unjustifiable. It is against the Free Trade principles of which he is an advocate; it is against Protectionist principles as well, and I rather regret that, while we got his sympathy, we had no promise that something would be done next year, if not this.

Mr. ERNEST BROWN

I moved the removal of this duty last year, and I regret that the Chancellor has not seen his way to meet us this year. This duty particularly affects the sea ports, in every one of which there are numbers of small varnish and colour manufacturers, who do not employ a lot of men, but who perform a valuable function, and who have been hardly hit by this duty. The amount of relief that would be given to this small industry is out of all proportion to the amount of money received by the Chancellor, and I know that there will be great regret in the seaports to-morrow when it is found that he cannot see his way to take the duty off, especially when he was bound to take up the position when in Opposition that the duty is a thoroughly bad impost in its relation to industry. We shall hope that next year the duty will be got rid of, because there is no defence whatever for it, and because it affects all the manufacturers of paint and varnish which is used not merely for housing, but for sea-going ships. I regret that the Chancellor has not been able to meet us in this matter.

Major HILLS

I find it difficult to argue against this duty, because the strongest speech against it has been made by the Chancellor of the Exchequer, but I would suggest that if there be any concession that he could properly make on the ground both of principle and of application, if is surely with a duty of this sort. I am certain that it offends his principles; I am sure that he does not like a tax on raw materials, or one that discriminates, as this does, against one special industry. I am sure he bears in mind also that the intention of the original Petrol Duty was never wide enough to include turpentine. The Petrol Duty was definitely a tax on transport. Rightly or wrongly, that was the intention, and largely the effect, of that duty De-rating was to be paid for by taxing transport, and it was on that ground that paraffin was exempted. I have always felt that the case for the exemption of these spirits was just as strong, for they cannot be used as motor spirit, and ought not to be within the ambit of the duty. A very small sum is involved in this duty, and its remission would not upset the Chancellor's Budget. He has much bigger sums to meet in future, and a small concession of £300,000 odd is not a big thing to ask. On points of principle and of justice the Chancellor of the Exchequer is with us, and I hope that even now he will yield. The demand comes from all sides of the Committee; it has been pressed with great moderation, and there is a very strong case for it.

5.0 p.m.

Mr. HOFFMAN

I would like to join with my colleague from Hull in pressing upon the Chancellor the request for the repeal of this duty. I understand that there may be some difficulty in distinguishing between white spirit and petrol, but that point cannot be made in respect of turpentine. Vegetable turpentine can never be mistaken for petrol, and if the Chancellor cannot see his way to remove the whole of the duty upon these commodities perhaps he can see his way to taking off that upon vegetable turpentine. It is a raw material which enters very largely into one of our basic home industries, and, apart from that, I would remind him of the growing export trade in boot polishes and floor polishes. Our export trade is carried on on a very narrow margin, and even a tax on vegetable turpentine may weight the balance against us in the world's markets. I hope the Chancellor will soften his heart and relieve us of the duty on vegetable turpentine.

Rear-Admiral BEAMISH

I also have a few points to put to the Chancellor with a view to persuading him to adjust his mind on this matter. I think I am correct in saying that continental countries allow a rebate on white spirit and turpentine which is used for industrial purposes such as we are referring to here, and that makes it a little unfair that we should continue this duty. He himself said that he would not have imposed such a duty until all the other available resources of taxation had been exhausted. Surely that cannot be the genuine opinion of a Chancellor of the Exchequer who has shown such remarkable ability in extracting money from the people of this country! If so, the Socialist schemes we have heard so much about cannot stand for a very great deal. I would like to concentrate on the lesser part of the problem, the turpentine duty. There are at least two, and I think more, factories in my constituency which use a large quantity of turpentine. They are remarkably efficient, and one of them at least—if not both—is considered to be one of our show factories and to lead the way in industrial welfare as well as in efficiency. They are both endeavouring to extend this growing British industry.

The Chancellor remarked just now on the difficulty of raising more money. Does he realise that if he were to give up this £100,000—even if he would give up only a half of it, that would be very acceptable—it would mean no more than one-eighth of a penny on the Income Tax? He has already raised the Income Tax by 6d. to get somewhere about 50 times the amount of money that he will raise by retaining the Turpentine Tax. Surely he is in a position to give up one-fiftieth of the 6d. rise on the Income Tax in the interest of the industries of this country? It is not as though turpentine were a luxury. There is not a cottage in the country, and certainly no large house, which does not take a pride in keeping its linoleum polished and having the place looking as smart and as bright as a British home should look, and I earnestly request the Chancellor to reconsider his attitude and at least remove the duty on turpentine. That would be a remarkably kind action, which would be very much appreciated in almost every constituency.

Mr. CULVERWELL

I would like to congratulate the Chancellor on the charming and almost disarming way in which he has refused this request, but I am sorry that he should have based his excuse on the Petrol Duties, because the duty upon turpentine has no real connection with the hydrocarbon oil duties. They were imposed partly in order to raise revenue and partly to levy a fairer burden upon motor car users with, as we hoped, the idea of a reduction in the horse-power duties when the revenue permitted it; and there was the further reason that it was hoped to encourage the distillation of oil from coal at home and in that way to build up an oil-producing industry in this country. Not one of those arguments applies to the duty upon turpentine. Turpentine cannot be produced in this country. It is a raw material of a very important industry, and one in which I am particularly interested, because there are several large and important paint factories in Bristol which are feeling the effects of this duty, and say that it more than outweighs the advantages they have received under the de-rating scheme. The Chancellor, in talking of the impossibility of accepting this proposal, said that if he agreed to all the proposals in the sheaf of Amendments he has before him he would be called upon to sacrifice some £257,000,000 of revenue. He is not afraid to increase expenditure, in order to gain the support of his followers on the back benches, by hundreds of millions of pounds. He has made no concession at all to industry in his Budget, done nothing to assist industry, made no reduction of taxation; and when he is asked to make this trifling concession of under £100,000 by repealing a duty which he admits is unjust I ask him to give the request most serious consideration, even though he may steel his heart against sacrificing the £257,000,000 involved in the other proposals.

Mr. KINLEY

I wish to add a further word of appeal to the Chancellor to give consideration to this new Clause while there is still time. I do so principally because there is in my own constituency an instance of the way in which this duty does cause hardship to one particular firm. It is an outstanding firm, and the head of it is one of the staunchest and best known Free Traders in this country. The conditions under which the employés work compare favourably not only with those of other firms in the same industry, but with those of any other industry, the conditions are of the best; and the firm is so carried on that the profits do not all go to the shareholders, but are largely returned to the employés.

The DEPUTY-CHAIRMAN

I do not think we can use this debate to advertise a particular firm.

Mr. KINLEY

I will come to the point. This firm has now to pay an annual tax of £2,500 upon one of its raw materials, white spirit. If there are firms which are so seriously hit by this duty upon one of their raw materials, then the Chancellor ought to be ready to grant the exception for which we ask. Industry ought to be freed from this impost; whatever the cost to the Treasury it would be well recompensed by the benefit to trade.

Lieut.-Colonel Sir A. LAMBERT WARD

It gives me very great pleasure to find myself in complete agreement with my hon. and gallant colleague the Member for Central Hull (Lieut.-Commander Kenworthy). This happens so very rarely that I think it will be agreed that any case which we have united to support must possess some inordinately good points. I have always looked upon this duty as being more or less in the nature of an experiment. The duty as originally drafted included all hydrocarbon oils, but it was very soon found that a duty on paraffin could not be carried, and that portion of the duty was dropped. In my opinion it has by now been amply demonstrated that the portion of the duty which is levied on turpentine and white spirit is also doing a, very grievous amount of harm to certain industries, and therefore it ought to be dropped. As I listened to the speech of the Chancellor I fear that I jumped prematurely to the conclusion that he would accept this new Clause, because he did not advance a single argument in favour of this duty other than the lather sordid one that it was helping him to obtain the last sixpence from the taxpayers' pockets. That is not altogether the point. As has been emphasised by many speaker s, this is a duty on the raw material of a particular industry which, without being especially flourishing, is one of the few industries which is maintaining its export trade. A duty on its principal yaw material will in the long run tell against that export trade and hinder the possibility of our reducing our adverse balance of trade.

One of the principal arguments in favour of the De-rating Act was that it would relieve industry of some of its heaviest burdens. Here we are giving with one hand and taking away with the other, and in many cases are actually taking away more than we are giving, because with the firms which I have in mind, the tax on turpentine and white spirit is costing in some cases a little more than, and in other cases nearly twice as much as, the amount of relief they are getting in the matter of rates. As far as export trade is concerned, it is perfectly true that a rebate or drawback is given on all tupentine and white spirit which has been used in an article for export, but the difficulty and the trouble of obtaining that drawback by proving the amount of taxable article that has been employed is so difficult and so worrying to put through that it is scarcely worth the trouble.

As regards the home trade, the argument was advanced during the debates on this particular tax that the tax could easily be transferred to the consumer. That was the original intention, but it has been proved to be useless on account of the fact that competition is so keen, and partly on account of other considerations connected with the trade, that it has not been possible to do so, and the whole of this tax has to be borne by the industries concerned. That being so, combined with the fact that the amount is so small, I sincerely ask the Chancellor of the Exchequer whether he cannot meet us in some way on this point. If he considers it essential that the tax on white spirit should be continued, then let him meet us with regard to turpentine, because that brings in a comparatively small amount. The remission of this tax would go a very long way towards improving the conditions of this particular trade.

Lieut.-Commander KENWORTHY

In view of the sympathetic answer which has been made by the Chancellor of the Exchequer, and in view of the expression of opinion in various quarters of the Committee, my object has been served, and I beg to ask leave to withdraw my Motion.

Motion and Clause, by leave, withdrawn.