HC Deb 15 April 1935 vol 300 cc1628-30

I come now to the next point, which concerns road vehicles. I dare say a good many hon. Members are aware of a development in recent times which, however admirable in itself, does threaten a considerable danger to the very important revenue which I derive from the duty upon light hydrocarbon oils. This development is an increased use of what are known as Diesel engines, particularly in the heavier types of goods and passenger vehicles. There has been a very marked growth of these heavy-oil engines in recent years. There are now said to be over 7,000 of them on the roads, and they are increasing daily. This development is not merely due to the inherent advantage of the particular type of engine. It is true that a Diesel engine, with one gallon of fuel, will do as much work as a petrol engine does on a gallon and three-quarters of petrol, but when the Committee consider that the duty on the heavy oil is only a penny a gallon, whereas the duty on petrol is 8d. a gallon, it will be seen what an enormous fiscal advantage accrues to the Diesel engine. In 1933 the licence duty on these heavy-oil vehicles was increased to a greater extent than that on the corresponding petrol vehicles, but, of course, the licence duty does not bear any relation to the amount of work performed, and as a counterpoise of the enormous difference in the oil duty it really has very little effect. Last year, I am told, in consequence of this development—and I may say that the total taxation on the heavy-oil vehicle doing only a moderate mileage is from one-half to two-thirds of that on the corresponding petrol vehicle—I lost £1,300,000 in revenue, and if that loss remains unchecked it might well rise to £2,200,000 in the coming year. There-fore, I cannot contemplate with equanimity a threat to my oil duty of that character, and while I certainly have no desire to cramp the development of the Diesel engine, which I am told has considerable advantages, I must ask it to make a somewhat larger contribution to the revenue.

I propose, therefore, to remove this differential licence duty and to substitute for it a more adequate and more equitable form of taxation by raising the duty on heavy oil used as fuel by road vehicles to 8d. The duty will, of course, be confined to oil used in road vehicles, and though the duty is equalised, the Diesel engine will still retain the advantage which it already possesses in consequence of the greater mileage it can do per gallon. In fact, if I took account of that, the duty would have to be raised not to 8d. but to is. 2d. per gallon. These engines can work upon a very wide range of fuel. That makes it impossible to adopt the ordinary method of taxing a specified grade. I am obliged to fall back upon taxing every kind of heavy oil used as fuel in road vehicles. As it will be necessary that the duty should be backed by prohibition, supported by heavy penalties, on the use in such vehicles of untaxed oil, and as I cannot bring these things into operation until the Finance Bill is passed, I cannot raise the duty until August next. If I had been able to get the advantage of the higher duty in a full year, it would have brought me in £1,200,000. As it is, I can only count upon £800,000 in the current year.

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