HC Deb 18 June 1935 vol 303 cc220-41

5.11 p.m.

Mr. ORR-EWING

I beg to move, in page 2, line 30, to leave out from "thirty-five," to the end of the Sub-section, and to insert: the rate of the rebate to be allowed under sub-section (3) of section two of the Finance Act, 1928, as amended by section six of the Finance Act, 1933, shall be reduced from sevenpence to fourpence per gallon in respect of all heavy oils used as fuel for mechanically propelled vehicles constructed or adapted for use on roads. The effect of this Amendment would be that the duty upon Diesel oil would only be an additional 3d. to the existing penny, making in all 4d. per gallon as against 8d. per gallon in the Bill as it stands. I should like to remove one or two mistaken impressions which might prejudice the minds of the Committee in considering the Amendment. In the first place, I have no connection whatever with any firm manufacturing Diesel engines or with any firm carrying on a road transport business. Any interest that I have in these industries is largely owing to early engineering training and to the fact that I am interested in an industry which supplies certain ingredients that are used in Diesel engines, but far more largely in petrol engines and even more largely in steam engines. There is another mistaken impression which has rather prejudiced the mind of some hon. Members in considering the whole of the Diesel oil problem. It is sometimes assumed that the enormous lorries and passenger vehicles that are on the road would not have been there had it not been for the arrival of the Diesel engine into the world of production. That is not the case. These enormous vehicles were already there in the days when the petrol engine was the only engine capable of pulling these big weights, and, even if the Diesel engine were obliterated from the roads by this tremendous tax that it is now proposed to impose on its fuel, these trains and trucks would continue to run on our roads propelled either by steam or by the petrol engine.

We already have my right hon. Friend's assurance that he does not mean to attack the Diesel engine through his taxation, but I cannot avoid thinking that it is a most desperate and fierce attack upon this particular industry. We are told that the tax is to be imposed to protect the revenue which the right hon. Gentleman has been in the habit of obtaining from petrol. I feel sure that he would not wish to imply that as yet he has actually lost any revenue owing to the arrival of the Diesel engine. That is obviously not the case, because we see that this year he is still budgetting for an additional £1,000,000 of revenue from the petrol duty. I might, perhaps, put it more fairly this way, that I take it that he thinks that his revenue derived from the tax on petrol may eventually be cut into with the expansion of the Diesel engine. Therefore, no definite loss has yet been sustained by the Chancellor through the arrival of the Diesel engine. My right hon. Friend, in attempting to reassure the House about the imposition of this additional duty, stated that so far from orders having been cancelled as a result of the announcement that this duty was to be increased, they had actually increased.

After that statement certain inquiries were made by the industry, and I should like to tell the Committee the facts of the situation. Sixteen firms manufacturing Diesel engines were asked what would be the effect of the proposed new duty. Out of those 16, six reported a definite cancellation of orders, and some of the others reported that they had only been able to retain orders by giving financial concessions of different kinds, either by lowering the price or spreading over the payments; but every single one of the 16 firms, who cover the whole of the firms manufacturing light Diesel engines, reported a serious falling off in light Diesel engine manufacture. In one particular case a firm, 23 per cent. of whose business was normally in this class of work, reported that since the announcement it had fallen to 7 per cent. I feel certain that when my right hon. Friend made his statement as regards orders he was not in possession of these facts, and did not know that the effect on the industry would be as serious as it has proved to be, and I hope that now that he knows the facts he will be the more willing to reconsider his proposed taxation. I hope he will be able to tell the Committee exactly how far the industry has been consulted and what steps have been taken to discover the real effect of this increased duty.

The reasons for the rapid effects which I have indicated are not difficult to imagine. The effect of the increased duty is confined to one type of user only, the user of road vehicles, and when one remembers that the present price of Diesel oil is round about 5d., or between 5d. and 5½d., a gallon, after the penny duty has been paid, but will by this proposed addition of 7d. be raised to 1s. or 1s. 0½d., a rise of 125 per cent., one can imagine what consternation has been caused among the users of this particular class of vehicle. It is not only a question of the running expenses, though that affects all the running contracts they have for haulage and the carriage of passengers; its most tragic effect is seen in the case of the small proprietor. Only four days ago I received a letter from a small garage proprietor in my own constituency, who was unaware that I was going to raise this question. He reported that he had bought a Diesel engine to re-engine a lorry, at the price of £600, and he asked me how I thought he could possibly afford to continue his hire purchase payments in face of this sudden and unexpected addition of 125 per cent. to the cost of fuel. It is true that by the reduction of the road licence brought about under the present Budget there has been some mitigation of the increased cost of running these engines as a result of the proposed new oil duty, but I must admit that I cannot follow my right hon. Friend when he speaks of the advantage which the Diesel engine still holds over the petrol engine. I do not think that when presenting his figures, which were based on a mileage of some 15,000 miles a year by a Diesel lorry as compared with a petrol lorry, he can have included in his calculations any recognition of the fact that the prime cost of the Diesel engine is higher than that of the petrol engine.

Even if there should be some slight advantage to the Diesel engine as compared with the petrol engine, after this new duty has been imposed, I maintain that far more than a slight advantage is needed to encourage people in business in this country, and in particular those associated with engineering, to adopt any new form of mechanical invention. I have for many years been associated with industries in which new inventions are perpetually being produced, some of them brilliant ones, and the time it takes to persuade any branch of the engineering industry seriously to look into even the most excellent, practical—even brilliant—invention is really rather formidable. If we are to encourage the use of what is acknowledged to be the more efficient type of engine, we must make the advantage of using it as clear as we possibly can, and as clear as the country can afford to allow us to make it, and even my proposal to halve the additional burden on the fuel would, I think, provide only just sufficient advantage to encourage the use of this great advance in engineering. I do not think any Member of this House could blame the industry for the fact that the Diesel engine costs more than the petrol engine. The heavy cost of research would alone be enough to explain at least some of the difference, and there is the fact that the market is at the present moment comparatively small, and the further fact that progress in the development of these engines has been very rapid and has not enabled manufacturers to standardise production in the way that an industry would like to do. There is the fact, also, that new alloys and new metals have to be used, for highly technical reasons; the high temperatures generated in these engines have called for an immense amount of experiment and there have been expensive failures.

The industry, though young, is amazingly progressive and amazingly keen. Only so lately as 1931 there were fewer than 200 Diesel engine vehicles on the roads of this country, but at the end of 1934 there were more than 7,000. That will show that at least some progress has been made. The actual capital in the industry which is to be burdened with this taxation is not as yet colossal, but the time is very near when it may seek to increase development and expect support. Again, the numbers engaged are not as yet large, but they have been steadily increasing, and were increasing very rapidly right up to the time when the Chancellor announced this additional taxation. At present some 6,000 people are directly employed in the industry. I ask whether this is the time to attack this industry or to burden it in this particular way—just when it was beginning to show even more rapid development than it had shown before. I would go further and ask whether this industry should have been attacked or so burdened at all.

I am sure that every hon. Member must recognise the difficulties that lie before any Chancellor of the Exchequer in these days, but even a wild and savage beast, lurking in the jungle, will wait and consider for some time before deciding on his victim, and will select the most toothsome with some care. We all know that my right hon. Friend is no wild and savage beast, but even the fishermen of the sea are controlled in the matter of the mesh of the nets they use in order that the sea may not be robbed of future adult fish. Though the Chancellor is not a fisherman of the sea, I feel sure that as a fisherman in other waters he must at some time or another have so skilfully cast his fly that some fish has taken it. But when he had examined it in his landing net, and found, perhaps, that it was not quite so big a fish as he would have liked to see there—not an unworthy fish, but one not fully grown—he has carefully removed the fly and, steadying that fish in his hands, has seen it flicker back to life and dart back to the deep pool, and possibly he has smiled to himself as he said, kindly, "Another day, perhaps!" I hope this industry may have a little consideration in that light when we come to the question of taxing it. It is by no means a fish, but is a very live industry, which is providing a very good opening for every kind of metallurgical research. To hamper that research at this stage will have a very serious effect not only on the industry itself but on other industries which are already benefiting by the research work done in the manufacture of Diesel engines. An industry which can reduce the weight in pounds per horse-power, as in the case of the Diesel engine, from 41 lb. per horse-power only five years ago to 13 lbs. at the present time, is making very considerable progress.

There is another aspect of the matter. At present we are subsidising some of our ships, and it seems almost an anachronism that we should attempt to hinder the production of an engine which may form and which should form, and I should say which must form, part of the cargoes of those ships to be exported to other lands. In the export trade the competition in this particular class of engines is terribly keen. It is more particularly keen in the lighter classes of engine, and it is the lighter classes which will be most hit by this proposed new taxation. While we in this country are considering whether an addition of 125 per cent. should be made to the cost of the fuel of these engines, in Germany, from the 1st April this year, there has been a reduction of 66 per cent. in the tax on all goods vehicles and other vehicles, Diesel engined or petrol engined, of a weight of more than two and a-half tons. It is a rather alarming prospect, because Germany is one of our keenest, shrewdest and most advanced competitors in this field. We in this country were late in the development of the Diesel engine for either heavy work or light, and we have still much ground to make up. That is another reason against the tax upon this industry.

Let the Committee be under no misapprehension as to what they will lose if they hamper and overburden the industry and interfere with its development. There is no denying that the engineer has produced a very efficient engine in the Diesel engine, which uses a fuel possessing the tremendous advantage that it is practically non-inflammable. There are no vital electrical parts of the engine which can be affected by climate, and that has a reaction upon our export trade, especially to the Dominions and Colonies. The exhaust fumes from the engine are non-poisonous, which is also an advantage in crowded and narrow streets. Especially when we may have to produce large numbers of tanks for the defence of our country is it of advantage that this engine should be available which will not poison the tank crews working in such confined spaces. Equally for marine work this engine would be available later on, after being developed upon the road. All these are very real advantages, not only in the carrying of passengers and goods, which can be transported far more cheaply, but in the advance of civilisation as a whole. I cannot see how any man has the right to suggest that at this stage of development of our engineering a brake should be put, not only on the production on a particular type of machine, but on something which will improve the life of the people of this country. It cannot be denied that heavy taxation would have that effect. I feel strongly that we are disappointing and cutting off a very live young branch of one of our oldest industries. New industries are like young trees, inter-planted and under-planted among the strong oaks which have built up our reputation. We cannot cut old timber from young trees. It is only fair that we should give encouragement and help to the young industries, in order that they may be developed for the use of future generations.

5.34 p.m.

Mr. GUY

I wish to support the Amendment, which has been moved with much appropriate argument and apt illustration by my hon. Friend. He covered the ground so fully that little more needs to be said. I would like to anticipate one argument which the Chancellor of the Exchequer may use in his reply. The right hon. Gentleman has to meet a case, because, on the face of it, the increase of duty on heavy oils from 1d. per gallon to 8d. per gallon is very drastic, without some justification other than has already been given in previous debates. The Chancellor of the Exchequer is the last word in sincerity and fairness. He has said that the increase has been proposed in order to equalise the duty with the duty on the lighter hydrocarbon oils, generally known as petrol. As my hon. Friend has pointed out, although a certain concession on the heavy oils duty has been given by a reduction in the vehicle duty to the same level as that imposed upon petrol vehicles, that advantage has been more than cancelled out by the increase in the fuel tax.

If the Chancellor says that this is an equalising duty, certain factors must be kept in mind. My information is to the effect that the heavy oil used in the Diesel engine gives rather a larger mileage per gallon, and, therefore, assuming that the cost is the same as petrol, the running costs in fuel alone are so much less per mile. My information is, however, that the initial cost of the Diesel engine is substantially heavier than that for the petrol engine, and that the additional cost amounts on the average to £150. Heavy maintenance charges must also be taken into consideration in relation to the Diesel-engined vehicle. That fact is not to be wondered at, because the Diesel engine is almost in its infancy and naturally has not been brought up to the same pitch of efficiency and reliability as the petrol engine. Considering all these factors, one is led to assume that if the tax be fixed at 8d. per gallon on the heavy oil, it will not be an equal tax but a heavier tax than that imposed upon other vehicles. The tax of 4d. a gallon proposed in the Amendment, would, on the other hand, be fair and equal.

Even though I were wrong, and 8d. a gallon still left a certain advantage to the Diesel engine, the Amendment could be fully justified. My hon. Friend has stated with force the contention that encouragement should be given to the Diesel engine. Let me give an illustration. I have been informed by a large omnibus company in Scotland that during the last year they changed over from the petrol-engined omnibus to the Diesel-engined omnibus. That cost them a considerable sum in capital outlay. They found that with the duty of only 1d. per gallon on fuel they were able to operate on certain thinly populated routes, and to provide a service at fares which was a boon to many low-paid workers, who were helped to travel to and from their work. The company will now revert to the petrol omnibus. The only alternatives would be to raise the fares, or to give up the services that they are at present providing in the district, and which are in many cases being run at a loss.

It may be said that in the event of the users of Diesel engines on the roads of the country using home-produced heavy oil, no duty would be payable, and the tax would be remitted. I have made inquiries of the Ministry of Mines, and I am informed that, although there are a number of potential sources of supply of heavy oil, the supplies are not immediately available, and, although there might appear to be an inducement by the complete rebate of the much heavier tax in order to stimulate those sources of supply, if the number of users of the Diesel engine should diminish in the meantime and the market for the Diesel engine should be reduced, that stimulus would tend to disappear, and there would not be an incentive to develop supplies of home-produced oil. If the duty were reduced to 4d. per gallon, the incentive would remain and if the supply of home-produced fuel were stimulated it would confer considerable advantages. I trust that the Chancellor of the Exchequer will very carefully consider the possible adverse effect of this very heavy duty on the industry manufacturing Diesel engines and upon the users of Diesel engines, and that he will try to see his way to accept the Amendment.

5.44 p.m.

Sir P. HARRIS

I would congratulate the mover of the Amendment upon the very strong case he built up and which he reasoned so eloquently and so persuasively. I could also appreciate from the right hon. Gentleman's clear Budget statement the reasons for the duty. Naturally the right hon. Gentleman desires to protect the revenue and to search for a large amount of money to meet the expenditure of the country. Every ingenuity is used in that search, and the Chancellor of the Exchequer is inevitably led to attack first this industry and then the other. Industry, on the other hand, with remarkable ingenuity, tries to escape the burden of tax by developing new methods and substituting new machines for old. Unfortunately, new taxes introduce uncertainty, and, as the mover of the Amendment quite rightly said, discourage enterprise and initiative and experiment in invention.

I have a vivid memory of the way in which the motor-car industry of this country has been handicapped in competition with other countries because of our method of horse-power taxation. Year after year we tried to persuade the Chancellor of the Exchequer of the day of the necessity for dropping our old system of taxation on the basis of horse-power, because it gave a premium to foreign countries that were able, like America, to offer high horse-power at a very much lower price than we could, on account of our horse-power tax. After years of agitation, the Revenue Department were persuaded of the error of their ways, and at last some concession has been made in that direction. Now we see the same kind of thing being done to an infant industry. It is true that the industry of manufacturing Diesel engines has been encouraged by the fact that it could sell its power more cheaply than its competitors, but the premium given to the Diesel engine was undoubtedly too high, as the Mover of the Amendment admits. But surely it is hard to increase at one jump a very small tax to a very high one which comes near to being penal.

I suggest that from the revenue point of view this Amendment is a reasonable one. It admits the necessity for some increase, but expresses objection to the tremendous increase that the Chancellor is now imposing. If in this new industry we are to be able to compete with foreign countries—and a very strong case has been made with regard to what is being done in Germany—if this new industry is to be encouraged to make the export of Diesel engines a thorough commercial proposition, the method of the Amendment is the right way to achieve that purpose. If the industry is killed completely by making the tax too heavy, the revenue will not get much advantage. It will lose in other directions. It will lose ultimately in Income Tax. Naturally, the industry will first explore the home market, and if the buyers of these engines are not to have the advantage of cheap fuel, which was the great inducement to them, obviously the home trade will suffer, and the revenue will suffer by loss of Income Tax. I think the Amendment is reasonable, and ought to be accepted.

5.48 p.m.

Mr. GLEDHILL

In supporting the Amendment I want to speak particularly on the question of local transport. In my constituency the local transport undertaking is run by a joint committee consisting of representatives of the railway companies and of the local authority. They have been gradually scrapping the trams and changing over to omnibuses, and, particularly in the last two years, they have purchased a number of Diesel-engined omnibuses. The extra cost that will be entailed upon them by the imposition of this additional tax will be in the region of from £6,000 to £7,000 a year. The right hon. Gentleman formerly had some experience at the Ministry of Health. He will know that the Ministry of Health is persuading local authorities to rehouse their people, and, in doing so, to go outside the district as far as is possible. Obviously, if a housing site is some distance out, the people must be provided with cheap transport to and from their work, and in the Diesel-engined omnibus the local authority has its opportunity of providing cheap transport. With this extra imposition, however, that benefit will be lost, and therefore I suggest that that in itself represents a change of policy on the part of the right hon. Gentleman.

Another point which should appeal to him, as a former Minister of Health, and which I think has not yet been made, is that the percentage of carbon monoxide in the exhaust fumes is only 0.1 in the case of the Diesel engine, whereas in the case of the ordinary petrol vehicle it is as high as 8 per cent. As regards the actual benefit to the Treasury, in the present year at any rate I do not think the benefit will be very great in comparison with the disturbance that will be caused in the industry generally. When the right hon. Gentleman was good enough to speak in my constituency in December, 1933, he listened to a, number of suggestions with regard to the taxation in his forthcoming Budget; and, whether it was due to those suggestions or whether it was due to suggestions from higher quarters, he was able very largely to meet us in his Budget of 1934. I suggest to him that he might like to carry on the good work and meet us again by accepting this Amendment.

5.51 p.m.

Captain STRICKLAND

I hope that the Chancellor of the Exchequer will be able to see his way from a business point of view to making some concession by way of reducing the very heavy additional impost which he proposes to place upon what must be regarded as one of the most promising of the recent developments in road transport. I think that perhaps the Committee will be able to see what a severe blow is being dealt, possibly unwittingly, at the industry, by considering the tax itself. It is proposed to place an additional tax of 7d. per gallon on the fuel oil used by the Diesel engine. I suppose that even an optimist would not claim that the Diesel engine would do more than 14 miles to the gallon, so that a tax of 7d. per gallon on its fuel oil must necessarily mean, without any equivocation whatever, an additional ½d. a mile on the running cost of those engines which run on Diesel oil. To take a concrete example, the London Passenger Transport Board, which has a very large fleet of Diesel-engined vehicles, has either been making, during the last 12 months, an extortionate profit out of the passengers whom it carries, or, conversely, it will be compelled to raise its fares in the City of London in order to meet this additional tax which is to be placed upon it. I cannot think that the London Passenger Transport Board has been making extraordinary profits on its undertaking. No doubt my hon. Friend the Member for Central Wandsworth (Sir H. Jackson), whom I see in his place, could inform us whether that has been done. This, however, is a sudden burden placed on an industry with very little notice. It might be justified in the long run, but a sudden imposition of this nature placed on an industry must have disastrous effects. I have been speaking of the passenger side, but when one considers the forward contracts that are made for carriage in goods vehicles on the roads, one can see what a disastrous effect the imposition of this tax may have.

There is one point that has not yet been touched upon, and I would venture to ask the Chancellor whether he would consider it and give us a reply upon it. On what does he base his statement that a loss of revenue has occurred as a result of the use of the roads? In making his Budget statement, he said that he had lost revenue. If he has lost revenue, I wonder if he could supply us with the exact quantity of Diesel oil that is used by passenger and goods vehicles in this country, as compared with the quantity that is used for stationary engines. I speak entirely subject to correction, but I think he would find that the major part of the Diesel engine oil used is not used by the road users, and I cannot understand why there should have been this concentration of taxation on one little section of industry, namely, the road transport and passenger section. An additional tax placed on the goods transport of this country is an indirect tax on the industry and trade of the country.

When one examines the Chancellor's statement that he has lost revenue, one wonders if it is really strictly accurate. I think that what he had in mind was that he had not realised quite as much as he thought he was going to get out of this taxation. The figures show that there has been a continuous rise in the yield of the fuel tax in this country since the year 1928–29, when it, yielded £12,900,000. In the five following years it was respectively £15,043,000, £15,900,000, £29,277,000, £35,310,000 and £40,500,000, while last year it was £42,323,000. Therefore, the right hon. Gentleman cannot claim that he has actually lost revenue, but simply that he has not gathered into his coffers from this particular source as much as he estimated. If that be the argument, surely it should have been applied in previous years, but with regard to the previous year the statement made was as follows: The Budget estimate of revenue for 1933–34 was £37,750,000, including £2,000,000 from the duty on heavy oils, but making no allowance for the exemption granted to vessels engaged in home waters, which was estimated to cost about £100,000 a year. The actual receipts were £40.4 million, including £2¾ million from the duty on heavy oils. The surplus may be attributable, at least in part, to a reduction of 2½d. per gallon in the retail price of petrol in May, 1933 (only partially offset by the restoration of 1d. per gallon in the following November), to a fine summer, and to the improvement in trade and industry in general which occurred during the year. That is the way in which the Chancellor explains it when he has a sum coming in in excess of what he estimated, but when the sum coming in is less than he has estimated he picks on road transport and says that it is owing to conversion from the petrol engine to the Diesel engine that this revenue has been lost. I venture to suggest that there has been no loss of actual revenue, but a gain every year from this source of taxation, and I ask the Chancellor, in all fairness to this industry, to give his consideration, first, to the question whether a jump from 1d. to 8d. is not too serious a blow to deal at an industry in one fell sweep; and, secondly, whether, if he has in mind, as may be the case, a desire to put the petrol engine on the same footing as the Diesel engine, the obvious way would not have been to reduce the tax on the petrol engine and make it equal to the Diesel engine in that way, instead of by raising the tax on Diesel oil.

I hope the right hon. Gentleman may be able to meet us in this matter. The industry is a growing one, which is providing increasing employment in this country and which, I believe, will be of the greatest benefit, not only to those workers who require transport from the suburbs of our cities to their work at the centre, but also for the conveyance of goods about the country. I think it would be well, also, to remove any sort of impression that the road industry has been selected as the one industry to receive penal treatment in this year's Budget. Therefore, I would ask the Chancellor of the Exchequer to give this matter his serious consideration, and see whether he cannot accept the Amendment which has been moved in such reasonable terms, and which, I am sure, will be supported by Members of all parties in the House.

6.0 p.m.

Mr. MACQUISTEN

This heavy duty is an attack upon transport. It is going to hinder it. Transport, I believe, is civilisation. What is the problem which besets us as a result of the industrial age? The concentration of population due almost entirely to the railway companies which congested the population together round the industries and caused the building of these great towns of which we hear so much with regard to slums. The hope of the people now is to get the population dispersed, and how can you do it except by cheap transport? You have enormous railway interests which represent much less capital and far fewer employed people than the motor industry, but they are concentrated and of great power. They are trying, like the old lady who tried to keep back the tide, to sweep back the motor industry. This is a tax upon the Diesel engine, to which I look with hope at least to see the population in much happier circumstances dispersed over the countryside. That is what I hope for, and here we have the National Government proposing to place this tax upon it. If the Amendment is carried it will mitigate the blow. It is far too soon to tax the industry in this way. The right hon. Gentleman might have waited until the chicken grew up before he made a boiling fowl of it. It is not grown up. Only last week I was travelling in one of those magnificent omnibuses of 130 horse power on the West Highland service on climbing hills over which no railway would ever attempt to tunnel. The population is being taken out to those parts.

Look how the population is being dispersed all round our great towns. It is because of the improvement of our transport. I hope the time will come when no one will think of living in tenements and in the great piles which are put up in our cities, and when every man will be living in a cottage and have a garden. This will be brought about through road transport, and nothing else. You will never do it by means of the railway. It only congests and adds to the social evil. I am looking at this matter from the point of view of the public good as well as the industry itself. We want to see the industries stimulated and prosperous, but industries must be looked at from the point of view of whether they serve the public good. We must not take the narrow view. That is where, I think, the point of view of Members of this House with regard to the railways is wrong. We do not want to see railway capital go awry and railway workers unemployed, but the question is: Do they serve the public as well as something else?

The DEPUTY-CHAIRMAN (Captain Bourne)

The hon. and learned Member had better keep to the Amendment which is before the Committee.

Mr. MACQUISTEN

I am sorry if I have digressed. This tax is going to hinder one of the healthiest and most growing industries we have, and one which, if it were allowed to progress unhindered would develop and do more to mitigate all the evils with regard to health, housing and unemployment than any other industry. I deeply regret that it has been so heavily struck by this Budget, and if the tax were reduced to a more moderate but still extravagant figure, the industry would have some chance of developing, and its strength would become so great that the revenue derived from it would be adequate for the needs of the Chancellor. The proposed tax is no less than £8 per ton. The Amendment reduces it to £4—a huge tax. How the railways would complain of a tax of even £1 on their coal! There has never been any industry taxed so much as the motor industry, and this is just about the last straw in the taxation of the most prosperous and virile industry in this country.

6.6 p.m.

Mr. CHAMBERLAIN

My hon. and learned Friend holds, like many Scotsmen before him, that the highest form of civilisation is that which provides you with means of getting away from where you are and finding yourself somewhere else.

Mr. MACQUISTEN

Boswell said to Johnson: The reason why we Scotsmen come to England is that it is difficult to make a good living among other Scotsmen; so we come down among the softer races.

Mr. CHAMBERLAIN

I would remind my hon. and learned Friend of the words of Dr. Johnson: Depend upon it, the noblest prospect which a Scotchman ever sees is the high road that leads him to England. If it be true that transport is the highest form of civilisation and that taxation is an attack upon it, his argument applies to all taxation of transport as much as to the particular tax the subject of this Amendment.

Mr. MACQUISTEN

There is no tax on roads.

Mr. CHAMBERLAIN

A tax on petrol, at any rate. It is just as much subject to the strictures of my hon. and learned Friend as a tax upon heavy oil. The Amendment with which we are concerned is designed to reduce the tax I was proposing to put upon what is known as Diesel oil when used in road vehicles, and my hon. Friend the Member for Weston-super-Mare (Mr. Orr-Ewing) who moved the Amendment brought forward considerable weight of argument in support of his thesis. He made a very good case, but I am bound to say that he made it by suppressing those parts of the case which told against him and only emphasising those parts in his favour. I know that that is the device of all advocates and one which is very frequently successful, but it is generally necessary to view the case from both sides.

I should like to remind the Committee of some of the points on the other side from that which my hon. Friend mentioned in moving his Amendment. He described this tax as a fierce attack upon a particular industry, the result of which, whatever the intentions of the author, would be not only to check its development, to throw people out of work and to sterilise the capital which had been put into it, but altogether to hinder its further development. If the Diesel engine industry stood alone there might possibly be some point in the observations of my hon. Friend, but we cannot consider the Diesel engine industry alone. This is an industry which is in fierce competition with another industry, namely, the industry which produces petrol engines, and what the Diesel industry has been doing during the last few years is to make remarkable progress at the expense of the petrol engine industry. It is in relation to that competition that I have to consider the position. My hon. Friend challenged my statement that in consequence of the Diesel engine I was losing revenue, and he justified his challenge by saying that the revenue from petrol continued to increase.

My hon. and gallant Friend the Member for Coventry (Captain Strickland) adopted a somewhat similar argument. He seems to think that the way I made my calculation was to compare my estimate with the actual revenue that was produced, and that if my estimate proved to have been in excess of the actual yield, I at once picked out the Diesel engine as the cause of the trouble. That is not the way I made my calculation at all. I made it on these simple facts. I took the amount of Diesel oil used for the purpose of road vehicles as near as I could get it. I knew how much that would be at the rate of 1d. a gallon. I estimated the equivalent amount of petrol which would have been required for the same purpose, and I knew how much that would be at the rate of 8d. per gallon, and the difference represented the loss of revenue I had sustained by reason of the fact that Diesel oil had cut out petrol.

Captain STRICKLAND

Will my right hon. Friend forgive me for asking him if he keeps a separate record of the heavy oil used for road vehicles as distinct from industrial use?

Mr. CHAMBERLAIN

No, Sir, I do not keep a separate record for the purpose, and I have no means of doing so, but that does not exhaust the resources of civilisation. What I did was to apply to the oil companies who do keep a record of the kind and they were good enough to supply me with the figures. My hon. Friend may perhaps be interested to know the figures which they gave me of the oil for use in Diesel engines. In 1932 the amount was 2,601,000 gallons; in 1933, it had risen to 8,275,000 gallons, and in 1934 to 20,907,000 gallons. Hon. Members will see that the increase in the amount of Diesel oil used for this purpose was going up by leaps and bounds, and when my hon. Friend who moved the Amendment said, "Is this a time to introduce taxation of this kind?" it seemed pretty clear to me that if this is not the time, there never will be a time, because, as my hon. and learned Friend said just now, the Diesel engine alone will soon get so strong that there will soon be no doing anything with it at all.

Mr. MACQUISTEN

I did not say that.

Mr. CHAMBERLAIN

Perhaps I added a little to what my hon. and learned Friend said.

Mr. MACQUISTEN

The right hon. Gentleman has turned it upside down.

Mr. CHAMBERLAIN

That is the conclusion I made from his observations.

Mr. MACQUISTEN

My argument was that it completely outstripped the petrol engine and that it would be of great benefit, and there would no longer be people burned to death.

Dr. O'DONOVAN

They will still be run over.

Mr. CHAMBERLAIN

To say that I did not get as much revenue as I might have got from these sources does not seem to offer me much consolation, because they come to very much the same thing in the end. As a matter of fact, I estimated that in 1934–5 the loss was £1,300,000, and in another year, if the use of the Diesel engine continues to grow, it will be very much more, and I am not able to afford a loss of revenue of that character. But when hon. Members talk so glibly about the development of the Diesel engine, let them remember that it is not a natural develop- ment at all. It is an artificial development which has been created by the differential taxation between these two kinds of oil and spirit used in competition with one another. Petrol is taxed 8d., and Diesel oil is only taxed 1d. In addition to that, a gallon of Diesel oil will do one and three-quarter times as much as a gallon of petrol, and, it seems to me that the enormous advantage of the Diesel engine is largely explained in the tremendous increase in the figures I have given.

I do not want, as I have said before, to cramp the development of a very fine piece of engineering work in the development of the Diesel engine, but I really do not see any particular reason why it should be, I might almost say, subsidised, or, at any rate, given such a tremendous artificial advantage as it has by this preferential taxation. Although it is quite possible to say that the thing should be really equalised, that is to say, that I should put up the duty not to 8d. but to a figure which would take account of the additional mileage which each gallon of Diesel oil would cover, I have been content to equalise the actual figure of duty of 8d. in each case, and to equalise at the same time the licence duties. I still believe the Diesel engine has substantial advantages over the petrol engine for certain kinds of road vehicles which will enable it, if not to go on increasing its use at the pace it has been doing under this artificial stimulus, at any rate, to follow it up and to be adapted to the needs of the road in a perfectly normal and natural way. I cannot accept the Amendment, and I hope that after this explanation the Committee will see that there is no reason why I should.

6.15 p.m.

Mr. HOLDSWORTH

Those who are interested in all forms of road transport must be exceedingly disappointed with the Chancellor of the Exchequer's reply. If there is one thing more than another which appeals to reasonable men it is that there should be a sense of equity in all forms of competitive industry. The Chancellor of the Exchequer has based his case upon that particular principle, and I think that none of us would disagree with him in that respect. Certainly, I should not defend for one moment the idea that one industry should succeed at the expense of another. I agree with the hon. and gallant Member for Coventry (Captain Strickland) when he said that the correct way to treat the matter was to lower the tax on petrol. Some of us who are interested in the development of the transport industry feel the tremendous cost put upon industry in general in this way. If we could calculate the cost from the raw material to the finished product of the terrific taxation on the transport industry we should be extremely surprised. My point is that there is a very unfair burden put upon this particular industry. Why should we single out one form of industry to bear a taxation of between £70,000,000 and £80,000,000 a year?

The DEPUTY-CHAIRMAN

We are not discussing the general taxation on transport.

Mr. HOLDSWORTH

I realise that, but I submit that there is no ground for the Chancellor of the Exchequer refusing the Amendment. He ought to have brought things into line by reducing taxation on the other side. I would emphasise the point made by the hon. Member for Halifax (Mr. Gledhill). The Bradford municipal undertaking, so far as transport is concerned, has been going through a very difficult time for a number of years. There had to be a rate to cover the loss in one particular year, but after putting on the road omnibuses run by Diesel engines we turned that loss into a profit of £3,000 during the last complete year. The putting on of this particular duty has brought down that profit to a few pounds. The extra cost of this levy on the Diesel engine has cancelled out the profit that we had succeeded in making. I hope that those who believe that this branch of the transport industry is suffering a grave injustice will carry their belief into the Division Lobby and vote for the Amendment.

6.19 p.m.

Mr. ORR-EWING

I feel some sense of disappointment in the reply given by the Chancellor of the Exchequer to what I looked upon as a reasonable proposal. I had hoped that he would have answered my question as to whether he had consulted with the industry and what information he had got from it as to the effect of his original proposal. I would ask now whether he would be prepared, without pledging himself in any way to alter the original proposal, to con- sult with the industry in order that he may be made more fully conversant with the effects of the proposals in the Bill, between now and the Report stage. I would not ask him to give any pledge of what he would propose to do after receiving that information, but I would beg him to take into consultation those whose livelihood depends upon the existence of this industry.

There is one further point to which I would call attention, and that is that his argument was based rather on the assumption that the Diesel engine industry and the petrol burning engine industry were in direct cut-throat competition in every case. As a matter of fact, the largest manufacturers of Diesel engines are also manufacturers of petrol engines, and they are developing the Diesel industry beside their existing petrol engine industry. I would once more beg the Chancellor of the Exchequer to get into touch with the industry before the Report stage.

Amendment negatived.

6.21 p.m.

Captain WATERHOUSE

I beg to move, in page 4, line 41, at the end, to insert "or any vehicle being a road roller."

The adoption of this Amendment would have the effect of exempting from the tax oil used by road rollers. The tax is levied on heavy oil used in mechanically propelled vehicles constructed or adapted for use on roads. I am not sure whether a roller comes under the category of a vehicle. All vehicles have a licence duty to pay. Even an agricultural tractor has to pay licence duty, but the road roller pays for no such licence. Therefore, from the start it is in a category by itself. Is it constructed for use on the road? One might ask when is a road not a road, and the answer might be when it is blocked by a Belisha beacon, or when it is occupied by a steam roller. The road roller does not of itself travel from area to area on the road, but only goes short distances from job to job. When it is going from area to area it is either put on a train or put on another vehicle. Certainly, when they are on the roads they leave them all the better for their passing. The road-making machine, from the Diesel engine which drives the compressor to the pneumatic drills in the quarry, and the Diesel engine which drives the tar plant, are exempt from tax, and it seems absurd that the one machine without the use of which all this ancillary machinery would be useless, should be asked to pay this tax. It means compelling the roller to pay a tax in order to keep up the road which the roller itself is making.

There is one further aspect to which I would draw attention, and that is the question of export. There has been a definite change from steam to Diesel in road rollers during the last two or three years. About 100 Diesel engines are made for the home market and no steam engines, while about 300 are made for export. If this tax is maintained on the road roller, there will be a change back to steam, and in that case the number of rollers which will be made for the home market will be decreased, and our competitive power in foreign markets will be lessened, with consequent decreased employment in areas where we most need it.

6.24 p.m.

Mr. DENMAN

May I press this Amendment upon the attention of my hon. and gallant Friend? The question is a simple one, and that is, in which category is the road roller put? Is it to be regarded as a road user or a road maker? The list of exemptions is clear. The machines that go to the making of roads are exempt. The excavator and the trench digger are exempt. They only pay the one penny Diesel oil tax, but when the road roller comes along it has to pay the eightpenny tax. That is an obvious anomaly. I trust that the Government will be able to meet us by accepting the Amendment.

6.25 p.m.

The PARLIAMENTARY SECRETARY to the MINISTRY of TRANSPORT (Captain Austin Hudson)

The effect of the Amendment would be to put the road roller in the same category as agricultural tractors and trench diggers so far as this tax is concerned. We have to acknowledge that there is a special case for road rollers, and as I understand the financial effect would be negligible, we are prepared to accept the Amendment.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.