HC Deb 22 June 1938 vol 337 cc1164-94

7.9 P.m.

Mr. H. G. Williams

I beg to move, in page 4, line 3, to leave out "ninepence," and to insert "fourpence halfpenny." My hon. Friends and I tabled this Amendment on the Report stage of the Budget Resolutions. We were not in any way inspired by the nature of the particular commodity but we felt, having always been convinced of the desirability of protecting production in this country, that it was wrong to deprive an industry entirely of protection. Our only opponent of any substance was the hon. Member for South Bradford (Mr. Holdsworth), who claimed that it was legitimate to impose this duty at 9d. on the ground that the production of power alcohol was in fact subsidised through the effect of the Excise rebate. Is it desirable that, since we are a protectionist country, we should encourage by means of protection the production of alcohol for the use of power purposes. It seems to me that, if our policy is to encourage the manufacturer of things that we can make here, clearly we ought to encourage the production of power alcohol. Under the last Clause we have committed ourselves for 12 years to encourage the production of petrol, though we all know that the degree of protection that it is to enjoy is enormous. It is 8d. in respect of something which on importation is worth a fraction over 3d. It is the greatest degree of protection given to anything. That enormous degree of protection is supported by hon. Members opposite on the ground that it assists the coal-mining industry, which is passing through a difficult time.

They are all agreed that the production of petrol ought to be protected, but it is said that power alcohol is different. It is made from imported raw material, and that is used as an argument for not protecting this commodity. It seems to me a dangerous argument to use because 90 per cent. of our protection relates to the production of goods made from imported raw material. If that argument is accepted we ought at once to abolish the duty on all electrical goods, because they are made of imported copper; we ought to abolish all protective duties on cotton goods, because raw cotton is imported; we ought to abolish duties on woollen goods, because the bulk of the wool is imported, and we ought to abolish all protective duties on anything made directly or indirectly from wood. So that I hope no one will advance that argument. It may be perfectly sound to argue that, where an article is made from an imported raw material, it should not enjoy as much protection as when it is made from indigenous material, but there can be no rhyme, reason or sense in anyone who believes in Protection saying that a thing should not be protected because it is made from an imported raw material. It is interesting to speculate why there is so much support in certain quarters for the Chancellor's proposal as against my proposal to maintain a degree of protection for the industry. I have here a publication known as the Petroleum Press Service containing an article headed "Britain's Alcohol Duty." It concludes with these words: At all events it is to be hoped that the Government will not be induced to swerve from their purpose by the vociferous objections of vested interests. "Vested interests" are always somebody else's interests; that is all that the term means. I wonder who is the author of that impressive sentence. I find that the Petroleum Press Service is published in three languages, English, French, and German, by the Petroleum Press Bureau, whose editor is Dr. Oskar Tokayer. I have nothing against that gentleman. I have no doubt he is a highly respectable gentleman and a competent journalist. He is, in fact, I am told—I hope I am not making a misstatement about him—a Hungarian gentleman, but it is strange when this country is urged by a Hungarian gentleman—acting for whom? The petroleum interests of the world, very largely foreign petroleum interests—not to be induced to swerve from their purpose by the vociferous objections of vested interests. That is really almost a classical phrase, particularly when the same publication, when commenting on Clause i of this Bill, takes an entirely different view and denounces the Chancellor for having raised the duty on petrol by a penny; the vested interests are then the other way round. These people are not in the least degree high minded. Their sole object is that they do not wish to see built up in this country a motor fuel which is not petrol. I think, from the point of view of national security, it is a good thing that we should know how to produce an alcohol, mixed with other fuels, suitable for the propulsion of motor cars, even though at the moment it is; produced mainly from imported raw materials. In time of emergency it could be produced, more expensively, I agree, very largely from indigenous material. I am inclined to think that ultimately it may be produced from vegetable growths which at the moment we regard as waste, because alcohol is one of the few things in this life which, whether we like it or not, you cannot avoid, because it is associated with almost everything that grows. Therefore, there is the possibility that ultimately we may build up a great alcohol industry in this country for industrial purposes, based on materials different from those which have been more freely used in the past.

It is alleged against the present absence of duty that one company—and until these Debates began I did not know that this company was largely associated with this mixture, because I think the bulk of its sales are in the North of England, and I have not in the past patronised its pumps—has made a lot of money. Therefore, the new theory is that if you find anybody making a lot of money, you must entirely take away any protection which they enjoy.

Mr. Dalton

That is what you do with-the ships in Spain.

Mr. Williams

If people like to have ships going from Marseilles to Valencia, and if those ships were formerly Greek and, after signing a few papers, shoved up the British flag, that does not have a great deal of bearing on this subject of motor alcohol. It is always terrible to become obsessed with one subject. [HON. MEMBERS: "Hear, hear."] I rejoice at those cheers, because they confirm my opinion that hon. Members opposite think this has something to do with ships in Spanish waters, but it has not. If this duty is raised to 9d. from nothing, I imagine that it will inflict a very grave blow at the production of this industrial material in this country, because if they are deprived of their protection, the chances are that the production will no longer continue. It is the case that alcohol is more costly to produce than petrol, and with a comparable duty I think the production in all probability might cease entirely or almost certainly be very heavily reduced.

I cannot understand anyone, unless they are Free Traders, saying that this industry should have no protection at all. Arguing on the basis that we are for the time being a protectionist country, I cannot understand anyone contending that it should have no protection, because if they say that, they are acting merely in the interests of the foreign oil interests. If we accept the principle that there should be a measure of protection, we come down to the practical detail of how much. When, somewhere about 1922, an Amendment was made to the Finance Bill to make possible the use of alcohol industrially, and certain restrictions were imposed upon those who produced it, restrictions which are, I understand, expensive to administer, there was allowed to the producer of industrial alcohol a rebate which was intended to be enough, and not more than enough, to compensate the distiller for the extra expense to which he was put. Now if the rebate of Rd. per gallon of pure spirit—I think that is the figure—is in fact to-day, because of the larger scale of production, more than is wanted, that is a matter of detail to be argued out, and we should apply our minds to the problem of how much protection is needed.

I have put down 4½d., not because I am fully acquainted with the details, because I am not; I do not know whether 4½d. is precisely the right amount, but I think, again on the assumption that the 8¾d. does not represent a subsidy, but is merely a refund of expenses imposed on the distillers by the Excise authorities and that when they receive 8¾d. they are in the same position as if they had received nothing and manufactured without restriction—on that basis, I think 4½d. is a fair amount of protection. If, on the other hand, it is the case that actually there is an element of subsidy in the 8¾d., on the ground that there is a larger scale of production now taking place, if it is the fact that the distillers can carry out these restrictions at less than it may be argued that the protection of 4½d. is more than sufficient, but that is a matter for technical considerations, with which I do not profess to be acquainted, and I imagine that the only person in a position to advise us on that point is the Chancellor himself.

I hope this problem will be approached in this Committee to-day without that curious prejudice which I have seen in communications outside. I have every reason to believe that the oil interests have been exceedingly busy. I got a most interesting free lunch the other day, when a friend of mine, a great friend whom I have known for years, asked me to lunch. I knew that he had some connection with the oil industry. There was another gentleman there, who was exceedingly well informed on this subject; we had a very good lunch, and they tried to persuade me how misguided I was, but they were not successful. I do not blame them. It was a perfectly legitimate form of friendly bribery and corruption of the kind to which we are all subjected from time to time, but when we accept such bribery and corruption, we must be very sure we still keep our wits about us. I have observed letters written to the Press containing precisely the same kind of misleading material that I find in this document. I do not blame the oil interests for being busy with propaganda to save themselves. They do not want to see the total amount of petroleum imported into this country diminished owing to the fact that we are producing in this country an alternative spirit. Naturally they do not want that, and they are doing something which is quite legitimate in seeking to sell as much imported petrol as they can.

Unfortunately, the British Empire is poor in petroleum, the bulk of our supplies of which must come from foreign sources, and I rejoice that on the previous Clause the Labour party did all they could to support the principle of reducing to some extent our dependence upon foreign sources. I hope the coal interests will not take a narrow view on this matter. There is plenty of room for them and for power alcohol. After all, in any event we shall have to import the bulk of our requirements for a very long time to come, and in the most favourable circumstances I cannot imagine coal and Scottish shale being able to provide us with more than a tenth of our requirements, so that it would be unfortunate if the coal interests in this House, because they regard power alcohol as a competitor to some extent, were not prepared to support those of us who think that this production should be maintained in this country and, within limits, increased.

I fully realise the problem of the Chancellor. These duties, now producing £58,000,000 or thereabouts, represent a very important prop to the Treasury in these days, and the right hon. Gentleman is right, if he sees that particular production, entirely exempt from taxation, making great inroads in his revenue, in saying, "I cannot afford, from the point of view of the revenue, to allow this to go scot-free," but in protecting his revenue he ought not to destroy the production, and my plea with him to-day is this: He is right to impose on the production of this alcohol a measure of duty in order that the revenue will not lose unduly. On the other hand, he should not impose it at the full rate, because in that way he will destroy the production in this country.

7.28 p.m.

Mr. Amery

I think it is a matter of general agreement in this Committee that in so far as we can liberate ourselves from complete dependence on external sources of so important a fuel as petrol, we ought to do so; and we did accept that principle just now with regard to the production of substitutes from our indigenous mineral resources. It seems no less important to liberate ourselves, in so far as we can do so, by the use of vegetable resources, whether indigenous or imported, and I might mention that even to the extent that we rely on imported vegetable produce for the creation of this power alcohol, we are drawing upon a much wider range of production and one of which we have much larger facilities within our own Empire, than in dependence upon oil which is largely produced in foreign countries. In any case we are dealing with this simple position, that a new industry, which after many experiments and failures seems to have arrived at the right technical method, has in the last year or two been making marked strides. It promises to give steadily increasing employment and, indeed, to hold out some hope of ultimately displacing foreign petrol to the extent of something like 15 per cent. That is a clear advantage, both from the specific point of view of our dependence on foreign sources for this important fuel and, more generally, from the point of view that we are developing a British industry, which, as my hon. Friend pointed out, does not differ from many other industries in relying to a substantial extent on imported raw materials.

The suggestion is that that progress should be stopped or severely checked in what is called the interests of the revenue. The whole point that I wish to make to the Committee is that that is an entirely false view to take of the interests of the revenue. The answer to that point of view was given very effectively a few minutes ago by my hon. and gallant Friend the Minister for Mines, when he said that preference was a question not of loss of revenue or subsidy, but of non-collection of a duty. It seems to me that it is in the interests of the revenue not to collect a duty if the collecting of that duty interferes with the development of national production and, therefore, with the development of all the sources of revenue upon which, in the long-run, we have to rely. Surely nothing could be more short-sighted than, for the sake of the immediate collection of revenue in respect of one particular tax, to check that national production upon which the revenue from all our taxation depends. My right hon. Friend who was representing the Treasury when we first brought this matter up and has now been translated to a higher sphere, used certain figures of the extent of loss which he anticipated—I think greatly exaggerated, and almost fantastic figures.

Even if they were true, the figures of the loss of revenue on that particular tax would be the measure of the development and progress of the industry and, therefore, of the revenue which the industry would yield to Income Tax, Surtax, National Defence Contribution and wages. Just like any other industry, it would yield a far larger amount in the long run than anything that the Chancellor would lose in respect of that particular tax. I was glad to note that at the end of the Debate my right hon. Friend was so impressed by the strength of the arguments on this issue that he promised on behalf of the Chancellor that the matter would receive most careful consideration. It is a matter to-day, in principle at any rate, that vitally affects the whole future of our revenue. There was a time when the total burden of taxation was insignificant as compared with the national wealth, and when the natural consideration that influenced any Chancellor of the Exchequer was the convenience of collection and the completeness of the collection of any particular tax at issue. That is not the point we have to consider to-day. We are confronted with the fact that we have a total national expenditure of £1,000,000,000, or more if we include municipal and local expenditure. That vast expenditure, representing fully one-quarter of the total national production, shows no signs of being likely to diminish in future, whereas the production on which it is based may be menaced by many circumstances in our own economic situation and that of the world outside.

Surely, in these conditions, the one thing on which the Chancellor of the Exchequer must keep his eye is strengthening the national production. No tax should be considered by him, however convenient its collection, if in any way it is likely to discourage national production. No tax should be rejected by him, however inconvenient or however small the revenue which it may collect, if its incidence contributed to stimulate the encouragement of national production. That is, after all, the principle we decided just now on Clause 2, and I hope that the Chancellor will be consistent to the extent of adopting the same principle with regard to the present Clause. I entirely agree with my hon. Friend that in so far as he can conveniently collect more revenue without checking further the development of this industry, there is no objection, but the Chancellor should maintain a preference to the amount that is essential to what ought to be his major purpose—the encouragement of production. Subject to that, if hecanincidentally draw some trifle of revenue from this industry, by all means let him do it, but let it not be done at the sacrifice of what ought to be the major object of every Chancellor to-day, namely, the promotion, strengthening and developing of our national industries.

7.39 P.m.

Mr. L. Jones

Every speech delivered this afternoon seemed to deplore the need for taxation, and the two speeches that we have heard on this Amendment have adopted the same trend of thought. I appreciate that the Chancellor's main concern in framing his Budget is to find the revenue to meet the expenditure of the country, and I, for one, support him in the proposal contained in this Clause for that reason in the first place. In the second place, I think that the fact that power alcohol has been free from this duty for so many years has given it considerable preference in the competitive market over other fuels. The hon. Member for South Croydon (Mr. H. G. Williams) suggested that this was a new industry which the Chancellor should encourage. Both the speeches we have heard contained a plaintive appeal to the Chancellor not to discourage a new type of industry. In 1931–32 there were produced in this country 18,331 gallons of power alcohol. In 1938–39 it is estimated that the production will be 9,333,000 gallons. That figure is arrived at from the amount which the Chancellor hopes to get from this duty.

I suggest that it is a little absurd to suggest that this industry requires very much encouragement in view of the remarkable progress it has made during the last few years. The hon. Member for South Croydon suggested that this was a good opening for a home industry and that it might do good to certain other supplies of raw material produced at home. It is remarkable that for the last six or seven years the bulk of the raw materials used by this industry has been imported, most of it from foreign sources. The suggestion that the industry will do wonders for British raw materials, therefore, is not borne out by the facts and experience of the last few years.

Mr. H. G. Williams

Will my hon. Friend agree that steel made in South Wales from Spanish ore should pay the same duty as imported steel?

Mr. Jones

I should be glad to discuss steel with my hon. Friend at another time. For the time being, I want to keep to the subject on which I am addressing the Committee. In 1936–37 only 7.9 per cent. of the raw materials used in the manufacture of power alcohol in this country was home-grown. Very little of the remainder was from Empire sources. The hon. Member for South Croydon asked for the continuance of this protection to power alcohol. It is obvious that this duty which the Chancellor has included in the Finance Bill is essentially a revenue-raising proposal. The hon. Member for South Croydon seems to have forgotten that all petrol made in this country from imported crude oil pays the full rate of duty. Why should power alcohol have an advantage over other types of petrol? The right hon. Gentleman the Member for Sparkbrook (Mr. Amery) mentioned that some of the raw materials were from foreign sources. As a matter of fact, a large tonnage of crude oil imported for manufacturing petrol in this country comes from Empire sources. In particular, I would mention Trinidad.

It is suggested by the hon. Member for South Croydon that some great blow will be given to this industry if the Chancellor insists on carrying through his proposal. In view of the fact that only 12 or 15 per cent. of alcohol is used in this petrol mixture, the effect of the proposal will be to increase the cost of production of power alcohol by one penny per gallon. It is still open to the power alcohol people to develop or to produce their alcohol for industrial purposes, and they do so at the present time in huge quantities, because alcohol used for industrial purposes is free from duty. References have been made also to the fact that certain preferences have been given to petrol manufactured from coal and shale. In connection with that the hon. Member for South Croydon thought it was desirable for this country to do what it could in the direction of self-sufficiency in petrol supplies. He was careful to avoid reference to the fact that in wartime it may be essential for us to have it for commercial aviation or for the Royal Air Force. I understand that his tune has been changed entirely since the discussion on this subject a few weeks ago. Power alcohol is not used for commercial aviation and blended petrol is not acceptable by the Royal Air Force. When we talk of petrol made from coal and shale and the preference which is given by the Chancellor in his proposals, it must be borne in mind that that was not intended to assist petrol as petrol, but was intended to assist the coal and shale industry. The power alcohol industry, in so far as it uses molasses, is assisted because that raw material is subsidised in the beet sugar industry to the extent of £2,000,000 per year.

There is one other point, which I wish particularly to bring to the notice of Members representing mining constituencies. In the First Schedule there is a stipulation that when home production of motor fuel reaches 20 per cent. of home consumption figure the guaranteed preference to oil from coal will decrease by 1d. per gallon, with further decreases for every 5 per cent. increase in production. This must be a matter of some concern to those who are interested in the production of oil from coal. This power alcohol is blended with petrol to the extent of 15 per cent. During the last few years there has been a considerable increase in the production and consumption of power alcohol. If the tax which the Chancellor has proposed is withdrawn there will be a still further considerable increase in the production of power alcohol, and very shortly we may find that it amounts to 15 per cent. of the petrol consumed in this country. If power alcohol is responsible for 15 per cent. and the maximum set up in the Schedule is 20 per cent., there will only be 5 per cent. left for oil from coal—if it is to retain the preference—whereas at present there is produced from coal, shale and other home products as much as 7 per cent. Therefore, those interested in the production of petrol from coal and shale will have to be very wary of the proposal in this Amendment.

The hon. Member for South Croydon noted that a number of references had been made to the Excise privilege which the power alcohol industry was receiving at the present time, and suggested that the 8¾d. was perhaps but little in excess of the increased expenditure which the producers had to incur. A good number of us think that the Chancellor might easily have reduced the 8¾d. When the 8¾d. was first agreed upon this was a small industry, and it is obvious that the cost of the process which it was essential for them to carry out to meet the demands of the Excise authorities must have been considerably more, per gallon, than it is, per gallon, at the present time now that the output has been increased so largely, and so I suggest that the industry already has a considerable preference on that Excise allowance, and I appeal to the Committee not to accept the Amendment. It would be absurd to say that this preference should be given to power alcohol if it reacts to the detriment of the production of oil from coal.

7.48 p.m.

Major Owen

I rise to support what my hon. Friend the Member for West Swansea (Mr. L. Jones) has said upon this Amendment, and I am in the happy position that on this occasion, at least, I am able to support the Chancellor of the Exchequer in placing this duty upon power alcohol. As the hon. Member for West Swansea has already said, there has been an enormous increase in its production within the last few years. In 1931 the production was only 18,381 gallons, but last year it had risen to 6,369,758 gallons, while this year the Chancellor estimates that 9,330,000 gallons will be produced. During those years the producers of this alcohol have had a special opportunity to make exceptional profits. There have been no Custom duties imposed on it, no tax of any kind, and, as other speakers have said, it has had the benefit of the 8¾d. Excise allowance. With such help it has made enormous strides. The hon. Member for South Croydon (Mr. H. G. Williams) said of power alcohol that it is a motor fuel which is not petrol. I think he is very much mistaken. He must know perfectly well that power alcohol is used only in conjunction with petrol, and at the outside there cannot be more than 15 per cent. of power alcohol added to petrol if the mixture is to be of any value as a motor fuel. Therefore, we have still to depend to a very large extent upon imported petrol. As he is in favour of Protection and Preference, why is it that he and the other supporters of this Amendment have not put down an Amendment to secure this preference of 8¾d. for the crude oil which is brought into this country from our own Empire and refined here? Why have they not proposed that there should be a preference for oil produced in our colony of Trinidad?

Mr. H. G. Williams

Some years ago I tried to persuade some of the oil interests that it would be a good thing to refine in this country; but they do not want to incur great capital expenditure, and therefore the whole of the vested oil interests are overwhelmingly opposed to it. I should like to make them do it, but, unfortunately, I cannot.

Major Owen

The hon. Member says that he is opposing the great oil interests.

Mr. Williams

Certainly.

Major Owen

If he thinks it is of benefit to the country to oppose them on that issue why does he not oppose them on the other?

Mr. Williams

One battle at a time.

Major Owen

Apparently he gives way to the big oil interests in one instance and in the other instance he dares them to do their worst. That is typical of the inconsistent attitude of those Members who are constantly asking for Protection for everything.

There is one other aspect of this matter which has not been put forward. It was argued when this matter was first raised that if we produced molasses or power alcohol in this country we should be making ourselves more secure in time of war, but what is the position? Out of 10,000,000 cwts. of molasses which we imported into this country last year only about one-fifth came from our own Colonies. The 10,000,000 cwts. of molasses would require two and half times the amount of shipping tonnage which would be needed for the quantity of petrol. How are we going to spare that tonnage in time of war? It has been claimed that by manufacturing power alcohol here we should have a source of supply within our own country during war, but surely the right hon. Member for Sparkbrook (Mr. Amery) and the hon. Member for South Croydon know perfectly well that we cannot afford to use potatoes to produce alcohol in time of war, because they would be needed for food. The whole thing is really an attempt to try to deceive this Committee into thinking that the power alcohol industry is a poor struggling industry which can hardly make both ends meet, but by the admixture of 15 per cent. of power alcohol with 85 per cent. of petrol it has been able to make enormous profits, yet the moment the Chancellor says, "I should like a little of those profits" it begins to squeal. I have not the slightest sympathy with this Amendment, and I hope the Committee will reject it.

7.55 p.m.

Mr. Gledhill

I desire to support the Amendment and I do so following upon representations submitted to me by a large firm in my constituency. This firm have just had plans passed for the erection of a large power alcohol production plant and they inform me that the sudden imposition of this tax means that those plans will have to be scrapped.

Mr. J. Griffiths

What is the name of the firm?

Mr. Gledhill

The Trent Oil Products, Limited. The plans had to be passed by the Department of Customs and Excise and were only passed shortly before this imposition was introduced. The firm told me that they have made an offer to the Government to take over the plant, because if they went on with it themselves they would be mulcted in a severe loss. They are not prepared to go on with their plans for the purpose they have in mind, which was the mixing of power alcohol with petrol to produce a spirit of high octane value, the ethyl petrol of the well known imported brands. I wish to put that point to the Chancellor of the Exchequer and ask him to give it his further consideration, so that this firm may not be mulcted in a heavy loss. I submit that they are entitled to the same protection as we have given to those dealt with under Clause 2.

7.58 p.m.

Mr. Dunn

I rise to oppose this Amendment, because this proposal not to treat power alcohol on the same lines as ordinary petrol is dealt with for purposes of taxation has been viewed with very grave concern, especially after a study of the reports of the Petroleum Storage and Finance Corporation. I cannot understand the position taken up by the hon. Member for South Croydon (Mr. H. G. Williams). He was good enough to tell us that he took lunch last week with the oil companies, but he was not good enough to tell us that the week before he may have been taking lunch with the Petroleum Storage and Finance Corporation. Whether that was so or not I do not know, but it is fairly obvious that so far as the Member for South Croydon is concerned—and I am glad he is back in the Committee again—on this occasion he has a leg in each camp. I have been in the House only since 1935, but I have noticed that every interest of this kind seems to have seized upon the hon. Member for South Croydon. I remember on the Moneylenders' Bill—

Mr. H. G. Williams

The hon. Member is under a misapprehension. I am very glad to say that I have never had recourse to moneylenders.

Mr. J. Griffiths

Perhaps they have had recourse to you.

Mr. Williams

No.

Mr. Dunn

Those people have been successful in spoiling the Hire Purchase Bill, to a very large degree, and they had as their main advocate the hon. Member for South Croydon (Mr. H. G. Williams).

Mr. Williams

On a point of Order. I do not mind having my leg pulled reasonably, but when the hon. Member makes a statement which he knows must be completely untrue it is time for me to say something. The Hire Purchase Bill was completely altered by the original proposer dropping 18 Clauses and substituting 12 new ones, as a result of negotiations in which I played no part whatever.

Hon. Members

Hear, hear.

Mr. Dunn

Some hon. Members said, "Hear, hear" to that, but the hon. Member for South Croydon will remember that he played an important part at every stage of the discussion of that Bill. We find him again now the chief advocate of the poor people who manufacture power alcohol.

Mr. Gledhill

Why not?

Mr. Dunn

The hon. Member might have told us a little more about the poverty of the people who were responsible in no small measure for financing, and probably assisting in the erection of the io important distilling companies in this country, and who, last year, paid a dividend of no less than 344 per cent.; and he would have the Committee believe that it is a wicked shame to ask corporations of this kind to contribute to the requirements of the country. It seems a scandal and a shame for good democrats and Tories, and people who are prepared to defend the country under all conditions, to be those who are begging the Chancellor of the Exchequer to allow to companies of that kind rebates in respect of petrol tax. The hon. Member pointed out that there was an Excise rebate of 8¾d. a gallon, and he said that the only advantage the companies would get would be, I think he said, equal to 1d. per gallon, after they had dealt with the registration process.

Mr. H. G. Williams

I must really protest. The hon. Member has constantly made reference to me and, without any validity, put into my mouth words which I have not used. I never made any reference to a rebate. I must ask him to conduct the Debate in the normal way and without making false quotations.

Mr. Dunn

That is the hon. Member's interpretation.

Mr. Williams

I must ask for your protection, Captain Bourne. The hon. Member quotes statements which he alleges I made when I have made no statements of that kind. [An HON. MEMBER: "See it in the OFFICIAL REPORT."] I never made any statements about 1d. per gallon in my speech.

Mr. Dunn

If I have misrepresented the hon. Member, I apologise.

Mr. Williams

Thank you.

Mr. Dunn

I understood the hon. Member, when he was dealing with this Excise Duty, to make reference to the fact that the only advantage that companies of this kind really got out of it was equal to 1d. per gallon, but if that is not his interpretation—

Mr. Williams

I have tried to explain to the hon. Member, but perhaps he did not understand. The Excise rebate is 1d. That is made with the Excise authorities, and the people are subject to conditions as to the conduct of their production. Certain limitations have imposed upon them heavy expenses. You find exactly the same thing in the match industry, which is liable to a revenue duty. The 8¾d. was originally calculated as equal to the extra expense incurred. Therefore it is not a rebate, an advantage or a subsidy, if the sum was correctly calculated. The hon. Member does not seem to appreciate the significance of the rebate. At no stage did I make a reference to 1d.

Mr. Dunn

Let me pass on to the real point which I wanted to make. The Excise rebate is 8¾d. and the exemption from tax, up to the time when the Chancellor proposed this tax, was 8d. per gallon, making in all is. 4¾d. per gallon, to companies of this kind, who made enormous profits last year equal to 344 per cent. Then they have the cheek and audacity to come to this House and ask to be allowed a special privilege. It is perfectly monstrous that the claim should come forward and I am glad that the Chancellor of the Exchequer has had the courage, in this period of national emergency, to insist upon a reasonable contribution from petrol companies as from other people.

I would ask the Chancellor of the Exchequer to take the country into his confidence when he replies on this Debate, and to tell us exactly the ramifications of those people, so that the country may know exactly where it stands. If he will do that, I am certain that there will be a better understanding of the position than there is to-day. Only one wish I would express, because most of what I intended to say has been covered by a previous speaker; I am satisfied that if the Excise rebate on petrol taxation amounting to is. 4¾d. per gallon had found its way into the coal-mining industry, which has got into serious financial difficulties—there is no 344 per cent. dividend being paid in it—and is waning very rapidly, there being fewer men employed to-day than there were in 1936—

The Deputy-Chairman

Coal does not come into the question of power alcohol.

Mr. Dunn

I was making a comparison to show that if the same rebate had been passed on to the coal industry as has been passed on to the industry to which we have been referring, it would have meant a step forward in the production of oil from coal compared with the position at the present time.

8.9 p.m.

Sir Adrian Baillie

I should have thought that the replies given by the Chancellor of the Exchequer and the Financial Secretary to the Treasury when this matter was raised in the Budget Debate, would be sufficient to deter further attempts on the same lines. My hon. Friend the Member for South Croydon (Mr. H. G. Williams) made, as the gravamen of his advocacy of the Amendment, that the duties were protective. He will recollect that the duties were never intended at the outset to be protective but to be revenue duties.

Mr. H. G. Williams

Which duties?

Sir A. Baillie

The duties on petrol and hydrocarbon oils. My hon. Friend claims that if his Amendment is not carried, the protection which the power alcohol business has received will cease and the business not be possible. As far as these duties are primarily revenue duties, it is apparent that the rapid increase in consumption of this power alcohol, free from all duty or tax, must gravely endanger the revenue received from the petrol tax. It has been mentioned on more than one occasion that the company most concerned is sheltering behind the accidental and unfair taxation, and has made vast profits because of that shelter. I cannot believe that the taxation which is presently to be applied to that concern, if this Clause stands part of the Bill, will penalise them so vitally as to affect their further development.

Another point made by my hon. Friend was that he hoped no one would bring forward the argument that power alcohol was produced from imported raw material. Well, I will make that point, but not for the reasons which he expected. Power alcohol, being produced from an imported raw material, is not entitled thereby to any more favourable treatment than petrol produced from imported crude oil. That should be obvious in logic. If the Chancellor of the Exchequer were to desire or were to be persuaded that the £44,000,000 which he hopes to get from the tax would be more equitably raised from other sources, that would be one thing; but so long as this tax is essential to his revenue, not only all petrol, wherever it is found, but all substitutes for petrol, must be taxed equally. I do not count the petrol which we get here from oil or shale because those sources are to a large extent non-expandable, or hydrogenated petrol, the preference on which is given merely for the benefit of research work.

Surely it is clear that the policy of the Government in this matter is not to attempt to promote self-sufficiency in petrol but to give reasonable assistance to the coal and oil industries, on lines recommended by the Falmouth Committee. I am interested in these matters; I have been politically interested for a long while. In the last Parliament I represented a constituency which was not only a coal-mining but a shale-mining constituency. Reference has already been made on a previous Clause to the benefit which this tax has conferred upon the shale-mining industry in West Lothian and Midlothian. I fought this tax, but to-day I hope that nothing will be done to whittle down the value of it to the shale-mining industry and to the coal- and oil-mining industries at present being developed in this country. It is because I fear that if the power alcohol production of this country were to continue to receive these benefits it would weaken the benefit to our coal-and oil-mining industries, that I hope that the Chancellor will not swerve from his equitable purpose because of the claims which have been put forward—if I may allude to the hon. Member for South Croydon (Mr. H. G. Williams) again—and by the vociferous objections of vested interests.

8.15 p.m.

Mr. Radford

A number of references have been made during this discussion to one company which manufactures an alcohol blend of motor spirit. The company in question is one of which I am a director, and although it was not my original intention to take part in this Debate, as I had intervened already at two different stages, once on the Report stage of the Budget Resolutions and once on the Second Reading of the Bill, I feel I must reply to some of the things which have been said this evening. On both occasions I made it clear that I was not a disinterested party, but I felt that, where one is interested and reveals one's interest, the fact that one has knowledge which one can contribute makes it necessary to take part in the Debate. Since when it became a crime for a company to make a good profit, I do not know. I must confess that, on the Second Reading of the Bill, I was astounded when my right hon. Friend the Chancellor of the Exchequer had no reply at all which he could vouchsafe to my speech except—I do not want to be unfair or offensive—what I felt was rather a sneering reference to the fact that the company with which I was connected had made very handsome profits in the past year, which he described as being more than no per cent. on the company's share capital.

Sir J. Simon

I should be very sorry if my hon. Friend thought for a moment that my reference was not quite fair. The reason why I did not deal at greater length with his speech in the Debate on the Second Reading was, frankly, that it did not seem to me that, in the Debate on the Second Reading of the Bill, to which but a single day had been given, very much time ought to be spent on what was essentially a speech on one detailed Clause in the Bill. With regard to my reference to the profits of this company, I have no objection to the making of profits which are properly earned, and my reference was purely in answer to the suggestion that, if this tax were imposed, someone or other was going to be ruined.

Mr. Radford

I am much obliged to my right hon. Friend. I did not feel that I was entitled to hear his decision on this question of a duty on power alcohol on the occasion of the Second Reading of the Bill, but, as my right hon. Friend the Member for Sparkbrook (Mr. Amery) has pointed out this evening, on the Report stage of the Budget Resolutions a promise was made by the then Financial Secretary to the Treasury that he and the Chancellor of the Exchequer would reconsider their proposals in this regard in the light of the further information which they had then acquired, and I well remember that my right hon. Friend the Chancellor of the Exchequer bowed in acquiescence and agreement with the undertaking then given by the right hon. Gentleman who is now Secretary of State for Scotland. I remember how glad I was to see that graceful bow which my right hon. Friend made in support of what the Financial Secretary was promising.

I am sorry that the hon. Member for Rother Valley (Mr. Dunn) is not here at the moment, but I heard his suggestion that it would be well if some light were thrown on this subject. As regards the vague talk that there has been about the company making a profit of 340 per cent., I would point out that that is on a small amount of deferred capital in is. shares, and is a very different matter from 340 per cent. on the total capital of the company. Other Members of the Committee have expressed a wish that a little light should be thrown on this subject, and I certainly consider that it is due to my hon. Friend the Member for South Croydon (Mr. H. G. Williams), and to others who have spoken in favour of a reduction of the duty, that I should supply that light. The first point I would make is that, while the capital of this company, as my right hon. Friend has said, is nominally £475,000, it has also a reserve fund of £350,000, which does not rank for any dividend, although it helps to provide the profits. The capital, therefore, is not £475,000, but £825,000. The profits that the company has made during its nine years of life have averaged £104,000 per annum. The profits that it made last year were entirely exceptional, and amounted to about half the total profits made in the nine years. Moreover, that money was not made, as has been stated, out of the alcohol blend; not more than a quarter of the company's business was in this alcohol blend, which is known on the market as Cleveland Discol. I wish that some of those hon. Members who have been so free with their innuendoes and sneers had remained in their places, so that they might hear the truth and see a little light.

Mr. J. Griffiths

I sat by the side of my hon. Friend the Member for Rother Valley (Mr. Dunn), who has been called out of the Committee, and I saw the newspaper cutting from which he quoted an article in the "Daily Express." It was given very big headlines, and I presume the attention of the hon. Member has already been called to it.

Mr. Radford

I am much obliged to the hon. Member. I saw what I think is best described as the contemptible and scurrilous article in question. I was brought into particular prominence in it, although there are some 1,200 shareholders in the company There was nothing really said in the article except mere tittle-tattle which was beneath contempt, and which I treated with the contempt it deserved.

The references which have been made to the making of huge profits out of the sale of this alcohol blend are utterly erroneous and incorrect. I know that very influential oil interests have been very active in this matter, and, when it is not oil interests who are speaking, it is those who are interested in coal and do not wish to see power alcohol getting any share of the preference that is going, to be given under my right hon. Friend's present Bill. I am not imputing motives or making any charge; I am stating a fact. I have heard one hon. Member speak already who, apart from those who may have been briefed by oil interests, is a director of an oil company himself, but I am not going into that; we each have our own methods of doing business, and mine is to tell the House at the outset that I am interested. I have gathered not so much from this Debate as from private conversations that Members have had with me on this subject, the views that are held with regard to it. I have been told, "What your company has done has been to blend alcohol with petrol, and, because the alcohol bore no duty and the resultant mixture was sold on the same basis as pure petrol, the company has made pots of money."

Mr. Lyons

Hear, hear!

Mr. Radford

I am very glad that my hon. and learned Friend says "Hear, hear," because perhaps I may be able to disabuse his mind at any rate. There are about five companies who do this blending of petrol and alcohol and the reason why the company with which I happen to be connected has alone been brought into prominence in the Debate is because it happens to be the only public company among them, and, therefore, the figures of the others are not known. Also, that company does the biggest proportion of this blending. In our blend the proportion of alcohol which has borne no duty costs us far more than the petrol plus duty that is also contained in the blend. It is not an economy to put in alcohol which is duty-free; we should have made more money if petrol alone had been used. We do not make this power alcohol; it is made by distilling companies, from whom we buy it, arid tha price which we and all the other four or five companies who are doing this have had to pay for power alcohol, although it has been free from duty until 2nd May, was much higher than the cost of petrol plus the 9d. duty.

Therefore, so far from this blend making lots of money, it is just the other way about; if we were not blending, but were selling pure petrol, we should make far more money, even after paying the 9d. duty. There is another point that I should like to make, because, although it is not the business of the House, I do not like to hear these remarks made, and should not like any Member of the Committee to go away with a false impression. Not more than a quarter of this company's business during the year in question was in alcohol blend. The rest was in straight petrol, and the conditions under which exceptional profits were made had nothing to do with the blending of alcohol, but were due to the relative price levels in the markets of the world and the retail price here, plus freights, which might go up or down.

It is grossly untrue and unfair to make these statements and charges which hon. Members have made, based, in some cases, on inadequate briefing. Hon. Members from the Opposition Liberal Benches have been peculiarly active in this regard. [HON. MEMBERS: "They are not here."] They are not here now; but they have been as active as anybody. As my right hon. Friend the Chancellor of the Exchequer stated—I think it was on the Second Reading—the cost to any company which was blending alcohol with petrol of the proposed 9d. duty would amount to a little over 1d. a gallon. Fifteen per cent. of 9d. is 1.345d. I think that I can take the Committee into my confidence to this extent, and say that 1.345d. per gallon exceeds the profit that is made. That is the answer to these inspired figures which have been given by hon. Members. I felt it incumbent on me to answer these innuendoes with regard to the blending of alcohol with petrol, and in particular so far as they relate to the company with which I am associated.

8.27 p.m.

Mr. Hely-Hutchinson

I hope the Chancellor will not yield on this Amendment. The duty to which it relates is imposed solely in the interests of revenue. Let us consider it wholly from that point of view, without reference to its effect on manufacturing. Let us assume that the effect of imposing this duty would be to put an end to the manufacture of power alcohol in this country. The result would be that my right hon. Friend would get 9d. a gallon on imported alcohol, and he would save in addition the 8¾d. which he has to hand out on the alcohol manufactured in this country. Therefore, it would be an attractive proposition for the revenue. But what evidence is there that the effect of imposing this duty will be to kill manufacturing in this country? No argument has been adduced to show that it will. My hon. Friend the Member for South Croydon (Mr. H. G. Williams), who introduced the Amendment to reduce the duty to 4½d., himself admitted that 4½d. was a "shot." For anybody with the encyclopaedic knowledge of my hon. Friend to come before this House with nothing but what he admits is a guess, was surprising. It shows how consistent he is. He cannot have had luncheon with anybody on the other side in order to get the necessary information. He spoke about legitimate forms of friendly bribery and corruption, and reminded me of the American lobbyist who complained that "some of these politicians will not stay bought."

For my part, I invited one of the vested interests on one side to have a drink with me, and I invited one of the vested interests on the other side to have luncheon with me. As a result of what I learned, I came to the conclusion that there was no justification for the removal of the duty now proposed. It is wrong to suppose that all the effect of this duty will fall on those companies such as that with which my hon. Friend the Member for Rushholme (Mr. Radford) is connected. There is the question of the profits of manufacturing as well as distributing. I am not prepared to support these figures in any detail, but I have been told that the all-in manufacturing costs of manufactured power alcohol in this country, after crediting the 8½d. a gallon received as rebate, amounts to something like 5½d. a gallon, and that that product, produced at a net cost of 5½. a gallon, is sold to such companies as that to which my hon. Friend the Member for Rushholme has referred at some such price as 1s. 2d. a gallon. Then his company comes along, and ekes out a precarious existence by selling it at 1s. 6½. a gallon.½

Mr. Radford

Has my hon. Friend forgotten that the garage filling men have to live, and also the cost of deliveries over 30, 40 or 5o miles?

Mr. Hely-Hutchinson

I appreciate that. I did not mean to imply that his company was making 4½d. a gallon profit; 4½d. a gallon is the gross figure with which he has to meet all the charges of the business. It is enough to suggest that this will not kill the industry in this country. Therefore, I do not think my hon. Friend the Member for South Croydon, and my right hon. Friend the Member for Sparkbrook (Mr. Amery) should weep these "hot, unnecessary tears."

Mr. Amery

It was never suggested that the duty would kill the industry. The suggestion was that it would prevent development which was in the interests of the country.

Mr. Hely-Hutchinson

If the industry will go on and the right hon. Gentleman will succeed in collecting the extra revenue, I think everybody will be satisfied.

8.34 p.m.

Mr. Lees-Smith

My hon. Friends and I have also had some discussions with people interested in this matter. We did not approach the topic with any prepossessions, either one way or the other, and it may be of interest to the Committee if I state the conclusions to which these discussions have now led me. There has been a good deal of discussion about this rebate of 8¾d. a gallon. It is fairly clear that now that rebate confers a very considerable advantage on this industry, something equivalent to a protective duty. This is a raw material and—this is my answer to the right hon. Gentleman the Member for Sparkbrook (Mr. Amery)—it has got this particular form of protection. A duty of 10 per cent. or 15 per cent. is about the average for other raw materials in this country, and this is in a better position that that which it ought to occupy.

The argument has been adduced that if this special exemption were not allowed to continue the industry would be killed. The right hon. Gentleman the Member for Sparkbrook repudiates that, but I took down the actual words of the hon. Member for South Croydon (Mr. H. G. Williams), who is not now in his place. He certainly said that the chances are that production will not continue unless this special exemption is permitted. That argument has really been destroyed. There is only one company of importance concerned, and that company has succeeded in making profits equal to the whole of its paid up capital. We have had the most remarkable figures given by the hon. Member for West Swansea (Mr. L. Jones) that in 1932 the output was 18,000 gallons and in 1938, 9,000,000 gallons. It therefore seems impossible for anyone seriously to suggest that an industry with this spectacular increase will not continue its production. I have noticed a considerable change in the arguments put before the Committee to-day. It is argued that there is a parallel between the special concessions given in respect of the production of oil from coal at Billingham, the shale oil industry and the low temperature carbonisation process.

Mr. Radford

And benzole.

Mr. Lees-Smith

And benzole. There is no parallel. It is no argument at all to say that the whole purpose is to encourage an industry to use indigenous raw material. This industry uses molasses as its raw material, 90 per cent. of which comes from abroad, three-quarters of it from outside the British Empire altogether. Therefore, there is no parallel. The real parallel is the treatment given to petrol made out of imported crude oil. That is not petrol made from an indigenous raw material but from an imported raw material, which is exactly comparable to power alcohol made from imported molasses.

Colonel Baldwin-Webb

Would it alter the position if this raw material could be home produced vegetable matter—potatoes, for instance? It is possible that this sort of thing might be developed and might be the means of encouraging the agricultural industry to supply home produced vegetable matter.

Mr. Lees-Smith

I will reply to the question of the hon. and gallant Gentleman after I have concluded the point I am making. The parallel is between power alcohol made from imported molasses and power alcohol made from imported crude oil. The removal of this exemption is exactly consistent with the whole plan adopted in regard to the production of petrol in this country. In reply to the question of the hon. and gallant Gentleman the suggestion now is that, at a time of national emergency, we should not depend upon molasses at all but upon potatoes. I should say that potatoes would be required for food. I remember everybody telling us that potatoes saved the nation during the War. It is a mistake to suggest that our man-power should be diverted to making this petrol from potatoes when it can be imported in very great quantities from abroad as long as we command the seas, and we have a Navy far more formidable than it was in 1914 compared with the Navies of the rest of the world.

Colonel Baldwin-Webb

I do not suggest for a moment that that should apply only to war time conditions. I think that in peace time, also, we should help the agricultural industry and help employment here by using home produced vegetable matter, such as potatoes and other materials.

Sir A. Baillie

Does my hon. and gallant Friend realise the uneconomic cost of producing power alcohol from potatoes, which is £60 a ton, as compared with £5 a ton when produced from imported molasses?

Mr. Lees-Smith

This industry is not the hypothetical industry that the hon. Member opposite seems to imagine. I cannot see why he should desire to put thousands of pounds into the hands of an existing company. I have seldom heard a case so completely met in debate as has been the case of the hon. Member for South Croydon.

8.42 p.m.

Sir J. Simon

Perhaps I may intervene at this stage to say a word or two because, as my hon. Friend the Member for South Croydon (Mr. H. G. Williams) told the-Committee with great frankness and straightforwardness, when he first raised this matter and produced a number of complicated arguments, I or the Financial Secretary undertook that the matter would be looked into further. I have done my best to look into it with care, and, I can assure my hon. Friend, with complete impartiality. I have come to a very clear conclusion, and perhaps the Committee will allow me to state how I arrived at that conclusion in my own way. I may be forgiven if I state one or two elementary things necessary to an understanding of why I take the view that the Clause should not be altered. Petrol has been taxed in this country since the year 1928. It was undoubtedly a revenue tax. If there ever was a revenue tax it was the tax on petrol. It produces a great deal of money and is very important for the Chancellor of the Exchequer and for the country. At that time, in 1928, the production of power alcohol was infinitesimal. I will give the figures. In 1928–29 the total consumption of power methylated spirit, which is denatured alcohol for use in motor engines, was 15,000 gallons. That was at the time that we first started the tax on petrol. It climbed up in this sort of way. In 1932–33, as my hon. Friend the Member for West Swansea (Mr. L. Jones) said, the figure was 85,000 gallons, by 1935–36 it was 914,000 gallons, in 1936–37, it was 2,925,000 gallons, and the figure for last year is approximately 6,500,000 gallons.

I think that on what we call ordinary principles, the arrangement that you would expect to be made for a tax for revenue purposes would be to put a tax on both commodities, that is, an equal tax upon say, both a tin containing petrol and another tin containing an alternative motor fuel, which is a mixture of petrol, 85 per cent., and some other material. That would seem the natural thing to do. It was not done in 1928 because the amount of power alcohol produced was so trumpery that it was not worth doing; but the quantities having grown according to the scale I have mentioned. I came to the conclusion, when I had to review this difficult subject of petrol taxation in connection with the Budget, that I was not justified any longer in leaving power alcohol out. The idea was simply this, that if you are engaged in collecting tax from the motorist there is a certain difficulty in saying that if he orders mixture A, it is to bear the tax on the whole contents of the tin, whereas if he orders some rival mixture it has to bear tax on only a portion of the tin.

My right hon. Friend the Member for Sparkbrook (Mr. Amery) was right when he said that the production of power alcohol has made marked strides. I have been marking some of the strides. My right hon. Friend thought there was a prospect that it would ultimately displace petrol to the amount of 15 per cent. That is a very optimistic estimate, and my hon. Friend the Member for Rusholmc (Mr. Radford) agreed that it was, but if my right hon. Friend was right when he said that it will ultimately displace petrol to the extent of 15 per cent., then, surely, the Treasury were also right in taxing it, and they ought not to have been rebuked for doing so, because if 15 per cent. of the existing petrol consumed is to be replaced by power alcohol it means that you are replacing 200,000,000 gallons of petrol. Two hundred million gallons of petrol taxed at 9d. a gallon represents £500,000. Therefore, if we allowed the present state of things to go on we should reach a point where not only would the country lose a great deal of revenue but we should have the industry coming forward and, not unreasonably, saying: "You knew perfectly well that this development was going on, and now we consider that we have a vested interest and are entitled to carry on our competitive business without being taxed in respect of its alcohol quantity." Constituents of my hon. Friend the Member for Halifax (Mr. Gledhill), we have been informed, were starting to build a distillery in the hope that they would be abl e to produce this stuff, and that it would be untaxed. The prospect that this taxation was likely to happen must have been apparent to persons who were following the trade.

Mr. Gledhill

The plans might have been held up.

Sir J. Simon

I do not think they have any complaint against the authorities. It has been pointed out to the firm in question by the officials that if it is a case of distilling alcohol there are many ways in which alcohol is used, and I hope that what they have contemplated doing will be no loss to them.

Then it is said, but I think the answer given by the right hon. Member for Keighley (Mr. Lees-Smith) was complete, that in imposing this new tax we ought to follow precedent and arrange for a measure of protection for power alcohol. I think I am right in saying that my right hon. Friend the Member for Sparkbrook went so far as to say that we ought to aim at freeing ourselves as far as we can from external sources of fuel. That seems to assume that you can use power alcohol and nothing else, but alcohol is simply an element that is added to petrol, not always petrol of the very highest quality. In order to use the power alcohol and to turn it into motor fuel considerable quantities of oil will still have to be imported, but we all hope very much that in the course of a few years we shall find a much more effective way of producing the oil from indigenous material. It has been said, quite rightly, that we do not give a preference to light oil which is refined in this country from crude oil, if the crude oil is imported. That is the true analogy to quote when it is suggested that we should give a preference to power alcohol because it is distilled in this country. The hon. and gallant Member for The Wrekin (Colonel Baldwin-Webb) asked a very natural question, a very practical one, whether it is not possible to imagine that this power alcohol might be produced from other vegetable materials, but, as the right hon. Member for Keighley said, we must look at the facts as they are and not be too fanciful. What are the facts? First, power alcohol, that is denatured alcohol, which is mixed with oil in order to make a motor fuel, is made from imported molasses. Last year there was not a pint of it that was made from home-produced molasses. There are such things as home-produced molasses, a by-product of the beet sugar industry. Those molasses are used economically for various purposes, such as the production of yeast and cattle food. The reason why home molasses are used for these purposes whereas imported molasses are used for distilling power alcohol is because, economically or chemically, it is found to be the best way of using these two sources of supply. I do not think the House of Commons would be justified in giving a further preference to the home-grown sugar industry, and I cannot conceive that it would be a reasonable thing in the circumstances to say that power alcohol, if it is distilled from home-produced molasses, which in fact it is not, shall escape duty or shall be given a lower duty, but that if it is produced from imported molasses it shall pay a higher duty.

Molasses is a very bulky substance. Something like 3½ tons of molasses are required to produce one ton of the ultimate product, and for reasons which have been pointed out by the hon. Member for Maidstone (Sir A. Baillie) I do not think it is a practical proposition to use potatoes for the purpose of producing alcohol. If hon. Members consider the economics of the subject they will realise that there is very great difficulty in that suggestion. Moreover, there would be very great administrative difficulties in drawing a distinction between alcohol which has been distilled from home-produced material and alcohol produced from materials imported from abroad.

I have done my best to state the case quite impartially and I have considered it impartially. I was willing to believe that I had made a mistake and that there ought to be some modification, but we have to look at the matter from the general interest of the public. I have explained to the Committee the considerations which have made me think that the proposal which we make is right. I do not believe that it will have the effect of stopping the production of power alcohol, which is being produced at the greatly increased annual rate which I have explained and is not likely to be blocked because of the duty being imposed.

Colonel Baldwin-Webb

Has my right hon. Friend considered what is taking place in other countries where they are endeavouring to produce power alcohol from home-grown vegetable matter?

Sir J. Simon

I am much obliged to the hon. Member. I know that in some countries in Europe quite considerable advance has been made in producing alcohol from home-grown materials. It is a matter which is being closely examined by those concerned, but I cannot give any more detailed information about it now. I hope I have satisfied the Committee that my approach to this subject has been quite reasonable. I should have been perfectly willing to make this duty lower if there seemed to be good and sufficient reasons, and I am not taking up this attitude because I deny that there are cases in which there ought to be in the interests of the country as a whole a measure of protection. There are, but I do not believe on the investigations I have been able to make, that any case has really been made out for the present Amendment and I hope the Committee will decide to accept the proposal as it is in the Bill.

Amendment negatived.

Clause ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.