CLAUSE 2.—(Preference for home produced oils.) (Hansard, 22 June 1938)

Colonel Sandeman Allen
I beg to move, in page 2, line 9, to leave out "twelve," and to insert "six."
The reason why I have tabled this Amendment is to get some explanation from the Treasury Bench as to what exactly they mean by saying in the Bill that "during the period of twelve years" the preference shall remain. Do they simply mean that, or do they imply further that the present high rate of tax on petrol shall continue for 12 years? If it is simply assistance for the home produced oils from shale and coal, I have no objection; but the implication that the 9d. tax on petrol is going on for 12 years seems to require some explanation. I have moved the Amendment in the hope that the Minister will be able to tell us that such is not the case, and that it is simply a matter of protection for the home industry.

§ Major Owen
I beg to support the Amendment. I have spoken on this matter on previous occasions in this House, and I have dared to prophesy that the period first envisaged for this relief of home produced oils would not be sufficient. In the Debate on 25th July, 1933, I said: You can produce any amount of oil from coal, just as you can produce any amount of sugar from beet; but at what cost? When the first subsidy was granted to sugar beet it was to be only for a period; but what happened? They came again for a little more. That is the danger. I fear that at the end of the four and a-half years if the 8d. Import Duty is still in existence Imperial Chemical Industries and others will come along and ask for an extension of the period. I proceeded to say: 1140 I ask the House to give careful consideration to this matter because on the question of employment the number you put on by this process will be displaced in the oil industry."—[OFFICIAL REPORT, 25th July, 5933; col. 2466, Vol. 280.] It seems to me that what I have foreshadowed has come to pass, and to-day we are asked to tie the House of Commons to a subsidy to this industry for a period of 12 years at the current rate of the Customs Duty on imported oil. Since that date we have had the report of the Falmouth Sub-Committee on oil from coal. This report, if it has any value at all, proves conclusively that it is impossible to produce oil from coal on a commercial basis. I am quite ready—so is everybody in the Committee—to do whatever is possible to restore prosperity in the coal industry, but, as I pointed out in a previous Debate, I think the cost of doing so is far too great.
I ask the Chancellor of the Exchequer to consider limiting this period by cutting it down to half at least. Next year, if the Chancellor of the Exchequer so wished, he could alter the period, but why should we to-day tie down the Committee to a period of 12 years. If this industry is going to be of any service to the country, it should be able to prove its worth before that time. I remember that during the debates in those days we were told that the production of oil from coal in this country would be of great benefit to the coal industry, and I should like to know from the Chancellor of the Exchequer how many extra miners have been employed in this country as a result of this process.

The Deputy-Chairman
I do not want to interrupt the hon. and gallant Gentleman unduly, but I must point out to him that either we must restrict discussion very strictly to the point whether it be 1141 for 12 years or six years, which is now before the Committee, and discuss the general question of whether the policy is desirable on the Question that the Clause stand part, or, if we have the wider discussion now, the arguments must not be resumed when we discuss the Clause later. I am in the hands of the Committee.

§ Major Owen
I hoped that we should be able to deal with the Amendment in the same way as we dealt with the Amendment on the previous Clause, namely, have a more or less general discussion, and that the various Amendments could then be put to the vote. I do not know whether you have expressed and Ruling on that point or not, and I should like to know.

The Deputy-Chairman
I express no opinion on the subject, but will merely take whatever course is most convenient to the Committee in general. If it is agreed by the Committee, I am willing to take the wider discussion now on the understanding that the arguments are not repeated later.

§ Major Owen
I am very much obliged. I felt that I was rather extending the scope of the argument in dealing with the matter which I have just raised. There were arguments put forward at the time when the then Prime Minister in 1934 announced this subsidy to the hydrogenation process in particular, but it included every other process of producing oil from coal in this country. There were speakers in the House at that time who seemed to think that it was the salvation of the coal industry. I ventured to differ, and I believe that if we read the Falmouth Report we shall find that that has not been proved to be the case. I will take, first of all, the low temperature carbonisation process, and quote paragraph 119 of the Falmouth Report: The question then arises: What are the prospects of a really large-scale development of low temperature carbonisation?—and to this point the Committee have given careful consideration. Paragraph 120 says: From the figures quoted in the Table in paragraph 109 it will be seen that the low temperature carbonisation method is first and foremost a coke-producing process, and that in consequence its commercial value is dependent on the possibility of disposing of 1142 the coke. This was accepted by the representatives of the Low Temperature Coal Distillers' Association. It says, in paragraph 123: The Committee further examined the claim made by many advocates of low temperature coke that a big development of this process would bring about a much wished for revival in the coal industry. Paragraph 124: The Committee have to report, however, in this connection, that the conclusions they arrived at were disappointing. In so far as low temperature coke might be used as a substitute for raw coal, very little increased demand for coal would ensue, as it is calculated that only 10 per cent. more coal would be required to give an equivalent amount of fuel and heat value. The Committee further say that the coal producers themselves were not very enamoured of this process because the result would be that people who now purchase coal for private purposes would no longer purchase it if coke from the low-temperature carbonisation process were available at low rates. What does the report say about the question of hydrogenation? This programme"— that is, the programme of the Billingham experiment— could only have been carried through by an undertaking having great resources, both financial and technical. It is a high testimony to the skill of all concerned that the plant is now virtually in full operation. In 1936, the production was about 120,000 tons of petrol, and the estimated production for 1937 is 130,000 tons, against a designed capacity of 150,000 tons. However, in spite of the most thorough investigation at each of the earlier stages in the development, difficulties which were not anticipated have been experienced in the large scale plant, which have involved the company in some expense and delay. With any process as novel as this, it is not surprising that this should he so and the experience of Billingham suggests very forcibly the necessity of accepting with caution any schemes of this kind involving very large capital expenditure, even if there is available, as in this case, great experience and data based on the most preparatory work. Here is a very important point, particularly as I had been arguing at that time that we must have supplies for our air-craft in time of war. In paragraph 150 the report of the Falmouth Committee says: It may be mentioned that, apart from the difficulties arising from the working of the plant, twice since the plant started the quality of the petrol has had to be improved to meet the demands of the market for petrols 1143 with higher octane numbers. This has inevitably resulted in some reduction of the plant yields. Any petrol used in aircraft must have high octane numbers, and you cannot get that from petrol produced from coal. So that in fact, however much we may produce by the hydrogenation process, we would have to import oil from other countries before that oil could be used in our aircraft. It was argued at that time that, if we produced oil from coal in this country, it would be a measure of safety and security for us in time of war. What does the Falmouth Committee say with regard to that? In paragraph 289 they say: Much stress has been laid, by those who advocate the encouragement of home production of oil, on the greater security which the country would obtain as compared with reliance on imported supplies. It is reasonable to assume that a large proportion of the tankers required for our oil imports would escape enemy attack. Furthermore, in the transport of seaborne oil, and also in the case of storage in this country, the risks would be spread over a very large number of units, and, though losses would be inevitable, the policy of storage and replenishment from overseas should provide adequate security for our oil requirements. In paragraph 290—and this is the point I made myself in the course of a speech in this House—they say: In the case of hydrogenation plants, on the other hand, the risks would be concentrated. The plants must of necessity be large, and would therefore provide conspicuous targets and he extremely vulnerable to air attack. There is another objection, and that is the question of cost. In paragraph 230 the committee report: In these circumstances, it is abundantly evident that, so long as the price of imported fuel remains in the neighbourhood of the present figure, the case for home-produced oil, judged by purely economic standards, falls to the ground. Hence it follows that if it is desirable for any of the reasons mentioned in paragraph 238 to produce oil from coal or other indigenous materials, Government assistance in one form or another must be forthcoming. Candidly, I should like to see something done for the coal industry in this country which would restore its prosperity, but, as I said on that occasion, I am afraid—and the facts have proved it since—that the low-temperature carbonisation method, the hydrogenation method, and the Fischer method are not likely to restore prosperity to the coal industry. They are not likely to give 1144 us an adequate or a safe supply in time of war. In addition to that, economically, it is going to cost the country and the Revenue an enormous amount, as has been explained already to the Committee this afternoon. The amount that is paid in taxation in respect of oil imported into this country is enormous, somewhere in the neighbourhood of £60,000,000 per annum. If we continue this process and apply it to all oils produced in this country, whatever may be the material from which that oil is produced, the cost to the country will be out of all proportion to the benefits the country will gain from it. I ask the Chancellor of the Exchequer seriously to consider whether it is in the interests of the country as a whole, of the coal industry, of the men and their families who depend upon the coal industry for their living and comfort to continue with this when we have at our disposal ample supplies of natural oil produced by British capital and British employes practically all over the world. It is work that employs hundreds and thousands of sailors in tankers, and in refineries put up by British capital, and I ask whether it is worth while to continue with this proposal and to extend the period for another 12 years?
We were led to understand, and there were members of the House at that time who said, that in the course of four-and-a-half years the process would have been so much improved that they would no longer require this support from the State. That has been proved to be a completely wrong and mistaken idea. The process has not improved and the cost of producing this oil without the subsidy is altogether impossible. I therefore plead with the Chancellor of the Exchequer to limit the period to six years. I should be only too happy to think that this process could be perfected within a reasonable period. I for one, at any rate, in view of the depression in the coal industry, would not oppose it, but to continue it in the present circumstances, in face of the Falmouth Report, is an entirely wrong thing unless the Government are prepared to say that it is a subsidy and nothing else. I ask the Chancellor of the Exchequer to accept the Amendment and to reduce the period to six years.

§ Mr. James Griffiths
I thank you for your Ruling, Captain Bourne, that we may discuss this subject in a large way. The Chancellor of the Exchequer was good enough, in reply to a question on 18th May, to say that he proposed to include a Clause of this kind in the Finance Bill because the Government had given consideration to the Famouth Committee's Report and had decided to accept its recommendations. One of the recommendations, which the hon. and gallant Member for Carnarvonshire (Major Owen) neglected, was that this preferential duty shall be stabilised for a period of 12 years. I share the views of the hon. and gallant Member in one respect, that on reading the report and then coming to the recommendations the report is in many ways a complete condemnation of any method of extracting oil from coal. On reading the document through, it is amazing to note that they make the recommendation that certain provisions should be made in order that the oil from coal industry might be maintained, and also developed.
The Falmouth's Committee's Report, and the way in which the investigation was conducted, have left those of us who are interested in the problem completely dissatisfied. We are of the opinion that the committee approached the problem from far too narrow an angle, that it completely omitted to take very important considerations into account, and that the report could not have been better written if it had been commissioned by the oil interests of this country. We in the coal-mining industry have given much thought and time to this matter and are convinced that from the beginning the oil interests have done everything, and they are doing everything, to prevent this native industry being developed in this country. The Falmouth Committee hold out scarcely any hope for this new industry. They say that it is too expensive, too imperfect, and that there is no hope of the industry being developed on any successful lines, and yet at the end of their report they make a recommendation which, quite frankly, cannot be understood, having regard to the nature of the report. They suggest that there should be a continuance of the guaranteed preference for a period of 12 years from 1938, and that the rate should be increased from 4d. to 8d. per gallon, and that the guarantee should be extended to include Diesel oil for use in 1146 motor vehicles. It is that guarantee that is included in this Clause, and which the Chancellor of the Exchequer asks the committee to accept.
The committee dealt with the two major processes of extracting oil from coal that are in use in this country and in the world generally. There is, first, the method of low-temperature carbonisation. They do not propose that there should be any further assistance given to that beyond the help given by the preferential duty, and they express the hope that under the shelter of this preference the industry may be developed in this country. The other process, the synthetic process, known as hydrogenation, has been dealt with, in our opinion, in a very unsatisfactory way. They do not recommend that the Government should take up the matter; all that they say is that they consider that it would be an advantage if a plant were established in this country to work the Fischer process, and they express the hope that somebody or other, some financiers, will come forward and put down the plant. If I was speaking to our own men I should call that the height of cheek, seeing that the committee have not gone into the matter as carefully as they ought to have done.
This is the 'first investigation by a Government committee undertaken in connection with this problem, and we are of opinion that the committee have not done their job as thoroughly as they ought to have done. This synthetic process, this hydrogenation process, has much attraction as compared with the other process, because it leave no residue behind, all the coal being converted into oil. It is not a process of extracting oil from coal but of liquefying coal into oil. The committee suggest that it is desirable that a plant should be established in this country of a substantial size for the production of not less than 20,000 or 30,000 tons of primary products per annum, and they express the hope that someone will come forward and be prepared to find the money. I do not know whom they expect to come forward but I am afraid that after reading their report anyone would be disposed to turn it down.
The committee say that they have heard a good deal of evidence in private. A large number of persons, experts and persons connected with companies operating processes, were asked to give evidence, 1147 and those persons requested that their evidence should be treated as private. Their evidence was given only on that consideration. That evidence, which was given in private by persons interested in the industry, has obviously swayed the report. The report can be understood and accepted only on the assumption that the evidence which is not revealed to us is overwhelmingly against this process.

§ Major Owen
It has been submitted to the Government.

§ Mr. Griffiths
I do not think the evidence has been submitted to them. It may have been submitted to the Committee of Imperial Defence, of which this committee was a sub-committee.

§ The Chancellor of the Exchequer (Sir John Simon)
That is so.

§ Mr. Griffiths
Therefore, the Cabinet in making their decision are in no better position than the House.

§ Major Owen
Oh, yes.

§ Mr. Griffiths
I understood that the Chancellor of the Exchequer had not seen the private evidence that was before the Committee.

§ Sir J. Simon
I do not want to state anything more positively than I know. Therefore, I am speaking subject to correction, if I do not state it rightly, but my understanding is that the Committee of Imperial Defence had all this material before them, and, as the hon. Member knows, members of the Cabinet who are specially concerned are members of the Committee of Imperial Defence.

§ Mr. Griffiths
This House has not the evidence. All that we have is simply a paragraph in the report that the evidence was given in private. This is an important matter of national policy. Why should this Committee to-day, or the country, be asked to pronounce definitely upon this question of oil from coal on a report in which the evidence is kept from us? Who has the evidence? Imperial Chemical Industries. They have arrangements with the oil industry. The oil industries of Europe have a stranglehold on the industries that extract oil from coal. From the beginning the oil interests have watched this new development. They have gone sound every- 1148 where and have bought up pits. They have a stranglehold. No one can sell a gallon of petrol extracted from the oil from coal processes in this country except through the usual agencies. From the start this matter has been looked at more from the standpoint of safeguarding the oil interests than from the future prospects of the coal mines of this country.
In accepting the report as it is there are certain aspects to which the committee have only given very cursory investigation and consideration. We approach this problem from the standpoint of the coal-mining industry, upon which the industrial life of this country in the last century was built up. In the last 10 or 12 years the coal industry has been faced with this great new competitive fuel, and we face the problem from the standpoint as to whether this new development, this new fuel, petrol, does take the place of coal. To the degree that it does, it closes our pits, displaces our men and creates a very serious community problem for us. From the national interest the right way to approach the problem is to consider whether it is possible to develop in our own industry, in our own country, from the raw materials that we have in abundance, an industry which can produce this fuel. If so, then we shall be able to maintain our mining communities and not destroy them as we are doing now. The Falmouth Committee has not done that. It has taken the question of cost purely on the question of the production of oil at this moment, at this stage in the development of this new industry as compared with the price of imported petrol. We say that the committee is not right in adopting that course. This new industry is in its experimental stage.

§ Major Owen
indicated dissent.

§ Mr. Griffiths
The hon. and gallant Member shakes his head. We have asked the Secretary for Mines whether the plant at Billingham has reached the stage when a pronouncement can he made, and he has told us almost every time that it is still in an expermiental stage and that they were still carrying on experiments, that they were trying variants of the original process, and that the time had not come to pronounce definitely upon it. But the Falmouth Committee have pronounced definitely. They have accepted 1149 the relative cost at the present time and have used it to condemn the development of this process. We say that they ought not to have done that. The costs of extracting oil from coal are at their highest now, and there is every reason why we should continue experiments.
There are many different kinds of processes, low-temperature processes, for extracting oil from coal, and people interested in those processes wrote to the committee and asked to be allowed to appear as witnesses. They asked to be allowed to give their evidence and to be permitted to explain their processes, but they were denied that opportunity by the Falmouth Committee. The committee selected a small number of companies to give evidence before them, and a small number of processes, and declined to accept evidence from a large number of other pioneers in this industry. We say that this Committee to-day, the Government and the country ought not to accept the report of a committee which refused to hear the evidence of scientists and engineers who have given years of work to these processes. If there is to be an investigation, let everybody have a chance. Why should the big combines and companies have all the opportunity?
I had the pleasure of sitting on a committee set up by our own party to consider this subject. It has published a report, and I venture to say that it was a far better and more judicial investigation of this problem than was made by the Falmouth Committee. Everybody who had given years to the study of this problem and the working out of the processes was invited to give evidence. That is what should have been done by the Falmouth Committee instead of declining to accept a large volume of evidence from men who have given years and sacrificed much in order to develop their processes. In the circumstances I think we should accept their report with a good deal of reservation. The Falmouth Committee, in my view, dealt far too lightly with what is taking place in Germany and other countries. In Germany they have now reached the stage where they are actually extracting oil from lignite, brown coal. If German engineers can produce oil from brown coal, are we to take it that our engineers are so incompetent that there is no prospect of being able to develop the extraction of oil from coal, using the 1150 coal which we have in such abundance in this country?

§ Mr. Lewis Jones
On a point of Order. I understood from the Deputy-Chairman that he would allow a rather wide discussion on this Amendment, and I would like to know for the guidance of the Committee whether in view of the speeches which have been made it is now open to anyone who takes part in these discussions to discuss in detail the Falmouth Report?

§ The Chairman (Sir Dennis Herbert)
I think not. I have listened to what the hon. Member for Llanelly (Mr. J. Griffiths) has said. I am always loath to interrupt unnecessarily and I think that the greater part of his argument is in order and relevant to the Clause generally, but I think the Committee should bear in mind that we cannot go into the whole of the details of the Falmouth Committee's report.

§ Mr. Bevan
May I submit to you that the Chancellor of the Exchequer has said that this part of the Finance Bill has been incorporated in consequence of the recommendations of the Falmouth Committee, which recommendations followed the investigation which the committee made and the evidence it took? It seems to me that the Committee cannot usefully consider this part of the Finance Bill unless they are able to consider the evidence which influenced the Government.

§ The Chairman
I congratulate the hon. Member on coming to the same conclusion as I have just announced.

§ Mr. J. Griffiths
The Chancellor of the Exchequer, I think it was on 18th May, said that the Government proposed to accept the Falmouth Committee's report, and the Clause which we are now discussing is based on that report.

§ Sir J. Simon
I agree, and I understood at the time that the hon. Member was glad of the decision and rather welcomed it.

§ Mr. Griffiths
Yes, and I shall certainly vote against the Amendment. This is the only opportunity we have of discussing the Falmouth Committee's report.

§ The Chairman
The hon. Member says that it is the only opportunity, but now is not an opportunity to discuss the Falmouth Committee's report.

§ Mr. Griffiths
At any rate, the Government are proposing to accept one of their recommendations, and it cannot be thoroughly understood without having the report. I hope the Government will think again on this problem and will not accept the Falmouth Committee's report, about which there is a good deal of dismay and dissatisfaction in the country. The investigation was not properly completed. We shall vote for a continuance of this preference, because without it no industry of this kind can be created in this country. We hope that this industry will be developed.

§ Mr. Hannah
I believe that I am about the most unsuitable person in the whole Committee to intervene in this Debate, being, as I imagine, the only Member of Parliament who does not possess a licence to drive a motor car, endorsed or unendorsed. I hope that I shall not be out of order in saying that my reason for intervening is to voice the strong discontent of some of my own constituents about the high taxation of motor fuel at the present time. In our Bilston area we have a number of places, I happen to live in one of them—

§ The Chairman
The hon. Member must find a more suitable opportunity for discussing motor taxation.

§ Mr. Hannah
My reason for objecting to the 12 years is because of the pessimistic view it appears to take. It implies that the high rates on motor fuel are going to last for all that time. I earnestly hope that there will come a time long before the 12 years have expired, when with peace re-established and when the world has returned to sanity, it will be possible very largely indeed to reduce these taxes.

§ Mr. Ellis Smith
We have a long way to go.

§ Mr. Hannah
We have, but I hope we shall get there under our present administration and, therefore, I support the Amendment in the hope that it will not be taken as an indication that these very high rates of taxation on motor fuel are to last for 12 whole years. I need hardly say that I hope that a purely native industry of extracting oil from coal will be satisfactorily built up. I should not for a moment support the Amendment if I thought it was in any way 1152 antagonistic to such a hope. There is no doubt that from the point of view of this country there is nothing more important than getting fuel which is wanted on so large a scale for transport, both by land and sea, from the resources in our own country and, therefore, in the hope that we shall have a materially lower scale of taxation in 12 years' time I hope the Committee will accept the shorter period and reduce it to six years.

§ Mr. R. Acland
I should like to ask the Chancellor of the Exchequer whether the opening words of this Clause: During the period of 12 years from the passing of this Act, are the usual, normal and proper words to be found in a Finance Act at all? Is it right that in 1938 we should apparently be settling some of the details of the Budget speech in 1950? If this is normal and proper can the Chancellor of the Exchequer give the Committee any guidance as to the limits to which such a process may be extended? Will it be proper for the Chancellor of the Exchequer next year, in what may well be his last Budget speech for some time, to insert a Clause at the instance of the present Minister for Agriculture and his supporters that for the next 12 years the preference given to beef produced from indigenous cows or bullocks shall be ¾d. per lb.? Would that be a proper Clause to find a place in next year's Finance Bill? If not, why is this proper? Will the Chancellor of the Exchequer in supporting the Clause, as I suppose he will, make it perfectly clear that a Chancellor of the Exchequer on a future occasion has every bit as much right to alter this preference, up or down, as he has to alter the Income Tax up or down, and that this industry has no more a vested interest in a preference of 8d. than has Lord Nuffield in a preference of 33¼ per cent.? I think it is absolutely impossible and contrary to all constitutional practice to attempt in one Finance Bill to fix what shall or shall not be done in a future Finance Bill. What may happen? We may get in power a Government which would make a strong stand against these monopolists and break in pieces this business of holding up patents. It might release a whole series of patents for the use of this industry. There may be new discoveries, some of which may not be snapped up by the oil importing industries. The hon. Member 1153 for Rusholme (Mr. Radford) might discover or develop the production of some of these oils from potatoes, and he might come here and attack other companies which are making profits of 140 per cent. by the manufacture of some kind of spirit.

§ Mr. Radford
The company with which I am connected has never made an ounce of alcohol from potatoes or from any other raw material. The hon. Member is talking absolute nonsense.

§ Mr. Acland
I recollect a speech of an hon. Member on these benches who mentioned the figure, and I do not think it was contradicted then. My argument is that all sorts of things may be discovered and you may get companies making enormous profits out of oil from indigenous materials. Is it to be said that whatever happens no future Chancellor of the Exchequer will have the right to interfere with them until the Finance Bill of 1951? I hope the Chancellor of the Exchequer will give us an assurance that this Clause has no binding force whatever upon future Chancellors of the Exchequer.

§ Mr. Bevan
I wish to make a few remarks only, as most of the ground has been covered very adequately by my hon. Friend the Member for Llanelly (Mr. J. Griffiths), who has devoted a great deal of attention to this problem. It is clear from the Falmouth Committee's Report that the recommendation upon which this Clause is based was either to some extent the result of representations made by the Committee of Imperial Defence or was arrived at very largely because of considerations of Imperial Defence. Otherwise, as my hon. Friend pointed out, the whole tone of the report would make the recommendation appear foolish, because throughout the report the committee comes down very heavily against the practicability of extracting oil from coal in Great Britain on a commercial basis. It is obvious that this plant, which it is recommended should be set up and should be supported by the preference, would not be established for technical reasons, because on page 42 of the report, the committee point out that the plant necessary for explorative technical work need not be as large as the one they recommend. Therefore, the recommendation is made for another purpose. Indeed, on 1154 the same page, it is stated in paragraph 209, which has strict relevance to the recommendation on which the Clause is based, that— Such a plant would not only provide valuable technical and economic data, but it would enable the nucleus of a staff to be trained which would be available when a larger production was required, and would provide facilities for large-scale research to be carried out. It would be also of great assistance in planning further plants if the national interest called for them or commercial concerns desired at any time to establish this type of process. Therefore, the proposal is made, not because the committee consider that a plant consuming from 20,000 to 30,000 tons of coal per annum would be a commercial proposition, but because if such a plant were established in this country there would be available a trained staff for work of that sort. The necessity for such a trained staff is that at some time we might be involved in a conflict, that our resources of foreign oil might be cut off, and we might have to rely upon producing oil in larger and larger quantities, so that it would be necessary to have a staff which would be able to take charge of that work. The committee arrived at that recommendation and the Government accepted it, not for strict economic and commercial reasons, but for reasons of military strategy. To say that is, I think, to put the whole argument upon a fair basis, because if it were for commercial reasons the report of the committee would be different.
If that be the purpose of the recommendation, how is it being implemented by the proposals before the Committee? The Government say that there should be a preference. For what reason? In the hope that a number of individuals having cash to spare will take a more optimistic view than the Falmouth Committee, for that committee have done their best to depress the hopes and expectations of anyone who might want to engage in this production. The Government say that this plant is needed in the vital national interest, and at the same time they publish a report which has the effect of militating against that national interest. I do not believe that, if the Falmouth Committee's Report is accepted, even with the preference anyone in this country will construct plant of this sort. Although I and my hon. Friends who are intimately associated 1155 with the mining industry cannot oppose this proposal, which is a small step to establish an oil-from-coal plant in Great Britain, nevertheless we are bound to say to the Government that a more maladroit and inadequate way of dealing with the problem could not have been devised. If a plant of this sort is necessary in the national interest, why do not the Government construct it? If this staff is necessary in order that our national wellbeing may be promoted, why do not the Government set up this plant? We are hoping that other people will take a much more optimistic view than the Falmouth Committee.
There is some constitutional justification for the view expressed by the hon. Member for Barnstaple (Mr. Acland). I think it is a very bad practice to include in Finance Bills a lot of useless lumber. It is clear that one Finance Bill cannot bind another, and that it is not possible for anyone to have a guarantee going on from year to year. No one knows that better than the Chancellor of the Exchequer. If this Clause is carried, all that we shall have is an expression of the opinion of the Committee to the people who may enter this sort of undertaking that this preference ought to be continued for 12 years. That is all the constitutional soundness there is in this proposal. I do not know whether this is the best way of doing it, but it may be desirable or necessary to put on record the view of the Committee at this moment about the proposal. We cannot do anything that will tie future Finance Bills, and any future Chancellor will be absolutely free in this matter.
Hon. Members on this side are deeply disappointed with the nature of the Falmouth Committee's report in so far as this Clause is based on it; we are greatly disappointed that hon. Members have not been given more information on which to base their judgment of this Clause; and we are deeply disappointed that the Government have not had more courage in dealing not only with this vital problem of national interest, but in finding for the coal industry other markets to replace those which modern technical developments are rapidly taking away from it. Valuable years are passing. If one is to form a judgment on the basis of what the Government are now doing, they themselves fear that we may be faced with 1156 a grave national peril in the not-very-fardistant future. If that be their view—and that is the only conclusion one can form from the enormous, unprecedented efforts they are making to rearm the country—it is sad that they are not taking bolder steps and bringing into existence a method of extracting oil from coal which might stand this country in good stead at a time of emergency.

§ The Secretary for Mines (Captain Crookshank)
I will abide by your Ruling. Sir Dennis, and not discuss the Falmouth Committee's report, but perhaps I may be allowed to make one or two references to it. I should like, in the first place, to express the indebtedness which everybody must feel to the members of the committee for the very thorough way in which they investigated the problem before them. The hon. Member for Llanelly (Mr. J. Griffiths) made some complaints on the subject of the evidence which he thought the committee ought to have heard and which it did not hear. If the hon. Member will study the report, particularly the introduction, in which he will see the principles upon which they took evidence, if he will look also at the end of the report where there is a list of those who gave evidence, and that a number of printed and other memoranda were also submitted, and if he will also bear in mind that the committee sat for a very long time in investigating this problem, which has been for so many years of great public importance, I think he will not carry his criticism on that score any further.
This is not a party matter, since two hon. Members opposite who do not seem to like the Falmouth Committee's report have stated that they will support this Clause, which implements the chief recommendation of the committee. As to hon. Members on the Liberal benches it is not surprising that they take what is really a middle course. What the Clause suggests is that there should be a guaranteed preference of 8d. for 12 years, and what hon. Gentlemen on the Liberal benches say is that there ought to be a guaranteed preference of 4d. for six years. They halve both figures. The adoption of such a proposal would not tally with the recommendation of the Falmouth Committee, which was to make it possible for further work to proceed on this very important subject.
1157 The hon. and gallant Member for Carnarvonshire (Major Owen) raised the old discussion, which I do not intend to reopen, as to whether this is a subsidy. It it not a subsidy; it is a non-collection of certain revenue which this Committee decides should not be collected. Home-produced oil, whether it be light oil as in the past or whether it be Diesel oil for road purposes, will receive a measure of preference. The hon. Member for Barnstaple (Mr. Acland) asked whether this is a correct constitutional procedure. It is a fact that in previous Finance Bills provisions have been taken, for example with regard to the Ottawa Duties and Imperial Preference at the time when the right hon. Gentleman the Member for Epping (Mr. Churchill) was Chancellor of the Exchequer, for a period longer than the year with which the Finance Bills were directly concerned. There is not very much in that point. As a justification of this Clause, I would say that, first of all, I think that the country is still without sufficient experience of all the different processes to know for certain whether in a reasonable time they will be economically possible. The Falmouth Committee made that point very clearly. They also made the following point, which I put in defence of a longer period as opposed to shorter one, about the expenditure in the early stages: One of the difficulties with the processes designed for the production of oil as the primary product is that not only are the large-scale plants expensive to build, but in the earlier stages, one of the main factors which renders them commercially unprofitable is the heavy allowance required to be made under the head of obsolescence. For, as improvements are discovered, it is often impossible to apply them without extensive alterations or reconstruction of plant. That also is pointed out in another part of the report which deals with Billingham, where the committee state that the company are still not yet in a position to derive the full benefit from the work they have already put in.

§ Major Owen
Surely, what was stated in 1934 was that the experiment at Billingham had reached such a stage that now they would be able to produce oil from coal commercially. They have had four and-half years in which further to improve these methods, and now we are asked to give them an extra 12 years. When are we to come to and end of— 1158 whatever the hon. and gallant Gentleman may call it—what is, in fact, a subsidy, and a very substantial one, to that particular manufacturing plant at Billing-ham?

§ Captain Crookshank
The hon. and gallant Member is quite right in saying that in 1934 it was stated that they could, extract oil from coal, but it was not until after the undertaking was given in July, 1933, about the guaranteed preference, that Imperial Chemical Industries decided to start building the plant. I think he is a little wrong in his dates. One of the reasons which I was adducing for this long period of guarantee was the high cost. Everybody who, has gone into this matter—and I know that many hon. Members have made a special study of it—knows that the capital expenditure involved is very high. It is a process which cannot be said to be finally established anywhere. Scientists in this and in other countries are at work upon it and one does not know what modifications in plant may be required in future which would have very important effects.
It is also difficult to foresee at this stage developments which may result in bringing down the cost of production. In those circumstances the Government feel that we cannot afford to lag behind. Our scientists are not unknown in the world and we must give them and others engaged in this work a guarantee of this kind, behind which they can develop the process. The Falmouth Committee came definitely to the conclusion that a guarantee of this kind was the best way of dealing with the matter. While we are not discussing the question in detail at the moment, I would commend to hon. Members paragraphs 259 to 269 inclusive of the report. There, the Falmouth Committee make it clear that in their view a preference of this kind and for this length of time would be the best possible way of development. At the same time I must call attention to the fact that in paragraph 261 the committee agree that: So far the results of the hydrogenation and synthetic processes are not sufficiently established to justify the spending of large sums of public money in building plants. Therefore, they favour a continuation of the form of assistance at present given by the guaranteed preference and as they point out in another part of the report—in paragraph 215—they have reason to think that with the assistance of that 1159 preference, private enterprise would be likely to find the capital for a plant of a commercial scale. Having examined the problem in detail and with information at their disposal which we readily acknowledge is not available to hon. Members, the committee arrived at those conclusions. That information was given in confidence to this body which was a sub-committee of the Committee of Imperial Defence. They had to consider a great many aspects of the question which it would not be proper to discuss in terms of evidence. I am sure that hon. Gentlemen all recognise that fact. Still they came to the unanimous decision that the step proposed in this Clause should be taken. The two hon. Gentlemen who spoke from the opposite side are really agreed upon that point. They have complaints about the Falmouth Committee not recommending something else, but they have not said that this is not a good thing to do and therefore it is with some confidence that I ask the Committee to accept the Clause.
When the hon. Member asks me what effect the Clause will have in the future, I cannot say more than that if it is passed it will be a declaration by Parliament that it is desirable for this work to continue. It will be a declaration by Parliament that a guarantee for 12 years should be given, and that that is the right way in which to proceed. It will be a declaration in accordance with the unanimous recommendations of the Falmouth Committee and both the Government and tilt official Opposition are agreed upon it. In those circumstances I submit that it is a declaration which is likely to be of value. I know that hon. Members opposite below the Gangway are inclined to excuse themselves from being associated with that declaration but, taking the matter by and large, if the Government of the day and the official Opposition agree in such a Parliamentary declaration, I think it will be an assurance which will enable industry to develop the processes behind the protection of this preference.

§ Mr. Bevan
We on this side do not wish to have it quoted against us in the future that we accepted the hon. and gallant Gentleman's statement, and I would ask him to read again paragraph 215 of the report. In his reference to it 1160 he gave the Committee the impression that the Falmouth Committee had been informed that the necessary money would be forthcoming if this proposal were adopted. May I read the paragraph? It says: One witness appeared to be confident that if a guarantee for 12 years were given, private enterprise would find the capital for a plant of a commercial scale. I would point out that even if this Clause is passed, there is no contractual guarantee. The paragraph continues: On the other hand, another witness who at first suggested that, in addition to a guaranteed preference, the Government should find or guarantee three-fourths of the capital for a commercial scale plant, finally wrote to the Committee and gave it as his considered view that the provision of capital for such a venture was not likely to attract outside investors.

§ Captain Crookshank
I take no exception to the hon. Member reading out any part of the report. All I said was that the Falmouth Committee had had from one witness the impression that it might be possible with this guarantee to find the money from private enterprise. It is also true that in another paragraph, to which I also referred, they said that it was not suitable for public money to be invested in this concern at this stage.

§ Mr. Dunn
With some of the comments made by the Secretary for Mines I find myself, to a certain extent, in agreement, but it must not be taken that we on this side are giving our whole-hearted support to the Falmouth Report. All I would say about that report is that we do not accept it, nor I think does anybody familiar with the question accept it, as the final word on this very important subject. We regard it as a restricted contribution to the solution of the problem, and the general view which we hold is that the report was more or less sabotaged and torpedoed by the oil industry in this country. That is as far as I want to go in that connection. I desire, however, to put the question of this Clause a little further than it has been put up to now. The Debate has centred largely round the question of the extraction of oil from coal and the report of the Falmouth Committee. I would like to ask the Chancellor of the Exchequer to look very closely into the question of power alcohol which is covered by this Clause.

§ The Chairman
I do not think that the question of power alcohol arises on this Amendment.

§ Mr. Dunn
I accept your Ruling, Sir Dennis, and will defer my remarks on that subject until the appropriate occasion.

Colonel Sandeman Allen
In view of the statement by the Minister that this Clause has been put down for the purpose of encouraging the manufacture of oil from coal and not for the purpose of keeping the Petrol Duty at 9d. for 12 years, I beg to ask leave to withdraw the Amendment.

§ Mr. Graham White
I beg to move in page 2, line 27, to leave out "eight-pence," and to insert "fourpence."
This Amendment is the natural sequel to the Amendment which was last under consideration. The previous Amendment dealt with the question of the time and this relates to the question of the amount of the preference and the original proposal was that if the rate was increased, the time was to be diminished. My hon. and gallant Friend the Member for Carnarvon (Major Owen), in supporting the previous Amendment, laid before the Committee certain arguments which were relevant to that Amendment and are also relevant to this Amendment. I do not propose to ask the Committee to listen to a restatement of those arguments.

§ Mr. Acland
On this Amendment I wish to address a few words to hon. Members on this side above the Gangway. I understand that they are no more willing to support this reduction than they were willing to support us on the previous Amendment. May I remind them that, according to their own policy, they will shortly desire to take over the whole of this industry and pay compensation for it? If this preference were not guaranteed for 12 years, or if it were reduced, they would of course pay compensation at the appropriate rate, and the industry being one which does not make any particular profits, the compensation payable would not be particularly large. But if there is a guaranteed preference for 12 years, or, at any rate, something which gives the industry the right to say that it has been told by Parliament that the preference is 1162 likely to continue for 12 years, and if the rate is fixed at 8d. rather than 4d. then, when hon. Members above the Gangway come to carry out their policy they will have to compensate the owners of this big monopoly at the value which the Stock Exchange will attach to the industry, with a 12 years guarantee of 8d.
I ask hon. Members to consider whether their refusal to support these Amendments is not contrary to the general line of their policy. I wonder whether it is the connection between the party above the Gangway and anything which concerns the coal industry which has resulted in their adoption of a new line of policy in this case. I suggest that it is a line of policy which they would never dream of adopting if we were discussing, say, a guaranteed preference of ¾d. a lb. on beef. They would never have dreamed of supporting a 12 years' guarantee in that case, and, if it had been moved at the rate of ¾d. a lb. guaranteed for 12 years, having voted against the 12 years, they would then move that it should be reduced from ¾d. to ⅜d.

§ Mr. T. Smith
I may, perhaps, remind the hon. Member that we could not always rely on the Liberal party when we were in power. There were times when they were not quite consistent. How many times did we have criticisms from that party as to what ought and what ought not to be done with regard to the coal industry? Perhaps two or three of the most damaging critics in that party are now Ministers of the Crown. I remember the Minister of Labour being very scathing with regard to certain things, and the Secretary for War was not altogether uncritical of the Labour Government.

§ Sir J. Simon
That was before the Popular Front.

§ Mr. Smith
If there is one Minister who ought not to mention the Popular Front it is the right hon. Gentleman, because he has been rather acrobatic in his political career. If there is one Member of the Government who is swallowing the principles that he preached in days gone by it is the right hon. Gentleman, and I think he will agree with me.

§ The Chairman
If the hon. Member thinks he has had a sufficient hit back at the Liberal party, perhaps he will come back to the Amendment.

§ Mr. Smith
The position of the Labour party on this question of preference can be easily stated. I have said many times that I believe there is a future for extracting oil from coal when we are prepared to get down to certain basic things, and that one of the reasons why we cannot induce private capital to come into the industry is that so many investors in the past have been led up the garden.

§ The Chairman
I think the hon. Member is now getting on to a wide discussion which we cannot have here. The Amendment is simply a question, if my arithmetic is right, whether for eight years out of the 12 the 8d. should be reduced to 4d.

§ Mr. Smith
You are quite right, Sir Dennis, and no one is disputing your Ruling. We are not supporting the 8d. because we believe that it will solve the problem of oil from coal. When the Secretary for Mines tells us to read the Falmouth Report, he must keep in mind that we are not altogether satisfied. We are accepting what is suggested in the Clause because the mining industry is in such a tragic plight and we believe that, if the preference is given for 12 years, it will encourage further plans for extracting oil from coal. We are not complaining of the advice that has been given from below the Gangway but on this occasion we have to have some regard for expediency. The mining industry is far from being in a healthy state.

§ Captain Crookshank
I do not think the Committee will require me to say more than that we cannot accept the Amendment. I have listened with interest to the lecture that has been addressed to the party above the Gangway and to their recollections of previous political history. But I should like to make one correction in what the hon. Member said. He spoke of this being a great concession to one of the greatest monopolies that there are, but the guarantee of this preference covers a variety of interests. It covers, for instance, the shale oil industry and many other processes.

§ Mr. Mathers
I am glad that at last mention has been made of the Scottish shale oil industry. The prospect of a continuance of the 8d. preference for oil produced from shale affords an opportunity to that industry to develop in a 1164 way which I am sure will be beneficial to the area that I represent together with the Secretary of State for Scotland in West Lothian and Midlothian. To reduce the preference to 4d. would not only prevent that development which is now going on but would, I am informed by the trade union section, destroy the industry and bring it back to the very serious position in which it found itself immediately after the War. I hope the Committee will give unanimous approval to the continuance of the preference for the period mentioned in the Bill.