HC Deb 17 June 1936 vol 313 cc1101-25

(1) There shall be allowed from the duties payable on light hydrocarbon oils under section two of the Finance Act, 1928, as amended by the Finance Act, 1931, and the Finance (No. 2) Act, 1931, a rebate at the rate of fourpence per gallon on all light hydrocarbon oils which are shown to the satisfaction of the Commissioners of Inland Revenue to have been used for any purpose other than a fuel for mechanically-propelled vehicles constructed or adapted for use on roads.

(2) This section shall be deemed to have had effect as from the first day of August, nineteen hundred and thirty-six, and shall have effect notwithstanding the preference granted by the British Hydrocarbon Oils Production Act, 1934, to light hydrocarbon oils manufactured in the United Kingdom from coal, shale, or peat indigenous to the United Kingdom.—[Major Hills.]

Brought up, and read the First time.

8.33 p.m.


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

This new Clause asks for a rebate of 4d. per gallon on the duty payable on certain light hydrocarbon oils which are not used as fuel for road vehicles. The cost of the concession would be £500,000 in a full year. The light hydrocarbon oils covered by the proposal are those used.in industry. The first is white spirit. It has a flashpoint of 73 degrees Fahrenheit or over, which means that it does not give off inflammable vapour until it is heated to 73 degrees Fahrenheit. It could, possibly, be used in an internal combustion engine but nobody in his senses would so use it. I mention that point because one of the objections which my hon. and learned Friend the Financial Secretary may take to my proposal is that if this concessoin were granted there would be the fear of evasion and of the lowly-taxed article being used for propelling vehicles on the road. I ask for a rebate of 4d. and since the duty is now 8d. that would leave a net duty of 4d. on white spirit and these industrial oils whereas as the Committee knows the Petrol Duty is 8d. The second class covered by the proposal consists of industrial spirits. These are of various kinds and applied to various uses. They are specially produced. They are not similar to motor spirit and they are easily identifiable but they have a low flash-point. They give inflammable vapour at a heat less than 73 degrees Fahrenheit, and, therefore, they could be used for internal combustion engines.

The third class is turpentine, a different article altogether, a vegetable spirit with a high flash point, and nobody could possibly use it in his motor car. The fourth is aviation spirit. I do not press that. If the Government would give the concession of 4d. a gallon on aviation spirit, it would be equal, as far as the Air Force are concerned, to what the Air Force would gain in buying their petrol rather more cheaply, and the country would gain in lower Estimates for the Air Force. If that concession were granted to civil aviation, it would cost about £50,000, included in the £500,000 that I have, already mentioned. I do not know whether the Government would like to encourage civil aviation. If they would rather that aviation spirit were excluded altogether, then the £500,000 loss of revenue would be reduced to £450,000. The industries which use this spirit are paint, colour and varnish manufacturers, painters and decorators, dyers and cleaners, boot and floor polish makers, and wallpaper makers. All those use white spirit and turpentine. The india rubber makers, the seed crushers, and the bone users make use of industrial spirit, and those industries among them employ between 400,000 and 500,000 people.

I press this concession on the Government with some confidence. I want, and I am sure they want also, to help industry. This is a tax on industry, and these spirits are taxed for this reason: In 1928, when derating was brought in, my right hon. Friend the Member for Epping (Mr. Churchill) put 4d. a gallon on petrol to pay for derating, but these industrial oils were not distinguished, and fell under the derating duty, and up to now they have paid a duty of 8d. For this reason I think I can make a strong case for industry being freed of a burden that was never really intended for it. Next I plead the analogy of the heavy oils. Last year the Chancellor of the Exchequer distinguished between heavy oils used for the Diesel engine in industry and those used in the Diesel engine on the roads, and now the heavy oil that is used in industry pays 1d. a gallon, whereas the heavy oil that is used in lorries and motor buses pays 8d. a gallon. If you can do it with the heavies, why cannot you do it with the lights? If you help industry by taking 7d. a gallon off the heavy oils, surely you can give me a smaller concession, equally-valuable to industry, by taking 4d. a gallon off the light oils. And let my hon. and learned Friend mark that even if we take this 4d. off, these industrial oils will still pay what I may call their derating 4d. because 4d. will remain as the duty. Fourpence was the sum imposed to pay for derating, and the duty on petrol was only raised to 6d., and then to 8d. in 1931, for quite different purposes.

Lastly, I ask for it because it is a tax on production. In some cases the duty is 100 per cent. of the raw article upon which the tax is imposed. I made the case last year for a bigger concession, and I will not go now into all the points that I raised last year, because I want to come to the Chancellor's objections, which I think may be the same as they were last year. He said that to take 7d. a gallon off these industrial oils would be a breach of faith, because under the British Hydrocarbon Oils Production Act, 1934, the producers of light hydrocarbon oils were granted for ten years a preference of 4d. a gallon, and he said with some force that they would be penalised if 7d. a gallon were taken off. I do not, as a matter of fact, think they would, because they produce a different article altogether, and they do not produce any of the articles that I have mentioned; but now, even if my Clause were passed, the manufacturers under the British Hydrocarbon Oils Production Act, 1934, would still enjoy that preference of 4d. a gallon. I hope I have fully met that objection.

His second objection was that of evasion, and that I want to deal with quite fully and fairly. Of course, there is a risk of evasion if you take the tax off a spirit that can be used in a motor car. If a man gets a chance of getting spirit with only 4d. a gallon tax instead of 8d., he may be tempted to use it in his motor car. I quite agree that that is so, but take all the spirits that I have mentioned. First of all, it is hardly possible that white spirit should ever be used in an internal combustion engine; I do not think anybody would really use it. Take industrial spirit, where I have got a stronger case to meet. You can differentiate and protect the revenue from evasion by one of two means, either by specification or by use. By specification, I mean that your chemists can invent a formula, and then the Statute can say that only those oils that come within the formula shall come within the lower duty. The standing case of that was that of paraffin in 1928. When my right hon. Friend the Member for Epping introduced his Petrol Tax, it was said that he had taxed the lamp oil of the less well-to-do people of this country. It was thought that it was impossible to differentiate, but those very able gentlemen the Treasury chemists got to work and in one day found a specification that would work perfectly well, and paraffin was excepted. I am certain that those able gentlemen could find a specification that would cover the industrial oils, but would not cover petrol or motor spirit.

Besides that, you can differentiate by use. The heavy oils used for motor cars or lorries and the heavy oils used in industrial Diesel engines are the same—there is no difference whatever—and I do not think there has been any evasion there. I do not think people have improperly bought the lower duty oil and used it in their lorries and motor omnibuses. You can, therefore, differentiate by use, and it is quite easy in the case of light oils. First, there are very few suppliers and very few people who make these light oils. It is easy to control them and to put them on terms to supply only people who use these oils industrially. You have a much simpler problem to prevent evasion than in the case of heavy oils, and yet there is no difficulty there and there has been no evasion, as far as I know.

The next point that the Chancellor of the Exchequer made was there was not the same case with regard to light oils as with heavy oils, because only 5 per cent. of light oil was used industrially, while 95 per cent. was used on the roads, whereas in the case of heavy oil the proportion was reversed. Therefore, he said, the risk of evasion was greater in the case of light oil because it would spread further and spread over the whole of the 95 per cent. instead of only 5 per cent. I expect that these proportions are changed now, and that more heavy oil is used on the roads than a year ago. There are many manufacturers who are employing Diesel engines in lorries who were not doing it before. Surely, if only a small proportion of light oil is used industrially, it is possible to put your hand on all the suppliers. You know where they are and you have a means of preventing the oil being used improperly which you have not got in the case of heavy oil.

Then there is the question of revenue. I know that it is a bad time to ask for any concession from the Treasury, but it is not right that a tax should fall on the wrong article. If you have to tax persons or things, tax the right person or the right thing. I contend that here you are taxing the wrong persons and doing it in the wrong way. Therefore, although he is a bold man who asks the Treasury to give up even £450,000, I do with some force ask my hon. and learned Friend whether it is a good thing to keep on a tax which discriminates hardly against industry and not to replace it by some other tax which bears more lightly. I shall be told, as I was told last year by the Chancellor of the Exchequer, that the manufacturers for whom I speak are not doing so badly. I do not deny that, but it is not the practice of the Exchequer to tax an industry because it is doing well. A growing industry ought to be encouraged. I believe that if some concession of this kind is made, the industries affected can go on and do better and employ more people, and that the Treasury will get back in Income Tax next year all the concession which they give.

Lastly, there is no effective drawback. Usually when an article is taxed and it is exported, a drawback of a greater part of the duty is given. The drawback does not apply to any of the products that I have mentioned which have lost their identity. As paint and varnish are such, painted and varnished articles exported do not get any rebate. Therefore, they pay the whole of the duty. Our competitors, France, Belgium, Germany and Holland, get concessions on these industrial oils. They are of varying amounts, but they are all important and large concessions. British manufacturers are handicapped by not having such a concession. This tax is burdensome to British industry, it handicaps them in competition with foreign manufacturers, it is outside the intention of the Act of 1928, and it discriminates against a particular set of industries.

8.52 p.m.


I want to ask the Chancellor to agree to this concession. We have not had very many concessions to Lancashire during my experience in this Parliament, and here is an opportunity for the Government to do something for a number of new industries that are growing up in Lancashire in place of the distressed cotton industry. There are in north-east Lancashire, which has been particularly hard hit, a number of firms connected with the wallpaper industry, and they use a considerable amount of light oil. It has often been said that the Government are anxious to help Lancashire. I notice, by the way, as an indication of how they neglect Lancashire, that, while there is a new directory in the Library for every other district in the country, the last directory for Lancashire is dated 1924.


The hon. Gentleman does not suggest that I am responsible for that?


I merely indicate it as typical of the attitude of the Government generally towards Lancashire. I hope that the Financial Secretary is going to follow on a different line. It is easy to differentiate between light oil used for industrial purposes and light oil used for transport. The Chancellor has already differentiated between the two classes of heavy oil by making the tax 8d. in the case of transport and a penny in the case of industrial oil. If this concession were given to the wallpaper manufacturers, the boot and floor polish manufacturers, and the varnish and paint manufacturers, who are developing in Lancashire a number of small industries that want help, they would be able to meet foreign competition more successfully. In foreign countries the users of light industrial oil either are exempt from taxation or get a considerable drawback. I have seen only this week a number of books of wallpaper patterns from Prance and Switzerland which come here to compete with our own people who are trying to do their best to put Lancashire on its feet again. I hope the Chancellor will be able to grant this concession as an honest gesture to Lancashire.

8.55 p.m.


I wish to say one or two words in support of the new Clause moved by my right hon. and gallant Friend. This is not the first time I have done it. This Clause has been moved by him on more than one occasion in previous years—and I think I may say that it will continue to be moved in future unless the case for moving it again should disappear in the course of this Debate—because there are a large number of manufacturers, employing a considerable number of people, who feel they are under a disability in this matter and that the injustice ought to be removed. My right hon. and gallant Friend pointed out that in its initial stages this tax had something of chance in it, but that what was regarded as a mishap to industry at the moment when the tax was first put on has been continued. If there were any inescapable administrative reason why light hydrocarbon oils should not be exempted from duty we should have to put up with the position, but, as has been pointed out, there could be no difficulty in devising means to prevent evasions. In other cases concerning oils the users have co-operated with the Customs and the Treasury in drawing up suitable schemes when there were complications—though the complications were not so great perhaps as in the present case—and there the Treasury have seen fit to carry out the declared policy of the Government to help industry as much as possible.

Take the case of a manufacturer of linoleum. He uses linseed oil for one purpose and may use light hydrocarbon oils for another. When the linseed oil duty was imposed difficulties arose for certain manufacturers, but the Government had been careful to set up an impartial body to investigate difficulties arising from the incidence of Customs duties. The matter was immediately taken up by the Import Duties Advisory Committee, and in conjunction with the manufacturers they devised a scheme of drawbacks and the disability was removed and there is now, as far as I know, no complaint. But what is the position of the linoleum manufacturer using light hydrocarbon oil for another purpose? He finds that his foreign competitors are either free from similar taxation or have a substantial drawback, and therefore he comes along to ask why he should not have the same facilities in the conduct of his business here. As the Government are ready to assist manufacturers over the whole range of industry in regard to import duties it seems quite reasonable for the users of this white spirit to ask for this concession. They would willingly co-operate in devising a scheme, and as the suppliers are limited in number that would facilitate the making of the necessary arrangements.

There is, perhaps, another reason why the Government in dealing with this duty ought to make no exception to their general policy of helping industry by removing any difficulties that arise. In the case of some users the white spirit is really a part of the machinery of their business. The dry cleaning business provides an example of this. It is a business which is trying to expand, and in these difficult times the Government ought to assist it. In the dry cleaning business white spirit is in some cases used more than once, and therefore it is correct to say that in taxing that white spirit we are imposing a tax upon their machinery. It is unnecessary for me to develop the case for this Clause at greater length, because my hon. and gallant Friend has already covered practically the whole of the ground. If I have any nuance of difference with him it is that he said one had to be a bold roan to ask for any financial concession in a year like this. I share his view that it is impossible to compute the actual amount of saving to the Revenue that would accrue if this drawback were granted or this differentiation were made in the taxation. Many industries would undoubtedly employ more people, there would be more Income Tax to pay, and I think it is certain that there would be a saving to the State in respect of unemployment allowances. This continued discrimination against the users of white spirit is contrary to the general policy of the Government, and I join in the appeal that favourable consideration should be given to this Clause.

9.3 p.m.


I should like to be associated with my right hon. and gallant Friend and others in pressing this, shall I call it, all-party Clause upon the Government. If the Chancellor had been in his place—I do not complain of his absence, because we have his very able colleague on the Treasury Bench—I should have reminded him that this is the hundredth anniversary of the year in which his distinguished father was born, and that one of the slogans of the late Joseph Chamberlain was, "No tax upon raw materials." One reason why we press for this new Clause is that these light hydrocarbon oils are the raw materials of the trades which have been enumerated. In the city of Hull, with which I am associated—my colleague the Member for South-West Hull (Mr. Law) is here to support the new Clause—we have a large and growing paint industry, and we need to develop it as much as we can, because as a result of the policy of the Government in other directions Hull is handicapped, and our unemployment figures are sufficiently alarming for the Government to have made the city of Hull into what is call a necessitous area. We do not want to advertise our- selves as a necessitous area. We have sufficient grit and we have sufficient men to be able to develop this new and growing paint and varnish industry.

Let us take one article alone, and that is turpentine. The hon. and learned Gentleman cannot try to hide behind the barrage of difficulties and obstacles which, he will say, will prevent his remitting the tax, because by no stretch of imagination can it be said that turpentine can be used for running an internal combustion engine. I believe it is a fact that we use in British trade at the present time about 6,000,000 gallons of British turpentine, good spirit, largely in those trades which have been so ably dealt with by the right hon. and gallant Gentleman the Member for Ripon (Major Hills). We come to the Financial Secretary, and we ask him to remember his past. [Interruption.] The hon. Lady the Member for Jarrow (Miss Wilkinson) would suggest that the Financial Secretary to the Treasury has no past, and only women have a past. [An HON. MEMBER,: "Shame!"] If there is anything offensive in that observation, I withdraw it. I should not dream of associating the hon. Lady with anybody who has had a past. I want to get back to the turpentine. I appeal to the Financial Secretary to the Treasury. When I mentioned his past I remembered that he was a kindly disposed gentleman, ready to listen to all reasonable pleas and to endeavour to meet them with reasonable answers.


Look at the company he is in.


Let us leave the company alone. I believe he is in charge for the time being, and can get up at that Box. During the time that we have been debating this dreary and humdrum Budget in Committee, the Financial Secretary to the Treasury has been able to get up at that Box and to give answers which would not only give pleasure to Members of the Committee, but would enable him to say that he had made some contribution to decreasing unemployment. That is what we are after. He could say that this substance is the raw material of a trade which is rapidly developing even under the handicap of competition from practically every other European nation. Most of those nations, whether it be Switzerland or Yugoslavia, recognise that this is a raw material which is fundamental in developing industry, and they either give a rebate or they cancel the tax altogether.

Let the hon. and learned Gentleman get up in due course, and let him remember the slogan of his party and the policy enunciated by that distinguished statesman, the late right hon. Member for West Birmingham. Let him say to us that he will make some concession upon turpentine, even if he cannot do it upon petrol, and that its administration by the wise heads of the Treasury presents not one atom of difficulty. I hope that we have softened the heart of the Financial Secretary, that he will give us that answer which turneth away all wrath, and that he will be able to go home to-night with the proper Boy Scout feeling, that he has done one good action this day.

9.11 p.m.


It is evident that we are in for a late sitting to-night. I therefore do not intend to detain the Committee for more than about two minutes, but I want to add a word on this question, about which the Treasury made so much difficulty last year. Several hon. Members mentioned that no difficulty has been found in differentiating between the heavy oil used in industry and transport. There are a number of other similar cases. The petrol used for fishing boats is exempt from import duties, as are materials used for building or refitting ships and molasses that go into yeast factories, and no difficulty has been experienced. The nature of the spirit we are dealing with is quite different from that used for motor transport. It is quite wrong that a duty which was intended to be applied to locomotion should be applied to a raw material used in industry, especially as the burden is so very heavy and there are a number of factories engaged in this industry in the Special Areas. I doubt whether any other raw material is taxed as highly as is this one. It may be difficult for the Financial Secretary to give up his £500,000, but I ask him to say that our cause is just and that the matter will receive consideration next year.

9.13 p.m.


I do not intend to take more than my share of responsibility if, as has just been predicted, we are in for a late sitting to-night, but I should be neglecting my duty to a portion of my constituency if I did not add my voice to those of hon. Members who have spoken on this proposed new Clause. My constituency is very largely interested in woollen textiles, and I cannot say that it would benefit to the same extent as that of my hon. Friend the Member for Burnley (Mr. Burke) by the acceptance of this proposal. It happens, while I represent a Yorkshire constituency, that one end of it approaches the borders of Lancashire. The textile, industry which predominates in Lancashire has overflown into that little corner of Yorkshire, which unfortunately shares with the rest of Lancashire, and perhaps in the worst possible degree, in the disaster which has overtaken the cotton textile industry.

Representations have been made to me from that corner of my constituency, that cotton mills, some nine in number, existing in the little townships round about, are now derelict. Most of them are of post-war erection but are standing empty. One of them has been taken for the establishment of a wallpaper factory on a fairly extensive scale. I believe there are possibilities of developing that industry in that neighbourhood—and Heaven knows, the neighbourhood needs such a development very greatly. I am not thinking particularly about the proprietors of the industry, but about those who have spent so many hopeless, helpless years suffering in that corner of my constituency, which is practically derelict. If by any means help can be given to them, however it may benefit the employers, I shall be happy to have contributed in however small a degree to that end. I know the Financial Secretary may tell us that the people who are engaged in manufacturing wallpaper do not need this help, and perhaps, judged by ordinary standards, they do not, but, if there is a possibility of their becoming so prosperous as to be able to develop and extend their business and employ more of the workpeople in whom I am specially interested, I hope he will turn a blind eye on the question of their comparative prosperity, and will not use that old argument again in justification of a refusal to grant this little concession. I feel sure that, if the matter were left to an open vote of the Committee, without any pressure from the Government, the Clause would be carried, with the result that a little additional ray of hope would be brought into the lives of those who have been suffering so long from trade depression.

9. 17 p.m.


I agree with the hon. Member for Colne Valley (Mr. Marklew) that, if this Clause went to a free vote of the Committee, there is little doubt that it would be carried. I have not received any representations on the matter from my constituency, but I should have thought that the Clause would commend itself from the point of view of industrialists throughout the country. Last year the Chancellor of the Exchequer, in opposing this Clause, said that only 5 per cent. of the light hydrocarbon oils imported into this country was used for industrial purposes, and that, therefore, it was only a small matter; but it is an important matter to everyone who uses this spirit in his factory or workshop, and it is important to every employ that he has in his place. I would press upon the Chancellor of the Exchequer the fact that it is not the volume that should count, but the difficulties that have to be faced by these industrialists, even though their number may be small and their factories may only employ a few hands, for they have to face competition while using a high-priced raw material.

Reference has been made to the question of linseed oil. I received this morning an Import Duties Order which stated that in future there were to be drawbacks on exported goods in which linseed oil had been used, and that is a principle which has obtained ever since the Import Duties Advisory Committee was set up. A few weeks ago the Opposition were very vehement when the duty on leather imported into this country was increased. They protested because it was a raw material of an industry. Why do they not show support for this Clause? [HON. MEMBERS: "They have."] If the Chancellor of the Exchequer had listened, as the Financial Secretary has during the last hour, to the protestations and pleadings of hon. Members on this side of the Committee, I am sure he would lend a sympathetic ear to our plea. It has been said that if this rebate were given it would be very difficult to control, but it seems to me that there would be no more difficulty than there is in controlling the supply of methylated spirit. In my works we have to fill in certificates for methylated spirit, and it is controlled at every point, and there is very little difficulty as regards evasion. The supplies of these hydrocarbon oils are in the hands of a very few firms, and surely the Government could come to some arrangement with them for controlling the avenues and seeing that there was no evasion of duty. This is a matter which requires ventilation once more in the House, and I am one of those Members who feel that the Chancellor would be doing a great service to industry in this country if he gave this Clause favourable consideration.

9.24 p.m.


I am rather surprised at the speech of the hon. Member for Pudsey and Otley (Mr. Gibson). If he had been in the Chamber throughout the Debate, he would know that from these benches strong pleas have been made to the Chancellor of the Exchequer and the Treasury to agree to this proposed new Clause, and such pleas have been submitted to him, not only this year, but during the last seven years. I would ask that the Clause should be accepted, not next year, but this year. I would ask the Treasury to consider the people who have to purchase the products of this industry. The extra cost involved by the duty may be small, but it would mean something to the painting and decorating trades in connection with the great schemes of housing which are now in progress in all parts of the country, and it would affect many other products which go into the homes of the people. For this reason, as well as the reason that it is a burdensome duty and one which irritates those engaged in these industries, I would ask the Chancellor to agree to the Clause and get rid of this duty, at any rate so far as regards the rebate asked for.

9.25 p.m.


In justice to my constituents I feel that I must add my voice to the unanimous chorus in support of this proposed new Clause. Evidently it seems to the Committee as a whole to be so reasonable that one would hope that the Chancellor would have no hesitation in accepting it. But at the back of our minds there is an uneasy feeling that he may not be as kindly disposed as we should wish. There are in the main only three lines of argument which can be adduced against the Clause. The first is that the Chancellor of the Exchequer has to get the money from somewhere, but it is fair to suggest to him, as the hon. Member for East Birkenhead (Mr. White) did suggest, that when he gets £500,000 by taxing the raw material of an important industry, by suppressing that industry and restricting employment in it, he may not be making such a good bargain as the figures would seem to indicate.

The second argument is the administrative difficulty. It is difficult to distinguish between these two purposes for the same commodity, but that is a difficulty which has been overcome in many other industries, and there seems to be no adequate reason why it should not be overcome in this case. Those industries which use these hydrocarbon oils as their raw material are, on the whole, in a fairly prosperous condition and can easily sustain the burden of the tax. It so happens that these industries are in the main situated in parts of the country which have been very severely afflicted by the world depression. In Lancashire, for example, and in my own constituency of Hull, these industries fill a very important place. In those parts of the country where these industries are, the Government are not responsible for the depression, and it is not the fault of the Chancellor of the Exchequer or of the Government that the Chancellor of the Exchequer is unable to wave a wand and bring back industries like the cotton industry or Continental shipping, such as we have in Hull.

But surely if the Chancellor of the Exchequer cannot work miracles it is all the more incumbent on him to do nothing which will retard the new industries which are springing up to take the place of the old ones. It is surely the duty of the Government to protect and keep going old industries, and if they cannot do that to give every kind of encouragement to new industries. But they are striking a blow at these new industries. From that point of view there is the strongest possible argument for accepting the new Clause which my right hon. Friend has moved.

9.28 p.m.


I have been asked to support this Clause not only by employers in the area which I represent but also by a very strong deputation of workers. Like the previous speaker 1 come from a depressed area—in my case, from the most depressed area. It gets a great deal of sympathy from the Government, but very little practical help. In our case we have a very large paint works, which in one of the most distressed parts of a distressed area does provide a considerable amount of employment on excellent trade union conditions and it is on the best of terms with its workers. We feel that these are people, both employers and workers, who are definitely helping in a very difficult area. The excessive tax on what is their essential raw material is really carried to absurdity. Whatever argument there may be for tariffs it is pretty evident from the Debate to-day that you can carry tariffs to an absurd point, and the high duty on these and linseed oils and raw materials that go into the manufacture of paint and similar commodities, is really carrying things to an absurdity.

I suggest that when many of these paint works are in areas which, if not scheduled as distressed, are in a bad state, it is for the Chancellor of the Exchequer to see whether he could not get this £500,000 from some of the industries which are very much better able to bear it. It does not seem to me a complete argument to say that this particular industry may be a comparatively prosperous industry. Where an industry is providing employment in very difficult areas it should come under this-Clause. If the Government are going to keep this particularly ramshackle system going at all they might try to make the thing work better in those areas where it is working extremely badly. Here is a case in point where it seems that the Chancellor of the Exchequer, without doing any injustice, could remove this vexatious duty and put it on someone who would feel it hardly at all—gramophone records if he likes; they are paying heaven knows what per cent. Here is an essential raw material of a good, well organised industry, and I think that the Chancellor of the Exchequer might, therefore, look into the matter further and remove or lighten a tax which his own supporters as well as those on this side feel to be vexatious to a degree.

9.33 p.m.


I know that what I have got to say will be unpopular because of the apparently unanimous feeling in the House that this Clause should be accepted. As it stands, perhaps, there is not as much menace in it as might come out of it later on, perhaps in future years, when, if the concession were granted, the natural corollary of it would be to extend the removal of this tax and to apply it to all that kind of oil for whatever purpose it is used. I represent a constituency which occupies largely the shale-producing area in Scotland, and to pass this Clause and later to give the same advantage to all such oil for whatever purpose it was used, would render that constituency one which, although it is a distressed area at the present time, would be even more distressed.


I may say that although I for one spoke in favour of this Clause I do not support the total abolition of the duty. It would be prejudicial to our own industry.


I have simply risen to express my fear of what may come out of giving effect to this Clause, and to point out that in the shale-producing areas which I represent there were previously engaged 12,000 workers. To-day they have been reduced to 3,000 and they are working for three weeks and idle for one. It is possible to carry the industry on simply because of the preference that it has in respect of an eight-penny tax on imported oil of the kind produced in the shale fields. I felt that it was ray duty to utter that word of warning and to indicate that the argument is not entirely on one side, although this proposal is a small thing compared with what might come out of it in the long run.

9.36 p.m.


It is very hard indeed to resist a request proposed in such persuasive tones and supported from various parts of the Committee with such force and moderation. At the same time, I fear that the acceptance of the Clause is impossible for two reasons, either of which would be disastrous. The first is one of principle and the second is that of cost. In introducing it my right hon. and gallant Friend mentioned an estimate of £450,000 as the cost of the concession. That is a sum that represents the balance of the Budget for the year, but even so he has under-estimated. The cost of the concession in a year would be £850,000, which is a very considerable sum, and one with which the Committee would be very ill-advised to part without good reason. It is very difficult to arrive at an exact figure, because at present no distinction is made between industrial petrol and motor spirit, but I am giving the estimate that has been given me by those who are fairly expert in these matters.


I am very surprised to find that the figures differ so much. May I ask whether my hon. and learned Friend's estimate includes aviation spirit?


I think I know where my right hon. and gallant Friend got his figure. I saw it put out by one of the associations interested in the matter. Perhaps he has accepted it; but I am told that the figure of £450,000 does not cover all the non-road uses of light oil and misses out marine engines, I do not think the Committee need have any qualms of conscience in refusing to part with this sum, because it has to be borne in mind what the duty is. The question has been obscured sometimes by Debates about the Road Fund, and an impression has got abroad that in some way this is a tax on petrol used for roads and only incidentally for industrial purposes, whereas the truth is that this is a duty imposed upon light hydrocarbon oils for the purpose of obtaining revenue, and it is exactly on the same footing as any other duty imposed for that purpose.

We are asked in this Clause to take this revenue duty and split it up into two sections, one of which is to pay a less tax than the other. There are only two ways in which you can distinguish industrial spirit from motor spirit. My right hon. and gallant Friend the Member for Ripon (Major Hills) indicated that in his view it might be possible to arrive at a distinction by way of specification, and he mentioned the case of kerosene as analogous to this. I am not a chemist, but I am told beyond any doubt that the two things are by no means analogous and, whereas it is possible to distinguish by a flash point test between kerosene and industrial and motor spirit, it is quite impossible by specification to distinguish between industrial spirit and petrol used for internal combustion engines. Therefore we are driven back upon the second possible form of distinction between these two forms of industrial spirit, and that is by the uses to which they are put. The Committee is familiar with the difficulties that lurk in any such proposal. It is not at all possible, without a very strict and burdensome control which might cost a great deal of money, to distinguish them by this means for the purposes of duty.


Would it be any more difficult to do so than it is at present to distinguish between heavy oil used for transport and industrial purposes?


What is the difficulty with regard to turpentine?


I will deal with turpentine in a moment. I am asked, Where is the difficulty in framing a distinction on the use to which the spirit is put when you are in fact already making such a distinction with success in the case of the heavy oils? My hon. Friend says, "You are at the moment distinguishing between heavy oil used for road transport and that used for other purposes. Why can you not do the same with equal facility in the case of petrol?" The answer broadly is that it depends entirely on the proportions that are used for the two purposes. My right hon. and gallant Friend rather anticipated this argument. He said that 5 per cent. of the amount of heavy oil was used in our road vehicles. He expected it was more. It is more, but not appreciably so. It is 6 per cent. The fact is that this particular fraction of the heavy oil used for, road vehicles is a very small fraction of the total, whereas in the case of petrol and light hydrocarbon oils the amount used on the roads is 95 per cent., and in industry 5 per cent. The relevance of these figures is this. Let the Committee imagine the problem of control facing the Customs in this matter, and how it is altered by these figures.

You have to control the fact that a number of the people who have to pay would use the less-taxed article for their own purposes. These are the people who have to be controlled. In the case of the light hydrocarbon oils, they are 05 per cent. of the total users, representing an enormous body of people, whereas in the case of the heavy oils they are only 6 per cent. of the total users of that particular oil, representing a very small and manageable body. Therefore, I suggest to the Committee that it would be very unwise to proceed upon the analogy of the ease with which the heavy oil problem may be handled, when only 6 per cent. of those have to be watched, to the light hydrocarbon oils, when those who would have a temptation to use the less-taxed article for their own purposes amount to 95 per cent. of the total users. That is the relevance of the figures to which the right hon. Gentleman referred earlier in his speech. There is no doubt that the difficulty of cost is one for the Committee, and the question is whether it is worth while facing the difficulties and incurring the cost. These are considerations which are, no doubt, present in the minds of hon. Members. Before you pay anything you want to know what you will get by paying it.

Is it the fact that the industries which are affected by this tax on light hydrocarbon oils require this assistance so much that it is worth while spending this money or losing this revenue and setting up the elaborate and expensive control necessary to administer this exemption? The facts are, I am glad to say, very different. Indeed, the industries chiefly concerned with the use of this particular substance, are, if one can judge by the speeches made at meetings by chairmen of companies, and by the public balance-sheets, on the whole in a very prosperous condition. My right hon. Friend the Member for Ripon in introducing this matter was candid enough to admit the fact. The hon. Gentleman the Member for East Birkenhead (Mr. White), who spoke on this subject, mentioned the case of dyers and cleaners, and it is true that some of those people who use this spirit are not so prosperous. But if one were to talk to anyone engaged in that trade he would find that the cause of the depression has nothing whatever to do with the tax on this spirit, but is due to a variety of other causes, including a certain kind of very keen competition.

I could not follow the hon. Gentleman the Member for East Birkenhead when he said that they had a particular claim for exemption because they used the same spirit time and time again. Those who use the spirit and consume it in the course of their operations would have a higher claim for exemption than those who use it over and over again. There is nothing to be gleaned from an examination of the industries concerned which would lead the Committee to the view that they were in such a parlous condition that they cannot pay this duty. My right hon. Friend the Chancellor of the Exchequer dealt with this question last year, and in the course of his speech said: I have had the curiosity to look up and see what has happened to these unfortunate industries that are fighting for their lives … against foreign competition, and it was with a sense of relief that I found that the 10 companies which I took which were engaged as manufacturers of paint.and varnish last year, made £128,800 more profit than they did the year before."—[OFFICIAL REPORT, 24th June, 1935; col. 913, Vol. 303.] I am able to supplement that now, and to say that for this year those same 10 paint and varnish manufacturing companies showed a further £117,000 in their trade profits this year. My right hon. Friend also mentioned last year the case of the wallpaper manufacturers, and said how in the year, at the end of which he was speaking, the wallpaper manufacturers who were engaged in using this substance increased their profits by 14 per cent. as compared with the year before. I am able to add to the story now, and to say that the same firms this year have added a further 10 per cent. to their profits. That is the light in which this matter ought to be reviewed.


What about turpentine?


I am obliged to the hon. Member for East Hull (Mr. Muff) for reminding me about turpentine; otherwise I might have forgotten it. Turpentine is in a separate category. Turpentine, although a light hydrocarbon oil for the purposes of the duty, is distinguishable by its vegetable origin from the other substances in this category. At the same time it is for the purposes of the duty a light hydrocarbon oil. The hon. Member says that we ought to differentiate in this matter. The justification for including turpentine within the duty is also the lack of distress among the companies using turpentine, but the special reason why we think that no exception should be made of turpentine in the matter of this Revenue duty is that to distinguish between one and another of a class on which you are placing a duty tends to make people fly to the substance which is less highly taxed, with resultant damage to the Revenue. Another thing which is very likely to happen is what happened when my right hon. Friend applied the duty to Diesel oil used for road purposes, when Diesel oil was being used on the roads to an unnatural degree and at the same time damaging the Revenue obtainable from petrol.

These are the reasons I submit to the Committee, and I would also reinforce what was said by the hon. Member for Linlithgow (Mr. Mathers), that one effect of the duty on light hydrocarbon oils is to stimulate the home-produced article, a matter which is not lost sight of. To sum up the arguments against the new Clause, in the first place the Committee are being asked to part with a great sum of Revenue, and, in order to get what Revenue is possible from the tax, to set up a heavy and troublesome control which might in the end be ineffective. They are asked to do all these things not to help industries which are distressed, but industries which are prosperous, and, at the same time, to make a definite breach in the integrity of the light hydrocarbon oil duty which has not been made by any Government since it was introduced in 1928.

9.54 p.m.


I am very sorry that the Government are unable to accept the Clause. I regret it very much. I cannot let pass one or two of the arguments which my hon. and learned Friend advanced. I agree that you can obtain revenue from taxing raw material. No one would deny that; but do you want to get your revenue from taxing raw material? I should have thought that the Government would have agreed that the worst way of obtaining revenue was to put a tax on raw material. The last argument of my hon. and learned Friend was that because an industry is prosperous, it should not ask for relief from a duty which it considers works unfairly. It is in the prosperous industries where you can expect to get decent employment. Because an industry shows signs of good management and of doing well, why should it be penalised? I have never heard that doctrine before. Because you show signs of wealth, you are to be taxed. I do not think that doctrine can be accepted. It has never been a principle of British taxation. I have never pretended that these industries are depressed. They are well managed, well run industries, and on the whole they are doing fairly well, but to

be told that because they are doing well their raw material should be subject to a tax which their foreign competitors do not pay is a doctrine that is new and that I have never heard before from the Financial Secretary to the Treasury.

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

The Committee divided: Ayes, 129; Noes, 206.

Division No. 244.] AYES. [9.57 p.m.
Acland, Rt. Hon. Sir F. Dyke Graham, D. M. (Hamilton) Morrison, Rt. Hon. H. (Ha'kn'y. S.)
Acland, R. T. D. (Barnstaple) Green, W. H. (Deptford) Morrison. R. C. (Tottenham, N.)
Adams, D. (Consett) Greenwood, Rt. Hon. A. Naylor, T. E.
Adams, D. M. (Poplar, S.) Grenfell, D. R. Oliver, G. H.
Adamson, W. M. Griffith, F. Kingsley (M'ddl'sbro, W.) Owen, Major G.
Alexander, Rt. Hon. A. V. (H'lsbr.) Griffiths, G. A. (Hemsworth) Paling, W.
Ammon, C. G. Hall, G. H. (Aberdare) Parker, J.
Anderson, F. (Whitehaven) Hall, J. H. (Whitechapel) Parkinson, J. A.
Attlee, Rt. Hon. C. R. Hardle, G. D. Potts, J.
Banfield, J. W. Harris, Sir P. A. Price, M. P.
Barnes, A. J. Henderson, J. (Ardwick) Pritt, D. N.
Barr, J. Henderson, T. (Tradeston) Rathbone, Eleanor (English Univ's.)
Batey, J. Hills, A. (Pontefract) Richards, R. (Wrexham)
Benson, G. Hills, Major Rt. Hon. J. W. (Ripon) Roberts, Rt. Hon. F. O. (W. Brom.)
Birchall, Sir J. D. Holdsworth, H. Roberts, W. (Cumberland, N.)
Broad, F. A. Holland, A. Robinson, W. A. (St. Helens)
Bromfield, W. Jagger, J. Salter, Dr. A.
Brooke, W. Jenkins, A. (Pontypool) Seely, Sir H. M.
Brown, Rt. Hon. J. (S. Ayrshire) Jenkins, Sir W. (Neath) Sexton, T. M.
Buchanan, G. Johnston, Rt. Hon. T. Short, A.
Cape, T. Jones, A. C. (Shipley) Sinclair, Rt. Hon. Sir A. (C'thn's)
Cassells, T. Jones, H. Haydn (Merioneth) Smith, E. (Stoke)
Charleton, H. C. Kelly, W. T. Smith, T. (Normanton)
Chater, D. Kennedy, Rt. Hon. T. Sorensen, R. W.
Cluse, W. S. Kirkwood, D. Stephen, C.
Cocks, F. S. Lathan, G. Stewart, W. J. (H'ght'n-le-Sp'ng)
Compton, J. Law, R. K. (Hull, S.W.) Strauss, G. R. (Lambeth, N.)
Cove, W. G. Lawson, J. J. Taylor, R. J. (Morpeth)
Cripps, Hon. Sir Stafford Leach, W. Thurtle, E.
Daggar, G. Lee, F. Tinker, J. J.
Dalton, H. Leonard, W. Vlant, S. P.
Davies, D. L. (Pontypridd) Leslie, J. R. Walkden, A. G.
Dobble, W. Logan, D. G. Watkins, F. C.
Dunn, E. (Rother Valley) Lunn, W. Watson, W. McL.
Ede, J. C. Macdonald, G. (Ince) Westwood, J.
Edwards, Sir C. (Bedwellty) McGhee, H. G. White, H. Graham
Evans, D. O. (Cardigan) MacLaren, A. Whiteley, W.
Fletcher, Lt.-Comdr. R. T. H. Maclean, N. Wilkinson, Ellen
Foot, D. M. MacMillan, M. (Western Isles) Williams, E. J. (Ogmore)
Gallacher, W. MacNeill, Weir, L. Williams, T. (Don Valley)
Gardner, B. W. Marklew, E. Wilson, C. H. (Attercliffe)
Garro Jones, G. M. Messer, F.
George, Megan Lloyd (Anglesey) Milner, Major J. TELLERS FOR THE AYES.—
Gibbins, J. Montague, F. Mr. Muff and Mr. Burke.
Adams, S. V. T. (Leeds, W.) Bullock, Capt. M. Critchley, A.
Agnew, Lieut.-Comdr. P. G. Burghley, Lord Crooke. J S
Albery, I. J. Butler, R. A. Crookshank, Capt. H. F. C.
Anderson, Sir A. Garrett (C. of Ldn.) Campbell, Sir E. T. Croom-Johnson, R. P.
Anstruther-Gray, W. J. Cartland, J. R. H. Cross, R. H.
Aske, Sir R. W. Carver, Major W. H. Crowder, J. F. E.
Balfour, G. (Hampstead) Cary, R. A. Cruddas, Col. B.
Balfour, Capt. H. H. (Isle of Thanet) Castlereagh, Viscount Culverwell, C. T.
Balniel, Lord Chamberlain, Rt. Hn. N. (Edgb't'n) Davies, Major G. F. (Yeovil)
Barclay-Harvey, C. M. Channon, H. Dawson, Sir P.
Beaumont, Hon. R. E. B. (Portsm'h) Chapman, A. (Rutherglen) De Chair, S. S.
Belt, Sir A. L. Christle, J. A. Denman, Hon. R. D.
Bernays, R. H. Colfox, Major W. P. Denville, Alfred
Blaker, Sir R. Colville, Lt.-Col. D. J. Dodd, J. S.
Blindell, Sir J. Cooke, J. D. (Hammersmith, S.) Dorman-Smith, Major R. H.
Bower, Comdr. R. T. Cooper, Rt.Hn. T. M. (E'nburgh, W.) Dower, Capt. A. V. G.
Boyce, H. Leslie Courthope, Col. Sir G. L. Duckworth, W. R. (Moss Side)
Brocklebank, C. E. R. Craddock, Sir R. H. Dugdale, Major T. L.
Brown, Col. D. C. (Hexham) Cranborne, Viscount Duggan, H. J.
Bull, B. B. Craven-Ellis, W. Duncan, J. A. L.
Eastwood, J. F. Kirkpatrick, W. M. Reed, A. C. (Exeter)
Eckersley, P. T. Lamb, Sir J. Q. Reid, Sir D. D. (Down)
Edmondson, Major Sir J. Law, Sir A. J. (High Peak) Reid, W. Allan (Derby)
Elliston, G. S. Leckie, J. A. Rickards, G. W. (Skipton)
Emmott, C. E. G. C. Leech, Dr. J. W. Robinson, J. R. (Blackpool)
Emrys-Evans, P. V. Lewis, O. Ropner, Colonel L.
Erskine Hill, A. G. Llewellin, Lieut.-Col. J. J. Ross Taylor, w. (Woodbridge)
Everard, W. L. Lloyd, G. W. Ruggles-Brise, Colonel Sir E. A.
Findlay, Sir E. Locker-Lampson, Comdr. O. S. Russell, A. West (Tynemouth)
Fleming, E. L. Loftus, P. C. Salmon, Sir I.
Fraser, Capt. Sir I. Lovat-Fraser, J. A. Salt, E. W.
Ganzoni, Sir J. Mabane, W. (Huddersfield) Samuel, M. R. A. (Putney)
Gledhill, G. McCorquodale, M. S. Sassoon, Rt. Hon. Sir P.
Gluckstein, L. H. MacDonald, Rt. Hn. J. R. (Scot. U.) Savery, Servington
Gower, Sir R. V. MacDonald, Rt. Hon. M. (Ross) Selley, H. R.
Graham, Captain A. C. (Wirral) McKie, J. H. Shaw, Major P. S. (Wavertree)
Grattan-Doyle, Sir N. Macnamara, Capt. J. R. J. Shaw, Captain W. T. (Forfar)
Greene, W. P. C. (Worcester) Magnay, T. Shepperson, Sir E. W.
Gretton, Col. Rt. Hon. J. Maitland, A. Shute, Colonel Sir J. J.
Gridley, Sir A. B. Makins, Brig.-Gen. E. Smith, Sir R. W. (Aberdeen)
Gritten, W. G. Howard Manningham-Buller, Sir M. Somervell, Sir D. B. (Crewe)
Guest, Maj. Hon. O.(C'mb'rw'll, N.W.) Margesson, Capt. Rt. Hon. H. D. R. Somerville, D. G. (Willesden, E.)
Guinness, T. L. E. B. Markham, S. F. Spens, W. P.
Gunston, Capt. D. W. Mason, Lt.-Col. Hon. G. K. M. Stanley, Rt. Hon. Lord (Fylde)
Guy, J. C. M. Mathers, G. Stanley, Rt. Hon. Oliver (W'm'I'd)
Hanbury, Sir C. Mayhew, Lt.-Col. J. Stourton, Major Hon. J. J.
Hannah, I. C. Mellor, Sir J. S. P. (Tamworth) Strauss, E. A. (Southwark, N.)
Hannon, Sir P. J. H. Mills, Major J. D. (New Forest) Strickland, Captain W. F.
Harbord, A. Mitchell, H. (Brentford and Chiswick) Stuart, Hon. J. (Moray and Nairn).
Haslam, Sir J. (Bolton) Moore, Lieut.-Col. T. C. R. Sueter, Rear-Admiral Sir M. F.
Hellgers, Captain F. F. A. Morgan, R. H. Tasker, Sir R. I.
Heneage, Lieut.-Colonel A. P. Morris, J. P. (Salford, N.) Tate, Mavis C.
Hepworth, J. Morrison, W. S. (Cirencester) Taylor, Vice-Adm. E. A. (Padd., S.)
Herbert, Major J. A. (Monmouth) Neven-Spence, Maj. B. H. H. Touche, G. C.
Herbert, Captain S. (Abbey) Nicolson, Hon. H. G. Tryon, Major Rt. Hon. G. C.
Holmes, J. S. O'Neill, Major Rt. Hon. Sir Hugh Tufnell, Lieut.-Com. R. L.
Hope, Captain Hon. A. O. J. Orr-Ewing, I. L. Wakefield, W. W.
Hopkinson, A. Palmer, G. E. H. Walker-Smith, Sir J.
Hore-Belisha, Rt. Hon. L. Patrick, C. M. Wallace, Captain Euan
Horsbrugh, Florence Peake, O. Ward, Lieut-Col. Sir A. L. (Hull)
Howitt, Dr. A. B. Penny, Sir G. Waterhouse, Captain C
Hudson, Capt. A. U. M. (Hack., N.) Perkins, W. R. D. Wells, S. R.
Hudson, R. S. (Southport) Petherick, M. Williams, H. G. (Croydon, S.)
Hume, Sir G. H. Pickthorn, K. W. M. Winterton, Rt. Hon. Earl
Hunter, T. Pownall, Sir Assheton Womersley, Sir W. J.
Inskip, Rt. Hon. Sir T. W. H. Radford, E. A. Young, A. S. L. (Partick)
James, Wing-Commander A. W. Raikes, H. V. A. M.
Jones. Sir G. W. H. (S'k N'w'gt'n) Rankin, R. TELLERS FOR THE NOES.—
Jones, L. (Swansea, W.) Rathbone, J. R. (Bodmin) Commander Southby and Dr.
Kerr, J. Graham (Scottish Univs.) Rayner, Major R. H. Morris-Jones.

Motion made, and Question, "That this Schedule, as amended, be the Fourth Schedule to the Bill," put, and agreed to.