§ As from the first day of January nineteen hundred and forty-four section nine of the Finance Act, 1939, and the Eighth Schedule to the said Act (which prescribed increased rates of excise licence duties on motor-cycles and private motor-cars) shall be repealed and section thirteen of the Finance Act, 1920 (which imposes duties of excise in respect of mechanically-propelled vehicles) shall have effect as if the said Eighth Schedule had not been substituted for the Third Schedule to the Finance Act, 1934.—[Mr. Robertson.]
§ Brought up, and read the First time.
Mr. Robertson (Streatham)
I beg to move, "That the Clause be read a Second time."
The Chancellor of the Exchequer will remember that a number of my hon. Friends and I put down a similar Clause on the Committee stage, but owing to the lateness of the hour we deemed it desirable to ask leave to withdraw it. The object of this new Clause is to revert to the pre-war tax of 15s. per horse-power in the case of motor-cars, because the restrictions necessarily imposed upon the use of patrol and rubber have caused the tax to operate unfairly. The House will probably recollect that the horse-power tax was first introduced in 1920 and the rate was 20s. per unit of horse-power. It took the place of a small registration tax of £1 or £2 per vehicle, and also of a small petrol tax which was repealed at that time and remained in abeyance for a period of eight years. I submit that is a most material point, because it clearly proves that for a period of eight years the horse-power tax was the sole tax imposed on motors and therefore it was clearly a tax on usage.
From 1920 to 1934 the horse-power tax remained at 20s. per unit of horse-power, but in the Finance Act, 1934, it was reduced to 15s. to enable Britain to produce and sell more cars at home and abroad. The hopes entertained at that time were fully achieved. The figures are really remarkable. In 1938 there were more than 2,00,000 private cars registered in Britain, and there is any amount of evidence to show that the reduction of the horse-power tax proved to be a great stimulus to manufacture, a great relief to unemployment, and a considerable gain to the export trade. I think it clearly proved that very many people with small 1520 incomes took up motoring, many for business purposes, still more, I imagine, to get out into the country, long before the State took any interest in town and country planning. The peasant in most of us wanted to get away from the hard pavements of the big cities, and undoubtedly the cheap motor-car and motor-bicycle and sidecar did enable many thousands of small wage-earners and income-earners to get into the country. Many had to go to live on unfavoured sites not too near railway stations where ground rents were lower, and they were able to use their motorcycles and cars to get to the station and carry on their business in the big cities and yet enjoy a rural life and raise their families in a better atmosphere.
In 1939, before the war broke out—I believe the motion had been on the stocks for some time prior to 1939 but it only became law in 1939—the horse-power tax was savagely increased from 15s. to 25s. per unit, an increase of 66⅔ per cent., and it has continued at that rate to the present time. Motorists have no grievance in regard to the curtailment of petrol and rubber, they know how essential they are to the war effort, but they have a definite grievance and a very serious one in that they of all taxpayers have been singled out as victims of a contract which has been frustrated. When this tax was brought in, in 1939, the Government, in exchange for the payment of the tax, gave the user of the car the unlimited right of the fine new roads which had been built. The motorist or motor-cyclist could use them to his heart's content, seven days a week and as often as he liked, because there were no restrictions whatsoever. But in 194o the system of the basic ration of petrol was introduced, and at a later date came the withdrawal of the basic ration, and to-day the only cars on the road—the only cars entitled to be on the road—are those of persons engaged on essential war work, on essential business work, or for essential domestic needs.
I wonder whether hon. members have any conception of how hardly this tax is hitting those persons who are compelled for business or domestic needs to use motor vehicles? I have a number of cases here, but I think it will suffice to quote one or two only. The first one concerns a lady living at Woking with an 1521 invalid husband. She has a 10 horsepower car and she is allowed five gallons of petrol per quarter which is 20 per year. The horse-power tax is £12 10s. plus 9d. petrol tax on every gallon. That means that she has to pay 13s. 3d. tax on every gallon of petrol she uses. This House had no conception that conditions like that would arise when this tax was increased by 66 per cent. in 1939. The House would never have passed that tax. How could they have increased a tax by 66 per cent and at the same time reduced the user of the vehicle by 80 per cent.? A tax of 13s 3d. a gallon on petrol is most unjust.
Here is another case. It is of a lady aged 61 and in poor health, living some miles outside Guildford. She has a seven horse-power car and is allowed four gallons a quarter, and the rate in her case is not less than 13s. 3d. per gallon. Another case near Oxford is of a tobacconist and confectioner who is running two businesses almost without staff. The businesses are separated by some distance, and he is allowed three gallons for three months. That is all he needs. In fact, none of these people have any complaint to make in regard to the petrol restriction, but why should this nation penalise these taxpayers, who are paying all their other taxes, both direct and indirect? Because they have motor vehicles they arc singled out for victimisation. Every motoring organisation in this country, representing more than 2,000,000 private motorists and perhaps a greater number of motor cyclists, support the proposed new Clause.
I ask the House also to support the Clause. It is directed against a most unjust situation. What is even more important than the hardship is the principle of equity in British taxation, which is violated in this case. We are spending the tremendous amount of £15,000,000 a day, half of which is being found by direct taxation, and we are proud of it, because the basis is fair and the burden is spread over the whole community according to income. The man with the bigger income pays most, and the man with the smaller income pays least. That is not so in this case. The people to whom I refer are bearing a tax of the savagery of which I have given an indication. The fair name of the Government is at stake. The fact that we need the money is no justification for continuing this taxation. If the taxa- 1522 tion is wrong, we should put it right. I am quite certain that hon. Members who have fought the case of the underdog so strongly and well in this House will support the proposed new Clause against something which is wrong in principle and a hardship to the individual.
§ Sir John Mellor (Tamworth)
I beg to second the Motion.
I hope very much that the Chancellor of the Exchequer will not look upon this as a humorous and optimistic gesture on the part of the Mover and myself. Even in war-time, if a case of injustice can 'oe made out, it should receive the proper consideration of the Chancellor of the Exchequer and of the House of Commons. The Finance Act, 1939, which imposed this high rate of duty, received the Royal Assent at the end of July of that year, when we were not actually at war, and it must be assumed that that Act was designed to impose taxation for revenue purposes. During the war Finance Acts are often designed to impose taxation for restrictive purposes of various kinds and not primarily for revenue purposes. On the assumption that this high rate of duty was introduced for revenue purposes, it must be borne in mind that at the time of its introduction the right to use a car was unlimited in regard to mileage. I hope my right hon. Friend will not argue that the rate of duty has no relation whatsoever to the amount of use, because that argument would be untenable. No duty is imposed unless a car is used, on the public road. No taxation is imposed upon a car that is only kept in a garage or used on a private road. This is not taxation on the possession of a car. I think the previous new Clause of which the House approved, introduced by the Parliamentary Secretary to the Ministry of War Transport, illustrates that point. It involved a discrimination of taxation of motor vehicles, having regard to the nature of their use.
If the rate of duty was in no way connected with actual use, as it was a flat-rate taxation, it must have been intended in 1939 to bear some relation to the average amount of use. It is clear that in war-time this has very important consequences. I cannot believe that in 1939 this House would have approved an increase in the rate of duty by two-thirds if it had been contemplated that a few 1523 years afterwards that use would be reduced to a quarter or less of the previous average mileage. By the abolition of the basic ration the luxury use of cars has been eliminated, and use is now restricted to purely essential purposes. If this is taxation for the purposes of revenue, it is unjust. If, on the other hand, the taxation is retained on the present scale for an ulterior purpose, it is a wrong method. It is certainly right to endeavour to economise in petrol and rubber by getting all unnecessary vehicles off the roads, but effective powers are available for that purpose and have been exercised. Direct methods only should be adopted and not a method of imposing intolerable expense upon those who really need, and are permitted because of that need, to use their cars. Such a method hits users irrespective of the degree of their need. And the poor owner of a car is hit relatively harder than the rich one.
It seems even that attempts are made to make essential motoring very difficult. At Question time to-day I referred to the action of the Minister of Fuel and Power in apparently putting an indirect obstacle in the way of people desiring to use their vehicles under present conditions. I called attention to the fact that he has refused to consider applications for petrol allowances unless and until vehicles are currently licensed and insured. If an applicant has first of all to license and insure his vehicle before he gets a ruling as to whether he will get a petrol allowance or not and then his application is rejected, it puts him to the trouble and inconvenience and perhaps expense of obtaining a refund from the licensing authority and from the insurance company. It may well be that he forfeits a portion of the license duty and the insurance premium in the process. That type of indirect method, whether by penal taxation or by the type of obstacle to which I have referred, of trying to get cars off the road is wrong. The direct method should be employed, by powers which already exist. I hope that the Minister will seriously consider the scale of the present rates of duty in relation to the average mileage. I submit that they are at least five times what they were before the war. In this connection he should bear in mind that cars are only able to be used now for essential pur- 1524 poses. I am sure that that is not the type of use which he desires to impede by taxation.
§ The Chancellor of the Exchequer (Sir Kingsley Wood)
My two hon. Friends have ,put their case, as they always do, with conciseness and force. I must confess that I thought my hon. Friend who moved the Clause was guilty of some exaggeration when he talked about the fair name of this country and made references to underdogs with motor cars. I would like to put it to the House, in order to satisfy my hon. Friends, that there is a considerable measure of justice and reason for the course that has been adopted, and also to remind them that this is a very bad time indeed to approach me for revision on the lines proposed. No doubt in happier days many of these taxes will have to be reconsidered in the light of circumstances then existing, but I think the House will support me when I say that I could not possibly be expected to make alterations of the nature suggested unless there was an extremely strong case for them. I say that both as regards the proposed new Clause and as a little warning to others that may follow.
I dealt with this matter in answer to a Question by one of my hon. Friends who asked me a little while ago whether I could reconsider this matter in the light of representations that were made. I stated quite shortly then that, particularly in present financial circumstances, I could not depart from the principle that the amount of the licence duty payable on a motor vehicle does not depend upon the extent to which it is used. My hon. Friend supported his case in two or three respects, and. I must admit that the tax on the use of private motor cars was increased to a considerable sum in 1939, but that increase was a purely revenue measure and had no relevance, and has no relevance to-day, to the degree of usage. The next point made was that there is no tax on the ownership of motor vehicles. My answer to that is that there is nothing exceptional in this respect in the application of the motor licence duty. Take, for instance, the wireless licence duty, which is not payable for the ownership of the wireless, but for being in possession of a set capable of being used. The duty is not payable in respect of tobacco, wines and spirits in bond, but only when they are released and available 1525 for consumption. I think the strongest point my two hon. Friends made was that the motor licence, in fact, permitted unlimited use of the roads under peacetime conditions, and that the licence is graded according to the horse-power as a measure of comparative usage. The answer to that is that licence duty based on horsepower cannot be regarded as a measure of comparative usage, and in fact, as we know, many small cars did prodigious mileages in pre-ration days. On the other hand, duty on petrol does provide taxation by usage.
I think the final point made was that under the stress of war the whole character of this unlimited-use licence has been altered as a result of the restrictions which the Government have found it necessary to impose. I am afraid the answer to that must be that war-time conditions have necessitated many restrictions and other serious disadvantages in many spheres, resulting, I am afraid, in heavy increases in overhead expenditure, for which no redress can be provided. My hon. Friend also said that the usage of the road by a licensed motor car is only in fact a minute fraction of the average peace-time mileage, and the tax per mile is therefore increased enormously. I am afraid that is so, but the extent to which car owners have been compelled to reduce their mileage as compared with their prewar practice varies within the widest limits, and I do not think that any uniform measure of reduction could be applied with equity to-day. I am afraid that my answer must be that I cannot at this time embark upon the alteration of a tax of this nature. I hope my hon. Friends and I will all be here when the matter can be reconsidered in happier times.
§ Sir William Davison (Kensington, South)
I am sorry I was not here at the beginning of this discussion. I gather however that the Chancellor is not willing to accept the Clause. What he said as entered the House was in reference to a question which I think I addressed to him some time ago, and to which he replied that the tax was not based on the amount of use made of a car. That is technically the truth. The Chancellor agrees with me, and I agree with him. But is it not a typical Treasury evasion of the truth? Of course, all taxes have to have regard to the use of the vehicle or whatever it is that is being taxed. That is to say, if 1526 there are only three or four of a thing, a heavy tax would not be levied on them because that would put the article taxed out of action or else it would not be worth while. It was having regard to the general use of motor cars along the roads of the country that that particular tax was imposed, and to say that Mr. X or Mr. Y, who only used their car on five days a year, had to pay the same as Mr. Z and Mr. W, who used theirs every day, may be quite true, but the tax was imposed on the basis of the general use of motors throughout the country.
With regard to what the Chancellor said finally as regards motorists, that he could not allow any particular class to escape from taxation which they had previously borne, I would say that the users of motors do not desire to escape from any taxation which is fair. What they do say is that it is not fair to single them, a particular class, out for an undue amount of taxation which should be borne by the community as a whole, especially as present conditions are quite different to those obtaining when the tax was imposed. That is what is being done, for there has been an increase of tax of 66⅔ per cent. and a reduction in usage of 75 per cent. That really is monstrous, and there is no doubt whatever that had the facts been as they are at present when this additional tax was imposed, I think in 1939, it would never have been imposed, because now, quite rightly, for national purposes the use of motors is drastically restricted and practically no one has a motor now unless he is engaged in some part of the war effort. Therefore, to go on making people who are continuing to run a car which in 999 cases out of 1,000 is used for Government purposes, pay the enormous additional tax, which was only imposed in 1939 under entirely different conditions, is altogether wrong. I am sorry the Chancellor has been rather warped in that clarity and fairness of his judgment since he went to the Treasury. I am quite sure that if I or any other Member had put this straight point to him before he was entangled in the meshes of the net of Treasury reasoning, he would have at once acceded to our request and said, "This is fair. I am prepared to make the whole community pay a little bit more rather than that these overburdened and heavily penalised gentlemen should be mulcted in this way."
1527 As an illustration—it is not strictly relevant, but it shows the Chancellor's mind —earlier to-day I drew his attention to the fact of no compensation being paid for the re-erection of railings which had been removed. It is the same sort of thing as taking something for nothing. I will not proceed with that illustration, Mr. Deputy-Speaker, as I see you are getting uneasy in your Chair. I am saying that the Chancellor is allowing his judgment to be a little warped by his surroundings. I would ask him, protected as he is all round by members with like minds to his own, to shake off the trammels of his associations of recent years and do the fair thing by this section of the community who are being unfairly dealt with and are bearing a very heavy burden, mainly in the interests of the State.
Motion, "That the Clause he read a Second time," put, and negatived.