HC Deb 12 June 1934 vol 290 cc1642-50

The rates of duty set out in the Seventh Schedule to the Finance Act, 1933, shall, as from the first day of January, nineteen hundred and thirty-five, he reduced by an amount equal to one-fourth of the said rates of duty.—[Mr. Holdsworth.]

Brought up, and read the First time.

9.8 p.m.


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

I have two purposes in view in moving this Clause: first of all, to draw the attention of the Committee to what, I think, is the grave injustice of the present taxation, and, secondly, to follow the good example shown by the Chancellor of the Exchequer in his Budget speech when he took off the 25 per cent. duty on private cars in order to stimulate the export trade. I do not suggest that if the present taxation on mechanically propelled vehicles were lowered that in itself would give a stimulus to the export trade in that particular section. Practically everybody in the Committee agreed with the Chancellor of the Exchequer in that reduction. There was an absolute specific purpose behind it, namely, to encourage the production of higher-powered cars which would meet the demand abroad for that type of car. If that was essential—and I agree that it was essential—in that particular case, I suggest that it is far more essential in this case, and from this point of view. It would be a great benefit to the export trade of this country if we had a very large export of heavy motor vehicles. The present duties, particularly as they were raised under certain sections of the Schedule last year, are acting against the production of the heavier type of motor vehicles. I know that there are some Members in the House who were all in favour of it because they were against the heavy type of vehicles being on the road, and thought that it would make for greater safety, but even on that point I am not certain that their intention is correct. The Minister of Transport, I think, will agree that when a firm apply for their licence it is based on their tonnage. I think that in view of this tremendous tax—at least, I am so informed—men are putting aside the 10 and 12-ton vehicle and substituting for it six vehicles of two tons each, and thereby, I contend, making for the greater congestion of the roads. You do not help the traffic problem by taking off one vehicle and substituting six smaller vehicles.

The development of motor taxation in this country is a very interesting study. It was in the Budget of 1909, which was not only famous for this particular thing but for many others, that we first saw the introduction of motor taxation in this country. The horse-power tax, with the petrol tax of 3d. per gallon, was first imposed by that particular Budget, and it was assumed that during the year 1909–10 there would be a revenue accruing of £600,000. I do not think that that sum was actually realised, but the then Chancellor of the Exchequer in his Budget speech gave that as the estimate of revenue from the tax. The purpose of the tax was to raise a fund—I do not think there is any question on this point—in order that the road system of the country might be adapted to the needs of modern transport. The raising and using of the fund for that specific purpose were complementary to one another. In that Budget the commercial vehicles, the motor cabs and omnibuses, were taxed, and half the petrol duty was levied. I took the trouble, in order to make certain why this tax was imposed, to look up what the then Chancellor of the Exchequer had to say about the duty, and I will read the words used by the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) on that occasion. He said that the £600,000 which was to be obtained by taxing motors and petrol: shall be placed at the disposal of a central authority, who will make grants to local authorities for the purpose of carrying out well-planned schemes which they have approved for widening roads, for straightening them, for making deviations round villages, for allaying the dust nuisance, and I should also propose that power should be given to this central authority to set aside a portion of the money so raised for constructing where they think it necessary and desirable, absolutely new roads."—[OFFICIAL REPORT, 29th April, 1909; col. 497, Vol. IV.] It is interesting also to see that the right hon. Gentleman the Member for West Birmingham (Sir A. Chamberlain), speaking at the same time—I want to prove conclusively why the tax was put on—used these words: Our attitude towards the tax will depend upon the answer to that question."— that is, what it was to be used for— If it is going to the support of the roads, we think it is a very fair proposition; if it is intended to take it for general revenue then we shall oppose it."—[OFFICIAL REPORT, 29th April, 1909; col. 600, Vol. IV.] The House at that time was in favour of the principle that the money raised should be used solely for the purpose of making the roads capable of meeting the needs of transport. I will only give one or two figures to show how the income grew in pre-War days. In 1909–10 the sum received was £312,000, but in 1915–16 it had grown to approximately £2,000,000. Then there was another change in this taxation. During the War period the motor vehicle tax was dropped and replaced by an additional tax on petrol, the reason given being that it was far easier to collect the tax in that way. When the War was over the petrol tax was dropped and the horsepower tax re-imposed, and in 1920 the right bon. Gentleman the Member for West Birmingham estimated that it would bring in a sum of £9,000,000. The right hon. Member for West Birmingham, who had agreed with the right hon. Member for Carnarvon Boroughs in 1909 that the tax should be used for the purpose of bringing the roads up to date, was of the same opinion in 1920, because in his speech he said: I do not propose to claim any share of this taxation for the Exchequer. Therefore, up to the year 1920 the same principle applied, but since that date there has been a tremendous change in the application of the tax, and now the Chancellor of the Exchequer takes the whole of the Petrol Duty, amounting to £36,000,000 together with £5,000,000 out of the amount which is raised by licence duties on vehicles, making the total which the Exchequer takes £41,000,000. If put in another way it is rather striking. If you take the estimated revenue for 1934–35 you will find that this amount of £41,000,000 represents 5.8 per cent. of the estimated revenue of the country. In 1928–29 the percentage was 2.5. In addition to that £41,000,000 the Road Fund receives £21,500,000 from licence duties, so that the total estimated taxation raised is £66,500,000, of which only £25,500,000 goes to the actual cost of the Road Fund in order to keep the roads of the country up-to-date. There was an article in the "Economist" on this subject about a fortnight ago in which figures were given of the total expenditure on the roads in 1931–32, the last complete year for which figures are available. The total was £78,500,000, and the article said that some of this was duplicated and that the net figure was £68,384,000. It also pointed out that about £6,000,000 was chargeable against public utility undertakings, frontages, and so on, and that the final figure of net expenditure was £62,500,000. I believe that there is a general misunderstanding throughout the country with regard to the payment for the upkeep of roads.


I have been listening to the hon. Member's argument very patiently and I cannot see any connection between it and the new Clause which he is moving.


I want to prove that there is excessive taxation, that as the tax was raised last year the motor industry is paying more than it should be called upon to pay for the cost of the roads. That is my purpose in quoting figures. I also want to suggest to the Minister of Transport that more money should come out of national taxation to pay for the roads——


That is exactly a point which the hon. Member cannot raise on this new Clause. He is entitled to argue that less duty should be paid on vehicles but not that money shall be diverted to the Road Fund.


I accept, of course, your ruling, but there is no doubt that at the present time the total yield of motor taxation considerably exceeds the total cost spent on the upkeep of the roads. In the Finance Act of last year tremendous increases were put upon certain vehicles. Take the heavy motor vehicle of nine to 10 tons. Before last year it paid a duty of £48, under the Finance Act that duty was increased to £170. One could go on and give many instances of increases of three and four times the amount of the tax on particular vehicles, and if we went into the scale of duties on vehicles using solid tyres we should find greater increases still. The taxation levied upon mechanically propelled vehicles is excessive. The public depends upon motor transport to a great extent to-day, almost entirely upon it for almost everything it uses and enjoys. This heavy taxation is also a burden on industry. Whatever may be our views as to the different modes of transport I am certain that most firms which have changed from the use of other forms of transport to motor transport are not likely to go back, and the cost in taxation in licences and Petrol Duty, if the right hon. Gentleman works it out, will be found to be equal to the cost of the wages of the men who drive the vehicles. That is a very excessive burden for industry to bear.

I have never understood why this particular form of transport should have to bear such a heavy burden. No matter where we sit in this House we are all agreed that we want to see an economic recovery. We do want to see progress made. My submission to the Committee is that by this excessive taxation we are preventing the natural development of the motor industry, placing a burden on industry in general, and asking from users of these particular vehicles far too much for the privileges that they enjoy.

9.26 p.m.


I hope the Committee will forgive me if I do not follow the hon. Member who moved this Clause in his exhaustive survey of the origin and development of the Road Fund. No doubt it raises questions of great importance, but they are not points raised by the Clause. This Clause is more restrictive and would simply have the effect of extending to hackney and commercial vehicles the same percentage of tax reduction as that for the horse-power taxation of private motor cars. There is little, of course, in the argument which the hon. Member based upon the concession made by the Chancellor of the Exchequer to the vehicles taxed on horsepower. The purpose of that was to remove obstacles to high-powered cars, and in that way to facilitate the manufacture of high-powered cars for export. That argument is a substantial one when dealing with cars according to horsepower, but these vehicles are not taxed on horse-power at all.

The Committee will remember that last year there was introduced a new scale of taxation for these goods vehicles. It was exhaustively discussed during the passage of the Finance Bill, and I tried to explain the principles on which it was arranged. My hon. Friend says he has never been able to understand why commercial vehicles should be taxed in this way. Four of the leaders of the industry held clearly that taxation should be imposed as far as possible according to the damage done to the roads. That new scale was accepted by the House last year, and nothing has occurred in the last 12 months to show that the estimate was wrong. I might point out that it was anticipated by the Salter Committee that, while taxation might be raised on commercial vehicles, there should be lower taxation on private vehicles, and that by doing that the burdens they ought to bear would be more fairly adjusted from the point of view of damage to the roads.

When my hon. Friend makes a plea for heavy vehicles, I would remind him and the Committee of the extraordinary privilege heavy vehicles had for many years, owing to the fact that the old scale of taxation stopped at five tons. Ten-ton vehicles were only being taxed as much as five-ton vehicles. That was a position no one could defend. The cost of this new Clause if it were carried would be £2,000,000 in the current financial year, and approximately £3,500,000 in a full year, the whole of which would come out of the Road Fund. In conclusion, it might interest my hon. Friend to know that the gloomy prophesies which he made last year as to the effect of taxation of goods vehicles were quite unjustified; and the reports he has given of the industry to-day are inaccurate. I have here some rather startling figures of vehicles registered during the first four months of last year under the old taxation, and the first four months in this year under the new taxation. During the first four months of 1933 the new goods vehicles registered numbered 15,936, and during the first four months of 1934 24,335, an increase of 8,399 or 52 per cent. since the new duties were imposed.


Has the Minister figures to show the differences in the weights of vehicles?


I am afraid I have not that. I think the hon. Member who is arguing for a reduction of the tax on heavy vehicles should remember that heavier vehicles enjoyed an unfair incidence in taxation, and he should not be surprised at taxation on a fairer basis. The commercial motor industry has continued to expand. In these circumstances, there is no case for the remission of taxation.

9.32 p.m.


I had not intended to intervene but to leave it to my hon. Friend, but when the Minister tells us that there is no analogy at all between the proposals we ask the Committee to consider and the remission of taxation on private motor cars already given effect to, I think he is really stretching the point a little too far. I read with care an hour ago the exact words of the Chancellor of the Exchequer which he used when he said he was going to reduce taxation on motor cars. Certainly he said he wanted to encourage the production of the higher horse-power cars, and that he did it in the interests of trade and employment. The analogy between this new Clause and the reason of the Chancellor of the Exchequer is a perfect one. What we are asking the Committee to do is to give the same treatment to motor goods vehicles as has been given to private cars.

The reason for that must be obvious to everybody. With the growth of the use of motor transport, which the Minister has pointed out is still expanding, the cost of motor transport enters into the cost of every product manufactured in the country. The cost of motor transport is considerable in the case of every article, and it seems to me, if we can reduce the overhead charges of transport, we are proceeding on the same principle as in the case of the private motor cars. Surely it must have a beneficial effect on the prospects of employment throughout the country. That, I submit, provides the analogy which we desire to show between the horse-power tax which has been reduced and the tax which we ask should be reduced. Another statement by the Minister of Transport struck me as remarkable. He pointed out that when these duties were recommended last year, the reason given in the Salter Report was that the vehicles should be taxed in order to pay for the cost of the roads. It is a remarkable thing that the figure which was given for the cost of the roads corresponded almost exactly with the amount of money raised from motor transport plus the petrol tax. But the money raised from motor taxation has never been applied to the roads at all. If it is proposed to reduce the amount of the horse-power tax on private cars and to keep up the tax on commercial vehicles, a very unfair distinction is being made between the two. You are asking heavy transport and motor transport of all classes to pay for roads while at the same time leaving other road users alone, and you are not devoting to the roads the money which is raised out of motor transport.

I do not know why the Minister of Transport introduced that argument. If the Chancellor of the Exchequer were handing over all the proceeds of motor taxation for the roads I could understand it. As my hon. Friend explained motor taxation was raised in the first instance to provide for the development of the roads. That was a principle agreed to by all parties at the time, but it has been departed from since. I submit that it is not fair that one section of transport should be penalised to this extent. I think many hon. Members if it were put to them would admit that when these taxation proposals were before the House of Commons last year they desired to see the increased taxation on motor vehicles simply and solely because they thought it would help the railways. Since that time many of the new vehicles which have come on to the road have been nut on by the railway companies and the railway companies need help just as much as the road transport industry. Any reduction would be a help to them just as much as to their competitors. The Chancellor of the Exchequer has given a remission to one form of transport on a certain principle, and I feel that in equity he ought to extend that principle to all these other forms of motor transport.

9.38 p.m.


It is not often that I intervene in Debate nor do I often agree with hon. Members opposite, but I confess that I agree entirely with the proposed new Clause which has been put before the Committee by the hon. Member for South Bradford (Mr. Holdsworth), and if it is carried to a Division I shall be compelled to vote against the Government on it. I was always under the impression that this Government had been sent here with a mandate to support industry, but the abnormal taxation which has been put on heavy vehicles is, to my mind, acting as a deterrent to industry. It has been said that we got a 25 per cent. reduction on licences in the last Budget. I think it would have been better if the 25 per cent. had been left on private cars and a 50 per cent. reduction given to commercial vehicles. Whatever the hon. Gentleman may think, road transport in this country has come to stay. The abnormal taxation that was put on commercial users of the road last year was put on in order to "boost up" the railway companies of this country and to stifle private enterprise. As I say, I regret that if the new Clause is put to a Division I shall have to vote against the Government.

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