§ As from the first day of September, nineteen hundred and fifty-three, there shall be allowed from the duties of Customs and Excise a rebate of sixpence a gallon on hydro-carbon oils supplied for use in any mechanically-propelled vehicle driven by diesel fuel and licensed as a public service vehicle for the carriage of passengers.—[Mr. Pargiter.]
§ Brought up, and read the First time.
§ Mr. G. A. Pargiter (Southall)
I beg to move, "That the Clause be read a Second time."
This new Clause is drawn rather more narrowly than I should have liked. In fact, there are other Clauses in connection with this matter which I would rather have been moving and upon which I could have developed the arguments with considerably greater effect than on the narrow point to which this is confined. But the fact that it is narrowly drawn gives me encouragement, because the Chancellor will not be able to say that its effects are so widespread that he cannot possibly concede it.
The very narrowness of this Clause may cause the right hon. Gentleman to think that it should be conceded. It would be a very welcome rebate so far as public service vehicles are concerned. The unanimity with which the proceedings of this Committee have so far been 1853 conducted leads me to suppose that the right hon. Gentleman will want to wind them up in a very friendly way by conceding the rather small concession for which we are asking in the Clause.
What is the case for encouraging the use of fuel oils of this kind? The whole development—and it has been a very remarkable development—of the compression ignition engine has been its greater efficiency. The first principle with which we are concerned is that the fuel required has to be purchased abroad, and, in many cases, there is a very large dollar content in it. To the extent that we use petrol instead of fuel oil, the dollar content is proportionately greater, because petrol goes much less far than diesel fuel oil for compression ignition engines.
It is true that approximate efficiency, in terms of mileage, taking a general average, is that the compression ignition engine will give a 50 per cent, greater efficiency than a comparable sized engine using higher grade fuel, such as petrol. That, in itself, ought to be a reason for encouragement to be given for the use of diesel fuel oil as against petrol. A very good case can be made out to get rid of some of the discriminatory charges which the Chancellor makes against fuel altogether for mechanically propelled vehicles, but that is an argument I am not able to pursue at the moment.
On this issue, having regard to the constant struggle which the operators of public service vehicles have to keep down their costs—and fuel represents a very important item in those costs—it would seem to be of general benefit—not to any particular section but to the whole community, for the whole community is, more or less, the travelling public—to be able to do something to lower the cost of transport in such a way that, even if it does not mean an immediate decrease in fares, it may at least mean that there will be no increase. That ought to be a factor which should be regarded as of first-class importance.
The argument could be developed generally that we ought to do everything we can to encourage the use of the compression ignition engine through the use of lower grade fuel so that we are developing the most efficient form of transport. To go back over the history of the matter, so that this type of engine 1854 could be developed it was freed from tax altogether. It was only when successive Chancellors began to see the possibilities of more revenue that it was made subject to taxation, and the very fact that it was brought into the taxation range tended to slow up the development of the compression ignition engine, and it might well have been developed for a lighter type of engine if it had not been for the fact that it lost its priority for tax rebate at a stage of its development which was too early.
I hope the Chancellor will sympathetically consider this matter. I do not think he can argue that it will cost millions of pounds. It will cost a little money, but the counter-balance in value in the cheapening of public transport, and the consequent general benefit to the public, would mean that it would be a most beneficial direction in which the Chancellor could grant a concession, which would be very readily accepted on both sides of the Committee.
§ Mr. David Jones (The Hartlepools)
I should like to support my hon. Friend the Member for Southall (Mr. Pargiter). Like him, I regret that the other Clauses are not being called, but that is not to say that a case cannot be made out for this one, because its effect on public service vehicles will be very material.
I think that perhaps the situation was better described by "The Times Review of Industry" last March, which stated:The high rate of the fuel tax has had a serious effect on the earning power of many bus and coach undertakings. Although conversions from trams and trolley buses are continuing, the purchase of new vehicles is being deferred until a new equilibrium can be reached on fares which, even without the new applications for increases, are already high and are discouraging the public from travelling.Lord Latham, Chairman of the London Transport Executive, said that, last year, there was a rise of £5.9 million in the costs of the London Transport Executive, of which sum £5.5 million was made up of fuel tax and vehicle duty, fuel tax itself costing £4.65 million.
The case is all the stronger when you come to the municipalities who are operating the diesel oil vehicles. Very many of the municipalities are now operating diesel oil services on what were originally tram routes. Within nearly all the private Bills which gave them permission to run electric tramways there 1855 was a clause which called upon municipal authorities to run services at convenient hours and at cheap fares for artisans and mechanics. Many of these authorities, who have turned from trams to diesel oil buses, are having to continue to run these services at comparatively low fares for workmen. The tremendous increase in the tax on fuel has resulted in the cost of operating being substantially higher than the revenue obtained.
This does not apply only to the municipalities. No one could by any stretch of the imagination accuse me of being friendly to the British Electric Traction Company, but I am going to quote Mr. Raymond Birch who, at a meeting of the Yorkshire Traction Company, said:The operation of our abnormally large number of workmen's services still causes us great concern. Ever since 1942 they have been running at a heavy loss, which last year was at least 3d. per mile, even if based on the average cost of all our services; actually the loss per mile was heavier than this, because workmen's services are the most expensive to run. Workmen's buses often lie idle in pit yards for an hour at a time, and many of them only cover 300 miles per week against the overall average of 800…The effect of the reduction proposed in the new Clause, while it might not cause a reduction in fares, would certainly prevent many of these operators from having to apply for increased fares in the not distant future. No company or municipality operating public service vehicles can increase their fares without making application to the licensing authority, and the licensing authority has to be satisfied that the costs of operating the service are such as to make the application for the increase justifiable. If a reduction in the taxation of this type of vehicle took place it would obviate the necessity for those applications.
The Chancellor will find no difficulty, I am sure, in accepting this Clause. He has already given complete exemption from this tax for fuel used for agricultural and for industrial purposes and, indeed, when diesel oil is used in railway locomotives and rail cars. If, therefore, tax-free diesel oil can be used in agricultural vehicles, in diesel driven railway locomotives, and railcars, there can be no justification for imposing the tax on diesel fuel for public service vehicles.
As my hon. Friend has pointed out, the Clause is very narrowly drawn. It 1856 will not cost the Chancellor very much, but I am sure it will go a great way towards satisfying the discontent being expressed by thousands of workers in the country who are having to pay increased fares to travel to and from their work because of the additional taxation on public service vehicles. I am sure that the Chancellor wishes to maintain his wage freeze policy in industry. One of the ways he can make a gesture to the industrial worker is to reduce taxation on this particular class of vehicle using diesel oil, and so indicate that it is not his desire that costs should increase.
§ Mr. Woodrow Wyatt (Birmingham, Aston)
I should like to support the plea made by my hon. Friends and appeal to the Financial Secretary to accept this very modest proposal. I dare say that he will make all the usual objections— administrative difficulties, a new departure, exempting a particular service, and all that kind of thing. I can see him getting ready to say the customary words in refusing the concession. But, as my hon. Friend the Member for The Hartlepools (Mr. D. Jones) has pointed out, the concession is already made to agricultural and industrial vehicles, and it is not difficult to make the concession to the type of vehicles mentioned in this new Clause. If it can be given to one group it can be given to another under the same sort of arrangement.
When this duty was last increased all the pundits on the other side of the Committee made vehement speeches attacking the increase and pointing out that it would increase the cost of living for working people throughout the country. Two of the most violent denouncers were the present Leader of the House and the present Minister of Works. The Leader of the House, who does not turn up very often late at night, might well have been here tonight because the concession for which we ask is one which is near to his heart. He asked for it very violently in June, 1951. The same applies to the Minister of Works and to many hon. Members opposite.
It is absurd to talk about only having Purchase Tax on luxury items when this duty operates as a Purchase Tax on working people, because public transport is absolutely essential to them. I should 1857 like to illustrate the point by telling the Committee what is happening in Birmingham. The amount of this duty paid by the city transport is £700,000 a year, and over the last few years they have been running at an increasing deficit. The duty more than accounts for that deficit. If it were only reduced by the amount proposed in this new Clause it would save the city's transport £140,000. They have already pending an application for an increase in fares amounting to £300,000, so at least they would be saved nearly half of that and therefore could halve the amount by which they intend to put up their fares if this concession is not made.
I hope that the Financial Secretary will try to do something better than give us the usual administrative objections, that he will be overcome by our arguments and will make the concession.
§ Mr. Boyd-Carpenter
The hon. Member for Southall (Mr. Pargiter) said, with admirable frankness, that this was not his favourite from the stable of new Clauses. He put it forward with modified rapture, but he raised the corner of the curtain at least on a very important and interesting subject.
As I think the hon. Member knows, I have had the privilege of discussing it during the last two months with a number of representative bodies, including representatives of local authorities who are concerned about its effect upon municipal transport services. There is no doubt that there is a certain amount of interest in the aspects of the matter which he has so very agreeably deployed. But, of course, the trouble here is the dilemma into which one falls, and which the hon. Gentleman did not himself wholly avoid. Either the proposal must be of an extremely expensive nature, or it must involve arbitrary discriminations between particular activities.
This proposal, which I appreciate is not his favourite, appears to involve arbitrary discriminations and, also, not inconsiderable cost. It involves a discrimination in favour of the category of vehicles using diesel fuel, or, to employ the rather disagreeable jargon of those concerned with the industry, "the Derv": and, even inside that, while proposing a concession for passenger vehicles, it does not propose anything for goods vehicles.
§ Mr. Pargiter
If the Financial Secretary wishes to widen the scope, we should be very happy. We merely seek the smallest concession.
§ 12.30 a.m.
§ Mr. Boyd-Carpenter
The hon. Member must not tempt me and, in any event, I must keep within the terms of the proposal which is now put forward.
It is a proposal which involves, first of all, quite unjustifiable discrimination inside the Derv group, as against the goods-carrying vehicles. It must be said that that discrimination can be defended by the subject of fares, but I think that there is an exaggeration as to the effect which would result on the level of fares. The industry puts forward a halfpenny on a threepenny fare as the total of the oil duty and it then follows that this particular proposal would only amount to one-tenth of a penny on a threepenny fare. Therefore, only in a certain number of marginal cases could it have any effect on the actual fare extracted. There cannot, therefore, be a sound case on the score that it is undesirable for fares to be increased.
It is only in a few cases which are very neatly balanced that the one-tenth of a penny could have any effect. But there is another consideration, and to that, none of the hon. Members who have spoken have addressed themselves. It is the discrimination inside the passenger carrying vehicle group as between those using Derv, and those using petrol vehicles. It is always important that taxation should be fair; that it should fall equitably on different people, and especially so when those people may be in competition one with the other.
This proposal to grant a rebate on diesel fuel, while leaving an arbitrary duty unchanged, would involve some degree of discrimination against the petrol driven passenger vehicle; and that becomes more important when one recalls that the modern vehicle used in towns is diesel engined, whereas the older fashioned country bus tends to be petrol driven. To that extent, this involves a discrimination between different types of passenger vehicle; a discrimination which might be thought to be somewhat unfair from the point of view of the petrol driven vehicle.
1859 It is a little difficult to justify, on the very general grounds the hon. Gentleman has put forward, this discrimination as between two types of vehicle. One hon. Member pointed out that the diesel driven vehicle is, on the whole, more economical in fuel. That may be an argument, to some extent, for this vehicle, but is equally, of course, an additional reason why a differential duty such as is proposed would operate somewhat harshly against the petrol driven vehicle. Therefore, there is this difficulty. The hon. Gentleman seeks to propose a comparatively limited concession, and, therefore, does involve himself in having to justify an arbitrary discrimination both between passenger and goods vehicles and, amongst passenger vehicles, between those propelled by one fuel and those propelled by another.
In so doing he has not succeeded in keeping the cost down to a figure which can be disregarded. The hon. Member for The Hartlepools referred to this as a rather small concession. It all depends, as the late Dr. Joad would have said, on what one means by "small." It would cost £5¼ million in a full year, a not unsubstantial figure.
§ Mr. Boyd-Carpenter
I fully understand the desire of the interests concerned to secure relief from the burden involved in the fuel tax, and one can understand the natural feeling, particularly of those who happen to operate vehicles of the particular kind the hon. Gentleman has picked out, that this would be from their point of view, a very agreeable concession, if it could be made, but it is really impossible to justify both discrimination of this sort and the not unsubstantial financial element, £5¼ million, involved.
I would suggest to the Committee that while nobody disregards the weight of this burden of taxation on many that has to be supported in these days in which a massive defence programme and a large social service system have to be simultaneously maintained it is really not the right way to approach this problem of the fuel duties, to put forward a discriminatory proposal of this sort. In any event, the cost, I am afraid, makes it quite impossible for my right hon. Friend, in present circumstances, to accept. 1860 Therefore, while I understand the interest in the proposal, and have had reason to be made to understand it from the many discussions I have had with a great many people outside about this sort of proposal, though not, I think, this particular proposal, it is not possible for the Government to accept it.
§ Mr. Jay
In default of any speech from the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), who seems to me to be taking slightly more interest in the proceedings than some of his colleagues on the Government benches below the Gangway, I venture to intervene. I think it is a little disappointing, even at this late hour and at this late stage on the Bill, that the Government are not able to make any concession at all. Never have I known a Chancellor who has been so sterile in concessions during the Committee stage of a Finance Bill.
I did think that my hon. Friends advanced at least two strong arguments in favour of this concession. First, they showed, what the Financial Secretary did not contest, that the diesel engine is more efficient in its operation than the ordinary petrol engine. Secondly, they argued— and again the Financial Secretary was not able to dispute the point—that any rise in the cost of public service vehicles tends to be reflected in the cost of living and become an argument, and a valid argument, for higher wage rates. Indeed, it is one of the disadvantages of these fuel taxes that it is exceedingly difficult to raise the tax, for, it may be, good reasons, on the ground of balance of payments, and so on, without creating this effect on public vehicles used by most of the people.
The Financial Secretary tried to argue that the effect would be small, and did not matter. Later he suggested that it was rather a big concession for the Treasury to accept at this stage. Therefore, I think it is clear that it is not a negligible concession. Nevertheless, I think there is some force in the difficulties about discrimination which the Financial Secretary set out. I say that not merely as a result of the speech of the Financial Secretary, but as a result of discussions on this subject which I have had in the past, and of the speeches which I have made in this House which, 1861 I am glad to find after this long interval have converted the hon. Gentleman.
I think there is a case for trying to do something if we can overcome those difficulties. I am not saying that the discrimination could not eventually, by further examination, be overcome; but I am not satisfied that they have been sufficiently overcome for me to advise my hon. Friends to press this matter much further at this time of night. None the less, it is a point which should have been raised, and I regret that the Government have had to continue their record of sterility throughout this Bill.
§ Question put, and negatived.
§ Second Schedule agreed to.
§ Bill reported, with Amendments; as amended, to be considered upon Monday next, and to be printed. [Bill 98.]