New Clause.—(EXTENSION OF DRAWBACKS OF HYDROCARBON OIL DUTIES.) (Hansard, 28 June 1951)

§ The Financial Secretary to the Treasury (Mr. Douglas Jay)
I beg to move, "That the Clause be read a Second time."
I should like first to associate the Government with the right hon. and gallant Member for Gainsborough (Captain Crookshank), in saying that we regret the absence of the right hon. Member for Aldershot (Mr. Lyttelton). We hope that he will soon be back.
This Clause carries out an undertaking which I gave on the Committee stage to see whether we could not give a concession in the case of industrial light oils used in the export of manufactured goods. As the House will remember, the present law is that where light hydrocarbon oils which have borne tax are used in the manufacture of goods exported, a drawback may be paid if the oil is physically present in the exported goods. What we propose to 1590 do is to widen the present provision for drawback in such a way that a similar drawback may be paid where the oil is not an actual physical ingredient of the exported goods but is, in the words of the Clause, used as a material, solvent, preservative or finish in the manufacture… of the goods. The other Clause which I understand we are also now discussing seeks to give a rebate or complete exemption of tax for all light oils used in manufacture. In our view, for reasons which I gave in Committee and in previous debates in this House, that is not practicable.
The first reason for that view is, of course, that it would arouse very great administrative difficulties if we attempted to give an exemption for industrial oils whether or not the resulting manufactured goods were exported. If they are exported, they pass through the Customs organisation of the port and, therefore, the job of checking and control is reasonably easy. Second, a general exemption for all light oils used in manufacture would cost a large sum—about £20 million in a full year—and, if that were to be made up, it would be necessary to throw a much heavier burden by way of tax on the road user.

§ Mr. Geoffrey Lloyd (Birmingham, King's Norton)
It would be only in the region of about £4 million if it were not complete exemption but if it were simply effected on the extra increase in this year's Budget.

§ Mr. Jay
I think that is right. With regard to the complete exemption of industrial oils, I think that it is generally agreed that the petrol used in ordinary commercial transport is, in a sense, part of the general production costs of manufactured goods. Therefore, it would be rather hard to distinguish between oils used in the physical process of manufacture and those used in the transfer, for instance, of components from one factory to another.
What we propose in the new Clause that stands in the name of my right hon. Friend is to grant a drawback in cases where the oil is used, although not present in a physical form, in the exported goods. An example of that, which we have discussed before, is rubber gloves, which require oil for their manufacture. The main 1591 difficulty which has deterred us from introducing this extension of drawback before was that the circumstances differed so much from one type of product to another that we always doubted whether any concession was administratively possible.
The method which we now suggest is that the Treasury should have power to determine, trade by trade, whether the sort of drawback covered by the Clause would be justified, and the basis on which it should be calculated. The Clause, therefore, provides that the drawback should be granted by Order, subject to annulment by this House. I may, perhaps, add that the trades, with many of which, of course, we have already been in consultation, if they wish to make proposals or discuss this matter with the Customs should communicate with the Commissioners of Customs and Excise in Finsbury Square. I hope that this concession, so far as it goes, will meet with general satisfaction, and I commend it to the House.

§ Mr. Geoffrey Lloyd
I can say at once that we are glad that the Chancellor of the Exchequer has moved this new Clause in order to give effect to the concession that he announced in Committee. We are however, disappointed that he has not gone further and made a point of exempting the users of these light oils in industry as a whole, as we proposed in Committee, and which is the effect of our later new Clause, at any rate to the extent of not putting on the extra Petrol Duty proposed in this year's Budget. I would remind the House that it would very notably reduce the figure that it would cost the Chancellor of the Exchequer from the point of view of revenue, as the Financial Secretary admitted when I made an interjection during his remarks.
I do not propose to traverse again the arguments that we used in Committee about the importance of the industrial development which is hindered by this high rate of duty on these oils used as an industrial material, but I should like to draw attention to what is going on in other countries. The Financial Secretary and the Chancellor are always very free in making comparisons with regard to the price of petrol in other countries when it happens to suit their argument. May I point out to the House that in the 1592 United States, for example, there is a rebate ranging from 90 per cent. to 100 per cent. in respect of the tax on these light oils used in industry as compared with their use in road transport. In Canada there is almost 100 per cent. rebate for industrial oil, as also in Australia, South Africa, Eire, Holland, Denmark and Norway; and lesser rebates in several other countries.
The effect is that nearly every industrial country in the world gives this kind of rebate which the Chancellor is refusing to industry in this country. It is not a matter of our being in the company of several industrial countries which do what the Chancellor is refusing to do as compared with several industrial countries which do something different; we are, in fact, practically the only industrial country in the world in which this rebate is refused. It would seem that some of the arguments which we made in Committee are accepted as being very valid in almost every other industrial country, but here the Chancellor refuses to acknowledge them.
The Financial Secretary said this afternoon that one of the reasons the Chancellor did not feel able to do so was because of the administrative difficulties. That is a matter to which we must give careful attention, because we have very high administrative standards in this country and we have the experience of several industrial conventions with regard to labour matters which we are fulfilling to the letter and which some other countries are not fulfilling to the same extent.
I admit the force of the argument that there may be still some countries which have not the same high standard of administration as we have in a matter of this kind. What I do not think it is valid for the Chancellor to contest is that in all the countries I have read out, and in all the well-conducted and well-administered countries of the world, there is not one of those countries that is not capable of a fair and equitable administration of this rebate. I do not believe that can be substantiated.
In Committee the Financial Secretary said that he was not satisfied from the information available that these rebates could be administered with fairness. It does not look as if he has complete 1593 knowledge on the subject. I should have thought that with regard to the United States, Sweden and Switzerland, and even in respect of France and some of the other countries I have mentioned, that on the general level of their financial administration they are administering this rebate in a practical way.
I suggest that it is not enough for the Treasury to produce this point and to suggest that no one else is likely to administer it fairly. I suggest that the Chancellor ought to inquire in detail into the methods of administration of this rebate in all the other big industrial countries with a view to making sure that it is possible to administer the rebate fairly in this country.

§ Mr. Ellis Smith (Stoke-on-Trent, South)
Would the right hon. Gentleman name the document from which he is quoting?

§ Mr. Lloyd
This is the document issued by the Industrial Light Oils Committee, which I think has made a serious study of the matter. I can let the hon. Member have a copy, or give him the information, if he is interested.
I suggest that the Government are not really making a very strong case on this matter of administration. If I may bring it down to an even finer point, the Financial Secretary went so far as to say that one of the difficulties was mainly that there is so little real distinction between these light oils and petrol used in ordinary commercial road transport. We have to remember that there is not only a partial exemption, but an exemption for the heavier oils used in industry, which include kerosene used in farm tractors, diesel oil and derv which are used in road transport to a very considerable extent.
What is the great difficulty which arises in regard to petrol used for industrial purposes because petrol is also used for commercial road transport, whereas, apparently, the difficulty has been successfully overcome by the Treasury when it was a question of giving a larger rebate for diesel oil used not only in industry but also, as everyone knows, in commercial road transport for lorry purposes? With that I shall conclude my case, because I do 1594 not believe that the Chancellor or the Treasury have an answer to that point