NEW CLAUSE.—(Amendment of Finance (No. 2) Act, 1945, and Finance Act, 1920.)

HC Deb 17 June 1947 vol 438 cc1793-840

(1) On the appointed day Section five of the Finance (No. 2) Act, 1945, shall cease to have effect and Section thirteen of the Finance Act, 1920, shall have effect as if the following proviso were inserted at the end of paragraph 6 of the Second Schedule to that Act, that is to say: Provided that, notwithstanding anything in the preceding provisions of this paragraph, the duty to be charged in respect of a vehicle falling within this paragraph which derives its motive power wholly from an internal combustion engine worked by a cylinder or cylinders shall be at a rate of five pounds per vehicle.

(2) For the purposes of this Section the appointed day shall be such day as the Treasury may by Order appoint.—[Mr. C. Shawcross.]

Brought up, and read the First time.

3.31 p.m.

Mr. Christopher Shawcross (Widnes)

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

I desire to be as brief as possible having regard to the great importance of the subject on the one hand, and, on the other, to the obvious desire of hon. and right hon. Members on both sides of the House to take part in the discussion, and to hear whatever the Chancellor may have to say. If I follow my notes closely I hope that hon. Members will excuse me, because it is for the sake of brevity. In view of the remarks which came from the Front Opposition Bench yesterday concerning your Ruling, Major Milner, upon a certain proposed new Clause, I hope that what follows can he regarded as entirely of a non-partisan, if not indeed a non-controversial, nature. I hope that when I have finished my remarks I may have persuaded hon. Gentlemen opposite that this new Clause is preferable to the one they had in mind.

The Clause is designed to secure an alteration in the law regarding the system of taxation of private motor cars. The present system, which is related to the horsepower of the engine of the motor car or to the cubic capacity of its cylinders, according to whether the car was a new one first registered this year or an older one not registered this year, is probably the most absurd system that could ever have been devised. If anybody in 1920 or whenever the date was when it was first thought about, had sat down deliberately intending to contrive a tax which would as much as possible hamper and harm the development of the motor industry of this country, he could not have done better than has been done in the provisions of the 1920 Act and the later provisions of the Finance (No. 2) Act, 1945. However that may be, the unfortunate results of that Measure from 1920 onwards soon become apparent because, just as now, we find that the American motor car industry is in a much stronger position than we are. So it was then. In that first world war our engineering industry had devoted itself to the production of military aircraft in which it far excelled, as it still excels, the American industry, and it was therefore far more difficult for us to produce motor cars in 1920. Upon this difficult position was imposed this absurd system.

Whether this was deliberately done or not, the result was it acted as a very effective deterrent to the importation and purchase of American cars in this country. For that reason and for several others, the industry acquired a vested interest in maintaining it. I cannot think of a better description of that system than that it was like a vast framework of innumerable pigeon holes of varying sizes in which the manufacturers were enticed and encouraged to fit an enormous number of different models merely in order to fit their products into the correct taxation pigeon hole, instead of producing a car which was most suitable or desirable as a motor car in itself. There were other reasons why this system was maintained for so long, the British public, for some reason the origin of which I do not know, have been brought up to regard the motor car as a kind of luxury. The rich man in his carriage became the rich man in his motor car. The poor man could aspire to nothing better than a motor cycle or at most an outworn and generally unroadworthy second-hand car, which he was able to afford after many years of saving—if he can afford it—of such diminutive proportions that it could hardly be called a motor car.

There was a further factor. It may be the main reason why this system was maintained for so long. Successive Chancellors of the Exchequer found that it produced a very good and convenient revenue, and they were never subjected to sufficient pressure to make any change until quite recently, so that it was maintained by the Government throughout the years between the wars. It was liked by the public, and those who could afford to buy motor cars at the prices which had to be charged appeared to demand a large number of different models because by skilful advertising they were led to believe that one model of a car was better than another if it were different from the other. It cannot be overlooked that the motor industry itself made a very good thing out of this. The profits were, in most cases, enormous, and far from reducing the number of models before the war, the tendency was every year to increase it. Thus it became more and more impossible to produce a cheap car—a car of a type which could compete with an American car at home or in the markets abroad—and that tendency would probably have continued had it not been for the war and what has happened more recently.

I do not desire in any remarks I may make to suggest that there is any inefficiency in the British industry—that may be so, but it is not relevant in this matter—or on the part of British designers of motor cars, for the cars and engines they designed were excellent as designs. Relative to the taxation and the purposes for which they were compelled by this absurd system to work, they were very good. They produced small engines of extraordinarily high efficiency, but they never produced good motor cars except in the very insignificant cases of the production of enormously expensive cars which did not have to bother at all about the taxation class into which they would be fitted. By and large, it is true to say that most of the motor cars produced at anything like a low price before the war were, because of this tax system, expensive, inefficient and entirely unsuitable from the point of view of competing with foreign makes, particularly the products of the American industry.

It is pertinent to remark here that the American industry was never hampered by any restrictions of this kind. Apart from the advantages which they gained in the first world war, they never had any of these harmful restrictions in the form of taxation. They had this additional advantage that the total weight of taxation in America was, and still is, at least seven times lighter than it is here. That enabled the ordinary American working man not only to buy a car much more cheaply than a car could be produced in this country, but also to run it at a rate much cheaper in regard not only to taxation but to insurance, to types, to maintenance and particularly to the price of petrol. So it should not be thought that the British manufacturer in failing to produce cars for the motorists in this country before the war was hampered entirely by this taxation system; there were other factors having, if not an equally important, at any rate, a great effect. It has also to be observed that it was not found that even this system of taxation was enough to keep out the foreign car, and, as the Committee will recall, we had in addition the McKenna duties which were required to provide further protection from the importation of foreign and. particularly, American vehicles.

During the war it became apparent to the Government that when hostilities ceased our export trade would be a matter of vital concern, and, fortunately, at that time my right hon. Friend was the President of the Board of Trade. I remember that he kindly allowed me to go and talk to him about these problems, although at that time I was a very obscure individual of whom he had not heard previously. [Laughter.] I am not suggesting that this is the result of those discussions. I mention it only to show how much he kept the interests and development of the industry in mind. Whether it was as a result of what he was then thinking about, or whether it was some other approach, I do not know, but at the beginning of 1945 there were discussions between the industry and his predecessors, which he continued on taking office. At that time the industry was unable to make up its mind upon what it really wanted. Some were for a flat rate plus a petrol tax, others wanted a different form of horse power tax on a graduated scale with wide steps, some wanted ad valorem duty, and some wanted taxation based on weight as in the case of commercial vehicles.

However, they agreed upon a compromise and proposed to the Chancellor, and persuaded him to accept, what is called the cubic capacity system. Many people thought that was an improvement, if only a slight one, on the former R.A.C. formula for horse power taxation; many experts, on the other hand, thought that it was even worse. It certainly was worse in one sense, because its effect was to make the amount payable higher on the larger horse power cars than it was before, thus making it even more impossible to buy imported cars, if they were allowed in, but also making it more difficult for the industry to produce and to establish in the home market a higher horse power car of the type which would be likely to sell abroad. When one looks a bit closely, it is difficult to understand how that "reform" was passed through the House because, from the point of view of the export trade, it could only have had a Ned effect. It increased taxation on higher and medium horse-power cars, and thus increased the tariff against imports, but made it more than ever impossible to produce a car suitable for exports. I would respectfully remind the Committee that in April of last year I made rather a long speech on the Adjournment on the subject of the motor industry in which I raised a number of topics, and made some criticisms, many of them pertinent now, but which I do not wish to repeat. They were all proved correct. Just about that time there was appointed the Motor Industry Advisory Council, a kind of working party for the motor industry. Recently, that Council has made a report to the Government who, unfortunately, have refused to publish it, so the Committee is not aware of its contents. However, because a public statement has been made, we know that the manufacturers are now unanimous in. requiring a change of taxation of the sort suggested in this new Clause which will provide for a flat rate. The only fear, I hope, in the Chancellor's mind may be that although they are unanimous at the moment, they will again change their minds in the future.

3.45 P.m.

When I first raised this Question in the House, I ventured to point out that the Chancellor was likely to make this reform because he is by far the best Chancellor that this country has ever had. I feel sure that, whatever the result of this discussion this afternoon, I shall remain of the same opinion, and I hope the Committee will agree that, whatever may he the proper limits of an act of that kind, it certainly was an act of greatness on his part to agree to re-open this question such a short time after he had received the treatment I have mentioned. I am sure there will be agreement that he looks at this matter, as he always does, in relation to any assistance that can be given to private enterprise and industry, with a perfectly broad mind and with no recriminations about what has happened in the past.

I ought now to refer to the details of this new Clause. It proposes that there should be a flat rate of £5 upon all cars instead of the existing taxes. It is obvious that that flat rate of £5 will not raise the revenue which accrues from the present tax. I suggest that the loss of revenue could be diminished to infinitesimal proportions if this Clause were passed, and an Amendment was proposed and carried on Report stage to make this apply only to cars first registered after the appointed day, that is to say, new cars. That the loss would be infinitesimal must be clear to all hon. Members because, for several years ahead at least, it will not be possible to supply more than a very small number of cars, it may be only 50,000 a year, for the home market because we must use every ounce of steel possible for exports. It may well be, therefore, that during the next three or four years the sum lost, if a flat rate £5 is applied to new vehicles, would be trivial—ten pounds has been mentioned, but it would not mean much more—which represents about £8 million or £9 million more if applied to all vehicles, that is vehicles in existence at the moment. If, therefore, such an Amendment were made, we-should have the same revenue slightly diminished year by year by a trivial sum without introducing the suggested increase in the cost of petrol in order to make up the revenue. I understand that 3d. has been suggested in certain quarters, but: that would not be enough; it might have to be 6d. However, having regard to the recent increase of 1½d. in the price of petrol, even if only 3d. were imposed the probability, if not the inevitability, is that it would increase 'bus fares, delivery charges, and so on, which would be highly undesirable at present. One of the greatest merits of this Clause is to reduce the overall weight of tax on motoring.

I feel that I may not have argued this case very strongly because, having thought about it so much and spoken about it on several former occasions, it seems to me so obvious that it proves itself. However, I would say, with respect, to my right hon. Friend and to the Committee that this change will, by itself, do nothing. It will not produce the cars required for the export trade. It will do nothing by itself. Only the motor industry can produce the cars that are required for our vital export trade. In saying that, I must not be understood to suggest that this is not a matter of vital importance. It is. Without this change, I feel there is no possibility of the industry by itself producing cars of that type. Whether it is the real obstacle or merely an excuse does not matter, but without its removal, that will never be done. I suggest, therefore, that this Clause or something similar must he regarded as a vital matter and a most essential part of our export trade, by which we live and without which we shall die.

Sir Peter Bennett (Birmingham, Edgbaston)

I have much pleasure in supporting the new Clause put forward by the hon. Member for Widnes (Mr. Shawcross), and I wish to congratulate him on the very sensible way in which he has moved it. With a great deal of what he said, I entirely agree, although there are one or two points where I differ slightly from him. He speaks from the outside, with very great knowledge, and has shown that he has studied this question very closely. I speak from the inside I have no financial interest, shareholding or anything of that sort, in any motor car firm, but I have an interest in every motor car that is made, because my companies supply a lot of what is known as the "bits and pieces" for them. Therefore, this is a matter in which I am vitally interested.

I would remind the Committee that a year ago the Chancellor put a question to us—did we want the old method of taxation to continue, or did we want in its place the cubic capacity method? On that occasion I devoted myself entirely to that question without attempting to deal with the question of the petrol tax, because, up to that time, that tax had been ruled out by the Chancellor's predecessors. It is quite incorrect for the hon. Member for Widnes to say that nothing had been done. We did attempt to get that tax dropped completely. We went to the then Chancellor of the Exchequer and suggested that it should be dropped. The result was that the tax was maintained, and the petrol tax was increased as well. People who have had that sort of treatment were not anxious to put up a new scheme and have it imposed on the old one.

It is not easy to get unanimity in this industry. We do not get it here, or in any industry, but in the course of years the motor industry has come to a unanimous decision on this matter. They are all agreed, the motor car manufacturers have agreed to the proposals now put forward. The motor cycle manufacturers have also agreed, with a slight modification. The commercial vehicle manufacturers have acquiesced. The user organisations has been campaigning for a great many years on this question particularly in regard to passenger vehicles, and, from reports I have had from users of commercial vehicles, I believe the majority of them agree. By and large we could say that the whole industry would accept proposals of this description, and the large majority of the users would also accept them.

To explain some of the remarks of the hon. Member for Widnes, we must go back into history a little. In the early clays motor cars had a very bad name. They were very much opposed when first introduced, and a man had to walk in front of a car with a red flag. That gave continental nations a start, and we were many years behind continental nations in our development. We worked hard, and by the early days of the century motor passenger vehicles were becoming increasingly used. In those days it was very pleasant. All one had to do was to buy a vehicle of this description, take out a carriage licence, as one takes out a dog licence, and drive it away without any number plate or any other licence. It was then decided to put a tax on cars, and the basis was what was known as the "R.A.C. rating." The way in which that came into being was not sheer cussedness. It was the rating introducing purely for handicapping motor car races.

In those days, many of my hon. Friends interested in motor racing will remember, the engines were what is known as "square engines," a four inch bore, and a four and a half inch stroke, with a speed of about 1,800 revolutions a minute. When it was decided to measure the taxation on the bore only and to ignore everything else, designers got down to the job and designed round a fixed bore. Then the question arose as to what, instead of a square engine, could be done with a much smaller bore to obtain the same power? So we got the development, by means of lengthening the stroke, increasing the compression, watching the tolerances and increasing the speeds up to 3,000 revolutions per minute, until we got the very high speed engines of today.

All this experience was not lost, but was taken up afterwards by aircraft designers, and our designers of aircraft engines led the world. We then had a start on other nations, and designers produced small engines which they put into cars. The 11.9 engine was produced in order that it should be under 12 h.p. and the 9.5, to be under 10 h.p. That was the state of the industry at the time of the last war. During the period when we were closed down in the first world war, America did not suffer the same disadvantage, but went ahead and took our markets, and also got ahead with their enormous home market. Then the late Lord Austin decided he must make a small car to take the place of the motor cycle and side-car and the story is told that he made a chalk mark round the space taken by the motor cycle and side-car, and designed a two-seater car to cover the same space. He was soon told that two seats were not enough, and produced a light four-seater. It is not correct to say that those cars were not good; they were very good for what they were. For many years the Baby Austin had the best secondhand value in the world. That applied to many other models produced by the late Lord Austin. The Baby Austin was not bought by sporty boys who would drive it to death, but by respectable gentlemen who drove at comfortable speeds. The fact that they had the highest secondhand value proved that they could not have been so bad.

4.0 p.m.

Then manufacturers went in for something a little larger, and they made the popular 8 h.p. car. At the outbreak of the recent war 80 per cent. of the cars in this country were 8 h.p. or 10 h.p., which ran neck and neck, with the 12 h.p. a bad third. Why was that? It was entirely due to the matter of expense. As the hon. Member for Widnes has said our taxation, based upon this formula, produced a small car which was cheap to run, because the expensive car was out of the reach of those with moderate means. Motor taxation in this country is, I think, eight times higher than in America. Before the war it was seven times higher. There, no registration fee is required. In America motor cars are cheap, petrol is cheap, ice water is free and one pays a lot for the rest. Motoring has been made very cheap in America. When speaking last year, I said, "Don't blame the motor car manufacturers." There is no conspiracy. They took advantage of the opportunities given to them. What would hon. Members opposite have said if they had not done so? The McKenna duties were not imposed at the request of the motor car industry, nor was the horse power tax. Of course, they took advantage of it. They would have been very shortsighted if they had not done so. For years motor car makers have been trying to get away from this basis of taxation, and they are in complete agreement today.

The result has been that the people have had the cars which they have been able to buy according to their pocket. Speaking last year, I said that the motor industry supplied the car that was wanted. An hon. Member opposite, who represents one of the Birmingham constituencies, said that I was quite wrong and that he bought a car not because it was what he wanted, but because it was what he could afford. To the dealer or the manufacturer, what a man can afford and intends to buy is what matters. The hon. Member referred to the people who had done well out of the tax, but if he looks back over the history of the motor industry he will also see that there were people who did badly. Many fortunes were lost, and many firms making big cars only kept going because they also began to produce a small car, and they went on producing a big car more as a matter of prestige than of profit. The car was small because motoring was expensive. Those were the reasons why those cars were made, and made in large quantities, enabling us to get a certain share of the world market.

Now that we have begun to export these little cars, they are found to be suitable in other climates as well as this. I have come back from the Continent, and I wag told there that they like them for the same reason that they are liked here—they are cheap to buy and cheap to run, whereas big cars are expensive and they cannot afford to run them. I refer to Holland, Denmark, Belgium, Switzerland and the suburban districts of the Empire where doctors, professional men and people who go to golf, etc., find it convenient to have some cheaply run car. Generally speaking, in the great world beyond, where conditions approximate to those of the United States, these small cars are not the cars that are wanted. In those markets the 27 or 30 horse power car produced in America is suitable. The story goes round that our cars are designed for the home market, whereas the Americans make a car specially to suit the export market in which they are sold. The countries which hold that view are flattering themselves. All they get is the left-over American production. The Americans have not designed a car specially for their benefit. Of course, as the Chancellor and the President of the Board of Trade know, those countries which are buying these larger American cars are the hard currency countries, where we are working hard to get into the market, which we find it difficult to do.

It is sometimes said that the British motor industry ought to make a special car for export, and that if that cannot be done by one maker the manufacturers should club together to do so. Clubbing together is not an easy job. Apart from that, if we made a special car for export, and not for the home market, the quantities would be very small. America produces over four million cars a year. Some of the larger makers there make more than our annual output, which is in the neighbourhood of 400,000. Thus American production is ten times greater than ours. If British manufacturers, in a group, sought to make a thousand cars a week, it would only be a small effort to compete with that large American output, and it would be beaten before it started. Take the tool charges for American vehicles as compared with ours, which, under such conditions, would be roughly one-tenth. A motor manufacturer here making a thousand cars a week will make 150,000 in three years. One of the large American makers will, in that period, make one million to a million and a half, and he will thus write off his tool charges over ten times the quantity of the British output. Tool charges to make a new car are estimated to be £1 million. So the handicap goes on right through the whole story. Mass production needs large quantities of supplies and materials. The Americans buy in quantities which keep a number of strip mills running continuously, whereas we have hard work to keep one or two going. The Americans are able to keep their plants running all the year round because of these large quantities.

I think I have shown that the suggestion that they make a special motor car for the export trade is not valid. Therefore, the problem is to produce a car larger than the present one, and bring it within the means of the home user, and so get a larger car used in this country, in larger quantities, with the small car fading out and the larger taking its place, that car to be sold overseas and in quantity, instead of in eights and tens. Price and quantity go hand in hand. The car about which I am speaking will fill the gap in the market overseas between the small car sold there with great effort, and the big American car, which in many markets is thought to be too large. The Americans have not so far introduced that smaller car, because they like big cars and ostentation, which seem to please them. They do not like to move into a smaller house or to have a smaller car. We understand that. We have that feeling in other directions.

If we could adopt the proposals of the hon. Member, and completely divorce design from taxation we should then get a car developing. It will not happen overnight, because it takes two is three years from the time one starts to the time the motorcar is produced. That is what the Americans say. We are a little more nimble off the mark than they are, and if the Chancellor can see his way to accept this proposition our manufacturers will get to work, and within a shorter time than three years we should have these cars being produced, because the public want them, and we believe that they would come within the reach of the public pocket. I believe that the Chancellor has a chance to do something for the nation. Years ago there was a tax on windows. What would have happened if some Chancellor had not repeated that tax? We should have had architects designing houses with the idea of that taxation in their minds, and restricting the amount of light entering the building. We ask that designers should be allowed to design according to the vehicle that is wanted. Let them produce such vehicles in quantity. I believe that if that is done the purchaser will have the larger car he needs, and will be able to regulate his mileage according to his pocket.

I must mention the motor cycle. Instead of a standard tax the motor cycle industry asks that the taxation should be 20S. for engines over 200 c.c. and 10s. for light-weights. I would like to support that. When Lord Snowden made a concession years ago to the lightweight motor car, he thought he was doing some good, but it handicapped the motor assisted pedal cycle. I would like to see that vehicle freed from all taxation. When I see men toiling to work pushing pedals, I often think that if they could have a strong auxiliary motor to save their brawn for their work and to minimise fatigue, somebody would have done a good job. It would not cost much if, as on the Continent, they could buy one of these things with practically no formalities and take it straight to work. I make that suggestion to the Minister.

Under this scheme it would be possible for designers to produce the larger cars we need at the price which the British purchaser can afford to pay. We should get them in quantities which would keep down the cost for export purposes. It would give the motor industry confidence to face that day which we can see coming when the sellers' market will give place to keen competition. By the time that arrives we ought to be able to have cars of a design in between the small ones we have today and the big American cars which have a bigger field all over the world and especially in the hard currency market.

There is one other point which I must mention, and that is the value of the secondhand market. It is not quite fair to scoff at the used car. Practically every car that is bought is passed on secondhand and used by somebody else. When a man is buying a car in this country—this does not often happen in America—he bears in mind that he is spending his capital which it has been hard to accumulate and he thinks always of the secondhand value. I have attended motor car shows and chatted with people who have said, "I would like that car but, you see, when I come to sell it in three years' time it will have no secondhand value and, of course, I must have a car with a good secondhand value." That is because the buyer of the cheaper car, the man whose pocket is limited, looks at the high initial cost of the registration and the high cost of the petrol tax and then says, "I cannot afford that car. I must buy a small one." If hon. Members go on the roads at the weekends they will see that it is the small car, very often the secondhand one, which has the most passengers in it. Perhaps there will be a man, his wife, two children, and auntie, all in a little car which ought to have only two people in it. Yet, one sees the bigger cars rolling along carrying only two people.

One can sell almost anything in the secondhand market today, but before the war when one came to sell a 25 or 30 h.p. car one could hardly give it away. I was once trying to give away a 25 h.p. Sunbeam. In the end, I found the only man who would have it was a hackney carriage man. At the same time, a man I know had a Baby Austin for sale and there was a queue waiting to buy that. I would like to see the larger secondhand cars purchased by the man who wants to use it and to get a bigger pleasure out of it at weekends. That would be possible if; when the original buyer was buying the car, he was not worried about its value, and the man buying a secondhand car was not faced with an enormous initial cost before he could put it on the road. Most purchasers bear in mind the secondhand value when buying a car. The market would be completely altered if a tax such as is proposed was instituted. I must not go into those parts of this new Clause which were left out. The Chancellor knows our views. I think I have said enough to show what the aim should be. We should free our designers at once from any connection with taxation so that they can produce the cars needed for the combined home and export market and be able to work towards the day—and I must emphasise this once more—when it will be possible to reduce the whole load of taxation so that we can develop in increased quantities these large cars and thus secure the export markets which are so vital to us.

4.15 p.m.

Mr. Edelman (Coventry, West)

I am glad to support the new Clause proposed by my hon. Friend the Member for Widnes (Mr. Shawcross) and advocated with such expert knowledge and valuable detail by the hon. Member for Edgbaston (Sir P. Bennett). I think we are all agreed that the fundamental purpose of this proposal, which is to change the principle of motor taxation, is one which commands the support not only of the whole of the motor industry but, I believe, of most people who had ever applied their minds to the question of motor taxation. The system of relating taxation to design is completely out of date in the light of the industry's current needs. At one time a motor car was considered a luxury or, at least, a vehicle for sport and recreation, fabricated by craftsmen. Today it is the product of a vast industry of vital concern to our export drive.

Because of that, it is essential that we should establish a divorce between design and taxation. There is no connection whatever between the two, in logic, nor should there be a connection in fact. At the same time, if, as I hope, the Chancellor accepts a new principle of taxation in order that we might create the type of car which will, at one and the same time, be suitable both for the home and export market, then indeed the motor manufacturers will be given the opportunity of doing what they have claimed they want to do for so long—to develop without artificial restraints a flourishing mass production industry which could be of the greatest service in connection with our export programme. I would add one word of warning. It is that in itself a change in the system of taxation will not be enough to give us the exports we need. In the long run that will depend on the new type of cars which the motor manufacturers evolve.

In the past, when design and taxation were closely linked, taxation was a sort of bed of Procrustes into which the designer had to fit his car. If the car was too big he simply had to cut it down. One of the results of that, as was mentioned by the hon. Member for Edgbaston, was that the very fact of these limitations helped our designers, engineers and workers to produce a highly developed type of engine and a car of specialised value, popular not only in this country but in many other parts of the world. That was much to the credit of the British motor industry. But today, now that the emphasis is primarily on the export market, we must obviously produce a different kind of car. Unless the form of taxation which the Chancellor introduces will have the effect of compressing the variety of models at both ends—in other words, concentrating the whole weight of the industry behind the manufacture of cars of between 14 and, say, 18 h.p.—then the new tax, if there is to be one, will have failed in its purpose. In those countries abroad where the Americans are sending the surplus of their four million annual production of motor cars, one sees large, high-powered American cars being sold at exactly the same price as British 12 h.p. cars exported to those areas.

I fully agree that there are countries where the small car can do its job more effectively than a larger car, and I think the reputation of the British motor industry stands very high today on the Continent. But the fact remains that in those hard currency areas where we have to compete with the Americans we are unable to do so because we have not got the sort of car, namely a medium horse power car of high efficiency to compete with the powerful and ostentatious cars which the Americans are producing. I agree with the hon. Member for Edgbaston when he says that it is impracticable to produce a car specifically for export at present. I do not think that that is the way to tackle this problem of the export industry. But one thing which is absolutely certain; the motor industry, if it is to compete in the markets of the world, must rationalise and standardise.

I would like to quote what was said by Mr. Lucas, who, I believe, is Chairman of the company in which the hon. Member for Edgbaston has some interest, and who was speaking on the question of standardisation of electrical components in motor cars. Although he himself is a director of a company which has a virtual monopoly of the production of these electrical components, he most vigorously attacked the diversity and multiplicity of designs which the motor manufacturers require. May I give a few examples of this over-multiplication of different components for motor cars? Messrs. Lucas have been asked to produce, and are in fact producing, 68 different kinds of distributors for cars, 60 different kinds of direction indicators, 133 different kinds of headlamps and 98 different kinds of windscreen wipers. In the 58 different cars which are produced in this country, there are 45 different types of starters produced by Messrs. Lucas.

It is time that we had a simplification of the different types of components. Not only is it the case that, while our car manufacturers are producing all these electrical components, they are never going to have that system of a flow of production which the manufacturers of this country admire in America, but the motor manufacturers are continually going to get the delays, of which they are continually complaining, in the supply of electrical components.

Sir P. Bennett

Is the hon. Gentleman going to finish the quotation, in which Mr. Lucas explained that all that was ancient history and that the future was to be a different story?

Mr. Edelman

I did not want to do an injustice to Mr. Lucas and I shall look forward to that future which he indicated. All I am suggesting now is that we should push on much more rapidly towards that future, because, looking at the designs for 1948, it is quite clear that this future is not likely to be reached in any time that one can foresee at the present moment, despite the fact that, in the case of headlamps, it is hoped that they may be reduced to two types as soon as possible.

Sir P. Bennett

With regard to starters and dynamos, there are only two sizes, though there are modifications, and, if the hon. Member will read the whole of that story, he will see that it suggests that, while we have had all these things in the past, designers for the future are working on the lines of very few models and the smallest number of alterations that can be arranged at the time of development.

Mr. Edelman

I welcome the hon. Member's admission that it has happened in the past and his assurance that it will not be so in the future. I was very glad that, at the Press Conference at which Mr. Lucas explained this over-diversity to correspondents, he was also able to show a "Chamber of Horrors" of the various types of components, which demonstrated exactly how bad was the system of the past. The hon. Gentleman has very rightly pointed forward to the future, and I want to emphasise that, if we are to have a happier future in the motor industry, in which the motor manufacturers will, in fact, be able to capture the foreign markets which today, in very many cases, is in American hands because only American cars are available, we must concentrate on the production of the sort of car which we can sell in that market, and in order to do that, we must give up the old system of "batch" production, in which one set up a machine to manufacture 200 or 300 "off," and then reset it for another short run. We must think in terms of tens of thousands.

I hope the Chancellor will accept the new Clause, or that, if he does not accept it, he will at any rate accept the principle. I do not want to emphasise that it is now up to the motor manufacturers. They have, in the past, expressed a variety of views on the taxation which should be applied to the motor industry and now, at last when they have unanimity, or appear to have, let us hope that they will also achieve unanimity in the matter of production. They have access to the most highly skilled pool of labour in this country; they have preferential treatment in the matter of steel allocation; and, above all, they have the benevolence of the Government in assisting them in the export drive. I hope there will be no delay in changing the tax on the grounds that a flat rate will encourage the purchase of cars at home. I do not believe it is possible to dig one's spurs into the flanks of the export horse and at the same time hold on tightly to its mouth. I think there should be encouragement of the industry as a whole, and that, I am sure, is what the Chancellor intends. He will be entitled to go to the industry in a year's time and say, "I have given you the form of taxation and the liberty of action you have asked for. Now it is up to you to deliver the goods."

Mr. Eccles (Chippenham)

I would like to congratulate the hon. Member for Widnes (Mr. Shawcross) on having taken a notable step. We shall remember this Debate for a long time, because this is the most important new Clause now on the Order Paper. I rise, without any inside knowledge of this industry, to emphasise the very critical nature of the decision which the Government must take. This decision has to be taken at a very difficult period, because the motor cars now in production for sale at home and overseas are all prewar models, and we all know that, in two or three years, the size and shape of the world's motor cars will be quite different. The question therefore is, when that happens, will the British industry have to shrink back into a protected industry supplying only the home market, or will it be a big factor in the world's motor car industry? This is an issue on which we can test the Government's sincerity when they tell the country that we must export or die. Ministers know the situation perfectly well. I was reading in the "Daily Mail" this morning reports of two speeches, one by the Paymaster-General, who, unfortunately, is no longer present, in which he is reported to have said: If the production drive fails, food supplies may have to be cut by half. The other speaker was the President of the Board of Trade who is reported to have said: If we do not export enough, we shall have to go without on a frightful scale—a starvation scale. I do not want to over-emphasise this, though we on these benches have recognised it for some time. The question is what are we going to do about it, and here is an opportunity for the Government to act—but not to act in the way they have done for so long merely by reducing rations or threatening us with a reduction—but to do something constructive to increase the production of goods in this country which can find a market abroad and so maintain our industries.

It is most important, in the changes to be made that the Government should not give with one hand and take back with the other. It is most important that they should do the job properly, and we shall look with anxiety to the Chancellor to see how far he is prepared to go to stimulate exports. The benefit will be in proportion to the generosity; of that I think there can be no doubt at all. Does he intend to abolish the impediments which have restricted and confined the industry and dwarfed it into unnatural shapes? Is he going to place the industry on a level with that of other countries or is he only going to take a small bite at the cherry?

4.30 p.m.

I do not think any industrial nation has overwhelming national advantages in the manufacture of motor cars. I know it is fashionable to talk about the huge home market of the United States as an advantage that we cannot enjoy, but I believe that to be greatly exaggerated. It is really in the nature of an alibi which is used by those who have not been able to find the true cause of the proliferation of small and uneconomic production lines in Great Britain. The motor industry is not like the whisky industry in which Scotland has definite natural advantages. It is not like the cultivation of tobacco, in regard to which the Chancellor of the Exchequer has told us that we have no advantages at all. In passing, I would like to tell him that I have received far too many letters since last Tuesday to say that he was wrong.

The Chancellor of the Exchequer (Mr. Dalton)

Has the hon. Gentleman received any of the tobacco which is alleged to have been grown?

Mr. Eccles

I have been told where on a dark night I can get it. Be that as it may, I think the motor industry is more like the moving picture industry where international success goes to the producer who displays the most imagination and skill.

Mr. Blackburn (Birmingham, King's Norton)

If the hon. Gentleman will allow me, I do not think his point is right, because the motor car manufacturer in this country has to pay almost three times as much for his coal and twice as much for his steel as does the American with whom he is competing [An HON. MEMBER: We have cheaper labour."] I dare say, but that is hardly a matter upon which we can congratulate ourselves. It is generally believed by motor car manufacturers that we can compete in quality but not in cost.

Mr. Eccles.

Taking the factors of production overall, and taking into consideration the skill, organising research and designing ability, there is no insurmountable handicap on the British motor car industry. I cannot see why a nation which can produce aeroplanes and electrical machinery better than other people should not be able to produce a better motor car. I do not think there is any insuperable reason why small and large British motor cars should not compete the world over. There is no handicap which it is not in our power to remove, nor is there any factor of success which it is not in our power to mobilise. As I see it, we have handicapped ourselves. We have of our own free will in past Parliaments laid upon this industry a burden of taxation which has crippled it, and when the Chancellor comes to make his decision about the change in taxation, I hope he will keep in mind the line from "Troilus and Cressida"— Those wounds heal ill that men do give themselves.' That has been the history of motor car taxation. I am not sure which has done more harm—the incidence or the total weight of taxation. It is not possible to disentangle the evil effects attributable to those two handicaps. There is no doubt that the total weight of taxation, as has been pointed out by other hon. Members, has resulted in keeping motoring in the rank of luxuries, when at this stage in industrial history it ought to have become a necessity of life. On the other hand, the horse power tax is responsible for the small size of British motor cars and the very large number of models.

I regard the horse power tax as having the same sort of influence on the motor industry as, from age to age, certain fashionable clothes have had upon women. That is to say, they restrict the movement of the wearer while giving great scope to the designers. It happens that the women adjust themselves to these fashions and, in the end, they come to like them. That, I believe, is the case with one or two of the big motor manufacturers so far as they have been affected by the horse-power tax. But, just as with these kinds of impediments in the world of clothes, so with the horsepower tax, the real experts know that if the restrictions are taken away health and growth will be greatly stimulated. I consider the total weight of taxation to be an even worse handicap. Every motor car purchaser who is seriously bothered by the tax has a demoralising effect upon the motor car manufacturer. The hon. Member for Widnes proved that when he mentioned British supremacy in the highest range of cars, the Rolls Royce and the Rolls Bentley.

It is no good saying that we have achieved that supremacy because our home market was a big one. There are far more millionaires in the United States than in the United Kingdom, but the United States have not produced cars of such consistent quality in the top class. The reason for that is that up to the outbreak of the war, no buyer of a Rolls Royce bothered about the tax which he would have to pay, and so the manufacturer never had to take into consideration that aspect and he was not demoralised by it. He produced what he knew to be the best quality article knowing that his customer would be willing to pay. That is a lesson which His Majesty's Government might well bear in mind when considering how far it is advisable in the interests of the export trade to lower the general rate of taxation on the 12, 16, and 18 horse power range of cars. We should, of course, abolish the horse power tax and free the design. That is a common demand in all the Clauses which have been put down, but I think the right hon. Gentleman must go further than that. He must reduce substantially the total weight of taxation on motor cars.

Perhaps I might say a word about the proposal contained in our Clause, namely, to maintain the same revenue from motoring by increasing the duty upon petrol. We only made that proposal because that was the principle which Chancellor after Chancellor has propounded when suggestions have been made for a change in the incidence of motor car taxation. It is a bad principle, and I should be sorry to see the Chancellor accept the proposal. I will not now argue why the right hon. Gentleman should not raise the duty on petrol; the reasons are too well known to the Committee.

I wish to conclude by returning to the question of the export trade, and to emphasise how important the motor car industry is in the picture. Apart from British agriculture, where I think a very great contribution could be made, I know of no single industry which could make so large a contribution towards closing the gap between imports and exports, and the Government ought to consider the motor car industry as a very special case where they can do something constructive. What can they do? They cannot give subsidies on exports. We have agreed with the Americans that subsidies on exports should not be a part of our commercial policy. I endorse that decision entirely. If all industrial nations will foreswear subsidies on exports, no nation will benefit more than the United Kingdom, and we ought to do nothing to weaken the chances of getting an agreement at Geneva, or wherever it is being discussed, that all subsidies on exports should be ruled out. But we have no agreement with America not to remove handicaps on a great export industry, and the kind of taxation now laid upon the motor industry is an immense negative subsidy; it is a subsidy in reverse, and its removal is a real stroke to be played by the Government.

I want to appeal to the Chancellor and to remind him of the history of this Committee stage. I looked at all the Amendments and all the new Clauses on the Order Paper and subjected them to the overriding test of their effect upon the expansion and efficiency of British production. By that test, we began well; we started with the welcome concession on kerosene, the price of which enters into the production costs of food, but thereafter the Committee will recall that the Chancellor insisted upon a series of taxes which, he knows as well as any other hon. Member, must in their effect be restrictive. That might have been good politics, but it was bad economics. The Profits Tax and the Bonus Issues Tax will not assist exports. Now we come to a great opportunity of abandoning restrictionist economics and doing something which is really constructive and expansionist. The country wants some symbolic gesture of this kind. They are tired of being told that the standard of life must go down and that the only way in which the gap between imports and exports can be bridged is by cutting the imports and making corresponding reductions in rations, or in employment, or whatever the austerity must be.

If the Chancellor were to do the really bold thing, not just put on a £10 tax on all registrations and raise the Purchase Tax at the same time on a number of models so that his revenue would be nearly the same, he could do a great thing. After all, the average horse-power tax paid over the whole range of private cars is something like£14,and there is very little difference between £10and £14. What we really want is a first-class operation upon the motor industry. Hon. Members opposite have very rightly said that if the Chancellor made such a gesture then it would be up to the industry to deliver the goods. I am sure they would. I cannot believe that there is any industry in the country which is more ready, more on its toes, to take advantage of what it knows quite well would be an opportunity of salvation.

I end therefore by appealing to the Chancellor not to do this thing by halves. Let us have something which will not only put heart into the whole of the engineering industry of the United Kingdom, but will make the Empire say, "There is the Mother Country waking up at last. There is the Mother Country doing something through the agency of the Budget—which is one of the few instruments of planning open to His Majesty's Ministers—which show that Great Britain is not going to wilt and retire into its shell but is going ahead." It would have a tremendous effect on other importing countries as well. I am glad to think that this is not a matter of party politics. Hon. Members in all parts of the House support a change, and I hope that when we get a statement from the Chancellor it will show that he is not going to do the thing by halves.

4.45 P.m.

Mr. Blackburn (King's Norton)

I do not want to detain the Committee long because everything I desired to say has already been said by my hon. Friend the Member for Widnes (Mr. Shawcross), the hon. Member for Edgbaston (Sir P. Bennett) and the hon. Member for Chippenham (Mr. Eccles) who made the speech which I more or less intended to make, with the exception of two points. The first is that I think he has got the difficulties of the motor industry quite wrong. Its difficulties are far greater than he has given the Committee to understand. The fact of the matter is, as I understand it, that we cannot hope to compete in cost with American cars in the near future. The hon. Member for Edgbaston will correct me if I am wrong, but that is what I understand to be the situation. Second, I think the hon. Member should have mentioned the White Paper, because the White Paper told us quite clearly that unless we attain 175 per cent. of our prewar exports we shall fail to reach equilibrium and we shall have our rations cut. It is a most serious thing that the Paymaster-General should have made the statement he made on Sunday, that if the production drive fails, we shall have to cut our rations in half. Any cut at all in rations may well mean a decrease in production, and we may be in a vicious spiral, going down. I therefore appeal to the Chancellor to consider this. The White Paper has not only said that we must have 175 per cent. of our prewar exports; it has also selected the particular industries in which we can hope to multiply our exports, and in particular it selected the motor car industry.

Speaking from memory, before the war, about four million cars a year were produced in America and only about one-tenth of that number in this country, and therefore we face an extremely difficult situation. I agree entirely with the hon. Member for Chippenham that the skill of our technicians and the skill and hard work of our workers in the motor industry will beat those of any other technicians and workers anywhere in the world, and I also believe from my experience of them that those in charge of the motor industry are trying very hard indeed to plan ahead in order to face the cut-throat competition which will eventually come. So I appeal to the Chancellor to make the really generous gesture for which the hon. Member for Chippenham has asked.

It is no good merely recognising the fantastic mistakes which have been made in the past 25 years. It seems to me that the whole of this Debate has been like shooting a sitting pheasant, which I always understood to be not very sportsmanlike. I do not want merely to shoot the sitting pheasant—the existing method of taxation. I want to urge that something far more radical is required. I entirely agree with the hon. Member for Chippenham that the Chancellor can do a great thing for the people of this country if he makes them realise now to what extreme measures the Government are prepared to go in order to enable our export trade to get back on its feet again. It is no good merely talking about standardisation, and lecturing the motor trade on that subject. The motor trade is only too anxious to standardise if standardisation can be effected.

There are the difficulties my hon. Friend mentioned, but I am not really thinking about trying to sell cars to America. Our export market for cars will not be in America. When I was in New Zealand and Australia in 1938 I could not find a British car on the roads. [HON. MEMBERS: "What?"] I am speaking generally. I found no one to say a good word for British cars. The overwhelming mass of the export market in New Zealand and Australia had been captured by the Americans, and surely that is a disgraceful situation. New Zealand and Australia are desperately anxious to buy our cars.

Sir P. Bennett

The hon. Gentleman is not quite correct. My own organisation keeps a very large organisation in New Zealand and Australia to service the very considerable number of cars that we sent there, and I can assure the hon. Member that it does not do so for fun. On that point he challenged me with regard to America. Of course if we try to copy an American car we cannot compete, but we can make something the Americans do not make, at a price which the world will pay.

Mr. Blackburn

I am very grateful. That is the point I was really making; there is no difference between us. I was saying that we cannot compete in cost but we can beat them in quality, and that is something which applies not only to motor cars but to a very wide range of manufactured goods. On the previous points, of course, I am sure there were very considerable numbers of our cars in Australia and New Zealand, but Australians and New Zealanders generally were then buying American cars and not British cars. The general opinion was that the British car was nothing like as serviceable as the American car in Australia and New Zealand I do not think that can be denied. Therefore, I say that our market will not be primarily America, but the British Commonwealth and Empire and other countries in the world. I appeal to the Chancellor, in the spirit of what has been said. to make a generous gesture now in order to show that we intend to do everything we can to get the motor trade on its feet again.

Mr. Digby (Dorset, Western)

We are-discussing a very important matter this. afternoon, and we are discussing it at an extraordinarily important moment. As has been noted already by several hon. Members, few of the cars which are now being turned out by the British motor car industry are anything but adapted 1939 models. At this moment it is most important that we should be getting ready for the time when the sellers' market ends, in order to be able to turn out the type of car which is required. The few postwar models that we have seen make it quite clear that great advances can be made even in the higher horse power models, in such matters as petrol consumption and general economy. Therefore, it is of the greatest importance that the question of the horse power tax should be settled in the right way by a flat rate. At the same time, it would be wrong for the Committee not to bear in mind that this is not the only factor in regard to purchases in the home market. The price of cars in the home market—and overseas, too—is still extremely high. The home market is much swollen by the Purchase Tax. In the past, insurance payments have been equal to the horse power tax as a deterrent, and that is another matter which may cause difficulty. If the Chancellor intends to increase the Purchase Tax in order to balance his concession on the horse power tax, I feel that we should be losing a great deal of what we have gained.

On this question of foreign markets, as has been rightly said by the hon. Member for King's Norton (Mr. Blackburn), it is important that we should direct our attention more at the Commonwealth than at European countries. Some hon. Members may have noted the extent to which in European countries our exports of motor cars are already falling off. For instance, the figures for Switzerland in March are interesting; the Americans exported 572 cars to Switzerland; the French, 562; and we exported only 282. I believe that for various reasons, including that of springing, it is difficult for us to compete on the Continent with Continental cars. I see no reason at all why, if we build cars with a bigger wheel base and a 'higher ground clearance, we should not have an excellent market—

Sir P. Bennett

It is not quite fair to talk about our exports in March, when we remember what sort of February we had, and that we were closed down. Of course the exports fell during March; but they went up again in April. Do bear in mind that we were closed down for two to three weeks in February.

Mr. Digby

I quite appreciate that that was an unfortunate month; but in view of the Monet Plan, and the extent to which French cars were entering Switzerland in that month, I think that we are bound to take note of that fact.

I should like to appeal once more to the Chancellor to be very careful where he tries to compensate himself and to find that extra money. He will be doing an excellent thing if he puts a flat rate on all motor cars; but in so doing he has to be very careful not to put a deterrent on ordinary people in this country from buying cars, when they should be put within the reach of more and more people.

The Chancellor of the Exchequer (Mr. Dalton)

We have had, not a long but a reasonably extended and most interesting discussion. I should like to thank my hon. Friend the Member for Widnes (Mr. Shawcross) for introducing this matter, and, as it were, bringing forward at this stage a discussion which would have taken place in any case, because, as I should explain to the Committee, I had it in mind to put down a new Clause myself before the Report stage was reached. This has given us an occasion for discussing the matter now. What we are aiming at doing today is, considering the pattern of the tax; we are not considering unchangeable rate fixed for all time, but what shall be the pattern of the taxation upon motor cars. In my Budget Speech I referred to a- proposal, which was then being pressed upon me from many quarters, that there should be, on the one hand, a flat rate licence fee on all motor vehicles—I emphasise "all," for reasons which I will elaborate in a moment—and, on the other hand, an increase of petrol tax. That was the most popular of the proposals which were put forward from a number of quarters of the Committee, and outside the Committee, from the motor industry.

In my Budget speech I said there were serious difficulties in the way of adopting these particular proposals. But I went on to undertake that provided there was no loss of revenue, or appreciable loss of revenue, I was willing to look at the whole question again—I think the phrase I used was— in consultation with competent people who know the problem … "[OFFICIAL REPORT. 15th April, 1947; Vol. 436. c. 79.] —and I have carried out that undertaking. My right hon. Friend the Minister of Supply and I have had consultations with the manufacturers. I, myself, have also had consultations with hon. Members of the Committee, some from the Government side and some from the Opposition side. From these consultations I have gained a certain impression of what it is that those who are particularly interested in this matter desire to see. I think I can claim that my right hon. Friend the Minister of Supply and I have shown ourselves susceptible to reasoning and to these representations; and we have tried to study the factors of the case, as they present themselves now to those who have given thought to the matter, and who have had practical experience of it.

I will not go over the speech of the hon. Member for Chippenham (Mr. Eccles), who spoke of the troubles arising out of the past, and the attitude of past Governments towards this matter, except to say that I, myself, have a pretty blameless record in this particular regard; and, it so be that I can make a bit of an improvement now, I hope it will be chalked up on the slate to me for righteousness. I leave that retrospective argument there. I am not responsible for what Tory Chancellors have not done over the past 20 years.

Mr. Oliver Stanley (Bristol, West)

thought the right hon. Gentleman was actually a Member of a Government which was in power for two years, and which never altered this tax?

Mr. Dalton

I referred to 20 years of undiluted Tory rule. I am not talking of that period when there was sufficient dilution to enable us to win the war. I, pass from that to the more serious industrial matters in relation to this controversial question. I was merely dotting the "i" in that admirable essay of the hon. Member for Chippenham.

Mr. Stanley rose—

Mr. Dalton

Let us leave it till later. I agree, the past is deplorable, and we must make the future better. The main object that has been put before us is—to use the phrase of my hon. Friend the Member for West Coventry (Mr. Edelman), which I cannot better—that we should divorce design from taxation. I will plead this, at any rate, that during the time I have had any responsibility for these affairs—whether as President of the Board of Trade in the Coalition Government, or as Chancellor of the Exchequer in the present Government—I have always tried, first of all, to understand what the motor manufacturers wanted, and then, within the limits of possibility, to give it to them. But they have been slightly elusive about it. I do not think they would mind my saying that. Last year I did carry out what they had represented to my predecessor as Chancellor of the Exchequer, when I was President of the Board of Trade under the Coalition, and was also interested in the discussions. What they said was, that they did not like the cylinder bore, and we sympathised with that. What they wanted was the cubic capacity tax. "All right," we said, "Give them what they want. Give them the cubic capacity tax," and we introduced it. My predecessor made a provisional agreement, under the Coalition, to do it, and I did it in my Budget last year.

5.0 p.m.

I thought that I was giving satisfaction there, if not to a unanimous industry, because we were not quite unanimous, at least to the majority view held in the industry. That is how the position now stands, and, with a view to what I am going to say, I should like to emphasise that. The cylinder bore is still the basis of taxation with regard to all private cars registered before 1st January last. In regard to private cars registered since 1st January, the new cubic capacity tax applies. That is the division between the cars running on the roads—they are divided into these two classes according to whether they were registered before or after 1st January. Since we did that, there have been further representations to the effect that what we really want to divorce taxation from design is a flat and uniform annual licence fee. We were told before that the present change would go a long distance towards divorcing design from taxation, and that is why a cubic capacity tax was represented by the industry as being better than a cylinder bore tax. Since then, the argument has gathered strength that what we really need to do, in order totally to divorce design from taxation, this was only a judicial separation between design and taxation—is to have, as I have said, a flat and uniform annual licence fee—I will deal with the petrol tax in a minute.

The main object we must all have in mind is to see that the form of our motor taxation is such that it assists the export drive to the greatest extent. I completely subordinate the home market at this time, and for the immediate years which lie ahead of us, to the export trade. I am familiar with the argument, which has weight, that you cannot produce a car wholly for export. I quite accept that, but it is far more important, in the national interest, to export than to have more cars on our congested roads. It is far more important that the people of this country who want a new car should wait until the battle of the gap, as between exports and imports, is won, and that the maximum number of cars should be exported. Having listened to the representations which have been made, both by the trade and by all sections in the House, I am quite satisfied that the case is made out for the flat licence duty for all cars to be made in the future. So far as the effect upon future design is concerned, we can forget all cars now running. In order to get the export drive we desire, and to get the type of car the more forward manufacturers want, what matters now is the design of cars to be hereafter produced. So far as the past is concerned, there it is, good or bad, and there are the cars running about, and there is nothing we can do in regard to them. That is why the conclusions I am now giving on behalf of the Government do not involve any change in taxation for cars registered before 1st January last. They will continue to be taxed, as they are taxed now, on the basis of the cylinder bore.

What we are proposing to do, is to make a change with regard to all cars which will be registered in the future—the proposal I shall submit in proper form before the Bill reaches its Report stage; I am now giving the broad intentions of the Government—and the proposal is that the annual licence fee, as from 1st January, 1948, on new cars shall be a flat rate of £10. Five pounds is too little, and therefore, technically, I cannot accept this Clause. We do not want to have three different types of taxation operating at the same time, and I will therefore make suitable provision, with which I need not trouble the Committee at this stage, because it is a relatively small matter, with regard to cars registered already as from 1st January last. The cubic capacity tax will disappear, and it will be replaced by the new flat rate tax. I am having the position looked into with regard to cars already registered this year under the new scheme, and we will see that they come under the uniform licence fee as from 1st January next. With regard to cars registered up to and before 1st January last, they will go on exactly as they are. That enables me to avoid the unpleasant suggestions that I should raise the fuel tax, which would increase the cost over a large field, not perhaps ruinously, but appreciably; it would be a new inflationary excuse for price increases, affecting commercial transport in particular, and it would put an increased cost upon people travelling in vehicles other than their own, such as buses and the like. In my view it is not in that direction that we should be moving. We do not want to raise any further, through the agency of taxation, the cost of transport—indeed, quite the reverse.

I am able to avoid the suggestion that I should raise the fuel tax by limiting the annual licence fee to new cars brought on to the roads as from now, and I hope that the Committee will think that that is a good conclusion. On the other hand, I must look about here and there for countervailing sources of revenue. It seems to me reasonable that we should, on the more expensive cars, ask at this stage for an increase in the Purchase Tax. After all, we want the more expensive cars, in greater degree than the less expensive cars, to be exported, and we would rather get foreign exchange from these cars than have them running about adding to the congested traffic on our roads. The Purchase Tax has the great advantage, which I have referred to more than once in the course of our Sittings, that it does not fall upon exports but upon things sold at home, and to that extent it stimulates exports, which need all the stimulation we can give. Therefore, in so far as a. higher Purchase Tax on the more expensive cars stimulates the export of these cars, it is wholly good, and if, on the other hand, it does not lead to their export, I gain a few extra halfpence from them. With regard to cars whose retail price, exclusive of Purchase Tax, is £1,000 or more, which is roughly equivalent to cars whose price, inclusive of Purchase Tax, is in the neighbourhood of £1,250, I propose that the existing Purchase Tax of 33⅓ per cent. should be double, as from today, so that the tax will he 66⅔ per cent. This tax is totally avoided by all cars exported, and no one will be more pleased than myself. On imported cars of comparable retail value it will be similarly increased.

Captain John Crowder (Finchley)

Is it 66⅔ per cent. on £1,000, or 66⅔ on £1,000 and over?

Mr. Dalton

The Purchase Tax is charged upon the total price. We make an adjustment for the margins. The general intention is that cars whose price, exclusive of Purchase Tax, is up to £1,000, will continue to pay the existing tax of 33⅓, but where the price is over £1,000, the Purchase Tax is doubled.

Mr. Keeling (Twickenham)

Can the right hon. Gentleman explain how the increase in Purchase Tax stimulates exports?

Mr. Dalton

The reason why Purchase Tax tends to stimulate exports is because, on the article exported, no tax is paid. If it is used within this country then the tax is payable. I should have thought it was obvious enough. In so far as cars within this range are produced, there is likely to be less demand for them at home and, therefore, greater incentive to export. I do not think that the point is subtle or difficult.

I would like to mention to the Committee the relation of the new annual rate of fro per annum to the existing rates. At present, less than 1 per cent. of all cars running on the roads are paying less than £10 per annum. These are mainly the small Fiats, which pay £8 15s. Twenty-seven per cent.—a substantial proportion—of all cars now running on the roads now pay £10. Those include the Austin, Morris, Ford, and Jowett 8 h.p. cars. Twenty-two per cent. of all cars now running on the roads pay only £12 10s. a year. That covers such cars as the 10 h.p. Austin, Morris, Wolseley, Jowett, Singer, Vauxhall, and Standard. Taking the two last classes together, those that pay £10 and those that pay £12 10s., between them they cover about 50 per cent. of all private cars now running on the roads. For about half the cars, therefore, there is not much difference between going on as they are and coming under the new arrangement. On the other hand, the position is more advantageous as regards new cars of higher horse-power under the £10 plan than it is now.

That is another justification for increasing the Purchase Tax on the more expensive cars. Over the next year or so—and I cannot look further ahead, as many other factors will determine what happens in the years hence—it looks as though the loss I shall incur in respect of the new cars—they form a slight percentage of the whole, but it is one which will increase each year—through having the flat rate of fro annually, will be about balanced by the additional revenue I shall get from the Purchase Tax. On the longer view, I, or my successors, may lose revenue, but it may well be that that will, be a direction in which they will be happy to lose revenue. All I have looked at is the immediate position so far as revenue is concerned, and we accept the position that the case has been made for a uniform licence fee on all new cars.

I hope these proposals will be regarded by all those who have studied this matter as a great improvement on present arrangements. I have gone some considerable distance towards meeting the representations I have had, both from the industry and Members in all parts of the Committee who have studied this question. I agree, however, with my hon. Friend the Member for West Coventry (Mr. Edelman) that these changes in taxation, by themselves, will not assure us of a prosperous motor industry and a substantial export. But I hope those who are concerned with the industry, who get their livelihood from it, and who have devoted their enterprise and resources to it, will be encouraged by the response I have made to their representations to go ahead and standardise their production more than they have done in the past, by giving us fewer types than we have had hitherto, types of cars which, under the new scheme of duty, will be more likely to get a good export market, not only in the immediate future, but in the years that lie ahead. I agree with the hon. Member for Chippenham (Mr. Eccles) that there is no reason why we, as makers of the best aircraft in the world, should not also make the best cars, and I hope those concerned with the industry will make sure that we do.

5.15 p.m.

Having given a broad indication—I hope sufficiently exact to be clear—I will have this Clause drafted in an exact form when we come to the appropriate stage of the Bill, particularly with regard to the overlap between cars registered before and since 1st January last. I hope that the Clause I shall put down on the Report Stage will be generally acceptable, that it will be felt that the Government have responded to the representations made to them, and have met those representations in essential principles.

Mr. Henry Usborne (Birmingham, Acock's Green)

Could my right hon. Friend explain the precise reasoning which has led up to his decison not to bring cars at present on the road into the new scale?

Mr. Dalton

For two reasons. First, because I wish to minimise the loss of revenue. I should lose a great deal more revenue if I applied this new scheme to all cars. Second, because it would achieve no purpose towards divorcing taxation from design.

Mr. Oliver Stanley (Bristol, West)

I think everybody in the Committee will have listened with great interest and considerable satisfaction to the statement which the Chancellor has just made. It has been obvious from the Order Paper and the Debates we have had so far, that this is a matter which arouses great interest, quite irrespective of party. It is the desire of all that whatever is possible to be done to stimulate the export of British cars shall be done. The right hon. Gentleman has today made an announcement in principle, and we shall have a further stage when we shall have an opportunity of considering the effect of that decision in principle in greater detail. I shall not, therefore, attempt to delay the Committee now by going into detailed questions of any kind. I am not sure—and I hope the Chancellor will not think me ungracious, because he has done no more or less than he has been asked to do—that we are facing up to this fundamental problem. The Chancellor has been asked to divorce design from taxation. 'That he is going to do. So far, so good. I understand that many experts believe that that in itself will carry the trade a long way in its drive for exports. I cannot pretend to speak as an expert. I do not share the specialised knowledge of many who have spoken here today. I know little indeed about strokes and cylinders, although with bores I am more familiar. Therefore, I can only put the problem as it would appear to someone who regards it with great interest, but with no specialised knowledge.

It may well be that the expert would be able to shoot me down, but I cannot think that the task of competing with America in the export trade of the world, in motor cars, is as simple as some people have led us to believe today. I do not think that it is quite true to say that we have no inherent difficulties. Although I am not saying that it is impossible to compete with America in the export trade, I am pretty certain that it is not possible for us to compete at all if, in addition, we handicap ourselves. I am, therefore, not convinced of the value of a mere alteration of the incidence of taxation if the volume of taxation is to remain the same. I do not believe that it is possible at the same time to regard the motor car as a vehicle of taxation and revenue collections and as a vehicle for export. I do not think the two things go together. At the moment we are still trying to run the two horses together. It may be that I am quite wrong and that the experts are right, and that even with an 800 per cent. disadvantage in the way of taxation on our side we can still compete on equal terms with America. But I do not believe that is true. I believe that sooner or later we have to face this fundamental fact that we cannot get export and revenue from the motor car industry at the same time. I am not going to prejudge the issue, or to say which is right. All of us, of course, want to get whatever exports we can, but if the cost of that, in this particular case, is the abandonment of a large section of revenue which has to be raised from other sources, and which, in turn, may react upon some other possibilities of export, then we have to judge the possibility of the motor car in comparison with whatever sources might be restricted.

I do not think that we have, in these circumstances, really got down to the fundamentals of the case. I think that we are still maintaining in this country a motor car market as a luxury market. We are putting it outside the range of the ordinary man. The motor car will still be regarded because of its expense as the exception and not the rule, whereas in America it is the rule and not the exception. Therefore, I believe that we are postponing the decision which, sooner or later, we have to take—whether we are to look to this great industry for export or for revenue. Meanwhile, that is no deterrent to what the Chancellor proposes to do. He is meeting the requests that have been made to him. It will give us an opportunity, at any rate, of seeing whether the limited approach is enough in itself, or whether, sooner or later, we shall have to take a final decision one way or the other. Meanwhile, therefore, I should merely like to thank the Chancellor. Any details can de discussed at a further stage.

Mr. Crossman (Coventry, East)

Speaking for Coventry, I thank the Chancellor of the Exchequer for his statement. We heard a certain amount about what it might be in the newspapers, but what he has said is a great deal better than the forecast in the Press. In the long run, we all hope to, see the total weight of motor taxation reduced in order to give us a really flourishing domestic market. I think that there will be no disagreement on either side that, looking six years ahead, we may hope for that; but I have always thought that the urgency at the moment was to recognise the fact that our supplies of steel are limited, and we can only give steel to industries that can export. There is no suggestion at the moment of relieving the total weight of taxation and stimulating the sales of motor cars for the home market. We cannot afford to produce cars in larger numbers than we are now doing for the home market because we have not the steel to enable that to be done.

What justifies and makes the Chancellor's contribution so helpful to the export trade is the fact that when one compares the motor car with the railway wagon or the steel rail it earns more foreign currency per ton of steel used. I believe that the management and the workers of Coventry are prepared to see as many as possible of our cars exported abroad, and we are prepared to see a considerable period of time before there can be more production for the home market. But in the long run, of course, the home market must be developed to help to develop the motor car industry.

Sir Arthur Salter (Oxford University)

Would the hon. Gentleman as representing Coventry say something on this question which is the one that preoccupies me? It there is a very heavy Purchase Tax, such as 66 per cent., on new cars of the bigger type which we want to export, and there is consequently little or no home market for them, would these bigger cars, in fact, be made for export? An exporting country, America, for example, does not normally make types for export; it exports some of these types for which there is already a large home demand.

Mr. Crossman

I am grateful to the right hon. Member for Oxford University (Sir A. Salter) for raising that point, and I think that the answer is fairly clear. If I understand the Chancellor's proposal correctly, it is that he imposes the extra Purchase Tax on cars whose cost minus Purchase Tax is over £1,000. During the Debate there was, I think, almost universal agreement that the type of car we should aim at producing for the export trade was the medium car. The ordinary 18 h.p. car made in Coventry or Birmingham falls below the £1,000 mark without Purchase Tax. I think that the rate of £1,000 is, therefore, precisely the right one.

The Deputy-Chairman

The hon. Member is now making a speech which would be more appropriate when the Chancellor of the Exchequer introduces the new Clause.

Mr. Crossman

I was replying to a point raised in reference to this Clause. We have had a speech from the other side suggesting that the Chancellor was not solving the problem satisfactorily, and a justification of the Chancellor's attitude is surely in Order?

The Deputy-Chairman

We are now discussing the Clause on which the Chancellor made a statement. Any reference to what the Chancellor said is in Order but not to debate it.

Mr. Crossman

Any proposal designed to help the industry will help the medium horse power car. as the new Clause would. It will not deter production of the expensive car, because in the case of the expensive car the tax forms a very small item in the actual cost of the model. In the present proposal, the revenue, on cars now in use is preserved and this will be a help for the Chancellor. We get a flat rate tax as the original proposal suggested, and we get, in addition, the promise of a slight reduction in the total volume of net taxation in the future. That is an omen of the future that we welcome. It means that a future Chancellor of the Exchequer will, in fact, get less revenue from the industry. It is on that point that I see an improvement on the original Clause as drafted by the hon. Member for Widnes (Mr. Shawcross).

But if we remove the financial shackles on the industry, which no one denies the Chancellor has done, there is a gigantic responsibility on the industry. There is more money and skill and manpower locked up in this great industry than perhaps in any other one industry. We depend on it for exports more than on anything else, and we in Coventry at least are fully aware that, despite anything the Chancellor may do, if this industry in a buyers' market fails to continue its exports, it will not be permitted to have steel merely to produce for the domestic market.

5.30 p.m.

Mr. Blackburn

Does the hon. Member think we are likely to have a continued shortage of steel?

Mr. Crossman

We are likely to have a shortage of steel for the next four years, before the Socialist reforms in which some of us believe come into full effect. We must, therefore, if we are responsible people, look forward to this. Within the next two or three years we must have a reorganisation of the industry, whose last excuse for not reorganising is removed by the Chancellor's speech. The hon. Member for King's Norton (Mr. Blackburn) said earlier in the Debate that, after all, price did not matter, we had quality. I would point out to him that even an article of quality has a price, and we have to compete in price with the rest of the world. Our 18 horse-power car has to compete with its American opposite number, and any one who went to the Geneva exhibition knows what we are up against. Our cars are competing against their opposite numbers which cost half as much. I do not mean opposite numbers in horse power, but opposite numbers in the sense of which a similar class of customer will buy—for instance, the Buick compared with the Humber. American cars are roughly half the price for the same sort of vehicle. We have to face that fact; we have to have competitive prices, and they will not be produced simply by a change in financial or fiscal legislation.

The Chancellor has removed the fiscal shackles, but the trouble is that there are a great many worse shackles, which the industry has set upon itself and to which allusion has been made, which it must remove. If those shackles are not removed in time, we shall have heavy unemployment in Coventry. We shall have heavy unemployment if we do not get ahead with the export drive, if we do not improve our models and cut down the prices so that, when we come to the buyers' market, we shall really be able to compete. If we do not do that the Midlands will be faced with a very serious situation, and it is therefore with a grave heart that we look forward. We thank the Chancellor and everybody who has helped us, but we know that the real job is up to the industry. If the industry is not willing and able by voluntary agreement to put its house in order, some of us at least would expect this Government to put some pressure on the industry, in the national interest and in the interest of the workers, to put itself in order by carrying out the necessary rationalisation, without which this change of fiscal policy will be completely nugatory.

Mr. Blackburn

Before the hon. Gentleman sits down, will he answer this question? It is a perfectly simple one and can be put quite clearly. Is he or is he not in favour of a reduction in the overall incidence of tax on the motor industry?

Mr. Crossman

I thought I made that quite clear in the course of my speech. Of course we are all in favour of it, and of course we can all make speeches saying that we are in favour of it, in the long term. But in the short term the motor car industry must—and it has always accepted this, and has been extremely good about it—justify itself in terms of exports up to, say, 50 per cent. of its production. If we are to do that we cannot encourage the home market. Lots of us want to buy cars, but we must be deterred by every method from buying them, so that they go abroad. That has been accepted by everybody in the industry. We all know that we will only get steel if we can with that steel make motor cars which earn foreign exchange and so enable us to buy the food and raw materials which we require.

The Deputy-Chairman

I want to make an appeal to the Committee. I think there is a danger at the moment that hon. Members may get entirely out of Order in discussing the Chancellor's proposals. These will come before the Committee at a later stage, and there will be a full opportunity for discussion. The only matter under discussion now is the proposed new Clause, and I hope hon. Members will confine their remarks strictly to it.

Mr. Walter Fletcher (Bury)

In view of your Ruling, Mr. Beaumont, I will try to confine myself to the original Clause. As to what the Chancellor has said, I think I can say that we are all grateful for the step he has taken, but let us hope that his motto is not "One step enough for me," because the step he has taken this afternoon, like the proposals in the new Clause, forms only one of the small bits and pieces required to make up the new machine which we must create in order to allow the motor industry to run properly and get the export business. The first difficulty I foresee is a mental hazard. The Chancellor has shown this afternoon that he has begun to overcome the difficulty which lay in regarding the motor car as a luxury and not as a necessity. We have seen on several occasions that he used to think that the ownership of a car was almost a badge of shame. There is a great danger in that, because there is no doubt about it that in times to come the type of motor car which will be produced, in view of the limitation of steel, labour, etc., must be suitable both for the home and export markets. In consequence, it seems highly necessary not only that the incidence of taxation but that the general attitude of the manufacturer of motor cars should be such as to bear that in mind. Let us, however, take it for granted now that the light has dawned and that the Chancellor really understands these things, so that the point will not be lost sight of.

I think it is rather necessary to go back a little way to discover some of the physical reasons which have put the motor industry into its present state. It is no use saying "Do not let us talk about the past," because we must learn the lessons from it. I believe, and I hope the Committee will agree with me, that changes in taxation alone, whether in regard to its incidence or its total, are entirely insufficient to solve this problem. There are many other causes which have brought about the present situation in which we manufacture a type of car which it is difficult to sell overseas because it is not suitable there. Let us go back to the original sin, and I know I am in some danger in doing so because of the original sinner. The original sin was the alteration and the robbing of the Road Fund. If the money which had flowed into the Road Fund from the time it was robbed had gone towards making new roads in this country, we should by now be producing a car which would be suitable for export. The hazards which this new Clause is designed to overcome lie not only in the fact that we have not got the same type of roads which exist in the rest of the world, but also in the fact that we have not built garages big enough for anything but small cars. Therefore, we have a very long term difficulty in synchronising and adjusting the home type of car and the overseas type of car: It cannot be solved by taxation alone, it must go very much deeper.

There is another point of considerable importance to which I should like to refer. There has been a tendency to fasten on the motor industry at the present moment the responsibility for the whole of its future, to say that, because the Chancellor is making this one step under some pressure, from now on the motor car industry must make its own way. That is not so. It must be a partnership between the Government and the motor industry, with contributions from both. I would like to point out another important factor. Every hon. Member who has spoken has referred to the export trade, but the demand from the export trade cannot be met efficiently by the motor industry for several years, because designs cannot be altered so rapidly that the car we shall eventually send into the outside markets can be produced within several years. I have lived overseas many years and I have been overseas recently. I realised the difference when travelling in a 12 h.p. car between Singapore and Kuala Lumpur. Incidentally, I have just bought a seven h.p. Austin, and I find it is very exhausting because I have practically to be forced into it, and the same is true of the type of car we are exporting today. The return journey I made in an American car, and the comparison in comfort was so much in favour of the American car that I cannot be surprised at the overseas buyer's attitude. As far as the British car is concerned, it has been a case of too much money chasing too little motor car.

We all talk very glibly about the export drive as if the choice was between making cars today for home consumption or making them for, export, but there is another alternative which is a rather frightening one, and that is that we shall not export motor cars but we shall export enterprise, energy and skill. Look what happened when the McKenna Duties were introduced and Imperial Preference of a sort decided upon. Some of the largest American companies in the United States crossed over the border to Canada and started factories there. In that country we have the greatest manufacturing area for cars in the Empire outside this country. It is clear that if the motor car industry is not going to have a great deal more assistance than this one item there will be a tendency for the manufacturers to go overseas and manufacture. This new Clause has provided—

The Deputy-Chairman

I am glad the hon. Member has come to the new Clause.

Mr. Fletcher

Perhaps I leave reached it in time. This new Clause by itself could not possibly achieve such a result. It is only one of the minor pieces of machinery. If we wish to make this country the motor car arsenal of the Empire, we shall have to go a great deal further than this alteration of a slight overbalancing from one portion to the other of the incidence of taxation. This will not produce a car of any sort. Our production of the peoples' car or the Volkeswagon—a word which has not a very happy sound in our ears—has not been very successful. If the Chancellor really wishes to see a people's car produced in this country, a car suitable for everybody through the redistribution of wealth, in which he is taking such an active part, he must act on great deal broader lines than he has up to date. I do not believe that taxation alone can achieve very much. I do not believe that this new Clause, though it has been so ably yet modestly proposed by the hon. Member for Widnes (Mr. Shawcross), is anything more than the opening of a small door. Beyond that door there is an enormous area in which the Chancellor and his colleagues must work. They have to get in conjunction with the industry further opportunities for the industry to show what it can do.

Above everything else, it must be recollected that it will be grossly unfair and a handicap to the industry if in a year or two hon. Members on the other side say, "We helped you in regard to taxation and still we are not getting the exports." The changeover takes a great many years, the overseas organisation, the selling organisation and the spare parts organisation all take a lot of time. It has taken many years to get to the present state. It is folly to think that we shall get out of that state very rapidly. This step is a good step but it must not be just a matter of self-congratulation by the Chancellor. It must be a spur to him to do much more in the realms of taxation.

Mr. Shawcross

Might I very briefly explain the reason I am going to take a certain course? First, I should like to thank hon. Members on both sides for the very cogent arguments with which they have supported the new Clause standing in my name, and I should like briefly to refer to certain arguments with which I do not agree in case I should be thought to accept them. The hon. Member for Bury (Mr. W. Fletcher), who spoke last, made it more clear apparently than I had done that this Clause, or one like it, would not of itself achieve anything in producing cars for the export trade. He went further and suggested that what he wanted was assistance in the form of supervision and control by the Government of the motor industry. I do not want that for a moment. So long as the industry remains in private hands it must be for the industry of itself to reorganise and rehabilitate its affairs to produce what is required.

Mr. W. Fletcher

I think that if the hon. Member looks at tomorrow's HANSARD, he will see that I suggested nothing of the sort. Neither control nor supervision by the Government was suggested by me, but that a new spirit of partnership between the industry and the Government had to be created.

Mr. Shawcross

I am much obliged to the hon. Member because I myself am in a somewhat difficult position in that respect. Some months ago I used some harsh words about the industry. In regard to that I feel rather like the Leader of the Opposition when he announced the alliance of this country with Soviet Russia. He said that he would not withdraw one single word of what he had said about Communism in the past, but nevertheless he was going wholeheartedly and frankly to ally himself and this country with Soviet Russia. I do not want any further comparison to be suggested except to say this: that so long as this industry does everything it can, as I believe it is doing, to produce the requirements for our export trade, we on this side of the Committee will assist it, but if it proves to be a failure—and I agree that one or two years is not enough time to judge it—it may be that hon. Members on this side of the Committee and this Party generally will come to the conclusion that it must, in the national interest, be taken into public ownership.

5.45 p.m.

The hon. Member for East Coventry (Mr. Crossman) misunderstood my new Clause, because he said that the Chancellor's proposals were better for reducing the over-all weight of taxation on the industry. I am sorry that the hon. Gentleman is not in his place at the moment, but that is quite wrong. My proposal went further than the Chancellor's and that was a matter which I stressed when I moved the new Clause. The hon. Member for King's Norton (Mr. Blackburn) seemed to be very despondent about the capabilities of the industry, and he seemed to me to be inclined to exaggerate the difficulties. It may be said that we cannot exaggerate those difficulties at the present time. I fully appreciate, as the right hon. Gentleman the Member for West Bristol (Mr. Stanley) pointed out, that it will be extremely difficult, for a great many important reasons, to be able even in the long run to compete with the American industry.

I should like to give an example for the hon. Member for King's Norton which comes from his own constituency and which may help in regard to this new Clause or another which will come later on. It is with regard to a vehicle produced by the Austin Motor Company which costs, without tax, the sum of £1,000. I have not seen it, but on paper it seems to be a type of vehicle that would be suitable for exporting. I ask the hon. Member for King's Norton and the constituency which he represents to consider whether it might not be possible, if that model were produced in sufficient quantities, to reduce the price by half. The quantities that are envisaged at the moment are so small that £1,000 is probably less than the cost, but if a sufficient number were produced it might well prove to be that it could be sold at a much lower price.

Mr. Gallacher (Fife, West)

Is the hon. Member not aware that, in dealing with quantities, any industry depends for the basic sale on the home market, and it depends upon the strength of those basic sales whether prices can be cut down in the home and export markets?

Mr. Shawcross

I am much obliged to the hon. Member for that remark, because it reminded me of what I wanted to say about the home market. I think it may be agreed, as was pointed out by the hon. Member for Chippenham (Mr. Eccles), that the American market is four times the size of ours, though possibly that is an exaggeration, and three times might be nearer the figure. That is no reason, however, why our industry should not produce at least one-quarter of the number of motor cars for the home market. I know all the difficulties; they can and, I am sure, will be overcome. Finally, may I refer to one or two remarks made by the hon. Member for Edgbaston (Sir P. Bennett), who seemed to think that I was complaining about bad cars produced in the past. I thought I made it clear that I was not complaining, but, on the contrary, was commending the ability with which manufacturers and designers had produced vehicles in relation to the taxation system into which they had to be fitted. What I was saying was that taxation prevented the production of the type of car on which we could rely for exports. I do not think that your Ruling in regard to remarks about the Chancellor's proposals was altogether applicable to me, Mr. Beaumont, since I am about to ask leave to withdraw the Clause.

The Deputy-Chairman

I am afraid I cannot discriminate between hon. Members in that connection. The ruling applies to all Members of the Committee.

Mr. Shawcross

Further to that Ruling, Mr. Beaumont, surely I am allowed to explain why, in view of what the Chancellor has said, I wish to withdraw the Clause which stands in my name and in the names of my hon. Friends.

The Deputy-Chairman

The hon. Member may mention it in passing, but he must not go into details.

Mr. Shawcross

May I just do it in the manner you have described and, referring to it in passing, say that I am sure that the Committee would, as other hon. Members have said, welcome what the Chancellor has stated in principle? I have already made some remarks about him which have been described as fulsome, so I will not offer any further comments on that score, but will reserve the comments which I would like to make—but which are now out of Order—for a future occasion. May I make this personal remark which affects my own constituency? It is often said to me, "Why do you take this interest in the motor car industry, inasmuch as you have no motor car manufacturers in your constituency?" My reply to that is, first, that until I heard the speech of my hon. Friend the Member for East Coventry this afternoon, I would have thought that it was a great disadvantage when speaking on a subject such as this to have in one's own constituency a very major part of the industry concerned. I feel free in these matters. On the other hand, I have in my constituency 100,000 workers, probably the largest—

The Deputy-Chairman

I do not think that the number of workers in the hon. Member's constituency has anything to do with the question under discussion.

Mr. Shawcross

I was just going to say that, having regard to the importance of this matter—and if you will let me include the sentence, Mr. Beaumont, I think you will see that it is in Order—

Mr. Stanley

On a point of Order, Mr. Beaumont; since I have an Amendment on the Order Paper which I do not propose to move, would it be in Order for me later to explain from the point of view of my constituency why I put down that Amendment?

The Deputy-Chairman

The right hon. Gentleman would not do so knowing that it would be out of Order.

Mr. Shawcross

My constituency is typically a large industrial constituency. One of the objects of this Clause, or of any other Clause like it moved from the other side, is that the workers of this country shall be able to look forward to the time when, by means of the motor industry, we shall have built up a great export trade. Then they can look forward to enjoying the use of motor cars themselves. That will not be achieved by excessive taxation. I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

The Deputy-Chairman

Before calling the new Clause—(Mills, factories allowances.)—in the name of the hon. Gentleman the Member for Chippenham (Mr. Eccles) I have to inform the Committee that this has been selected after a great deal of consideration and some hesitation and that the Chair reserves the right of withdrawal if it is demonstrated that the passing of the Clause would impose a charge.