HC Deb 11 May 1959 vol 605 cc918-23

Motion made, and Question proposed. That the Clause stand part of the Bill.

6.30 p.m.

Mr. Ernest Davies (Enfield, East)

I do not think that the Committee will find this Clause controversial, or that it will occupy us long, but it would be helpful to us if it could be explained to us and particularly if we could know how it is proposed to administer the provisions of the Clause.

As I understand it, from the vague references made by the Chancellor during his Budget speech, the Clause exempts from fuel duty oil which is used in certain cases. The first case is where the engine is not actually used to propel the vehicle upon the road; that is to say, it is a subsidiary engine used for other purposes and does not draw its supply of oil from the engine which is used for propulsion. The other case is where vehicles are not actually used on the roads.

This is where I would like an explanation because I am not clear, either from what the Chancellor told us earlier or from the wording of the Clause, what category of vehicles are here concerned. What vehicles are there which are not used upon the roads but which consume oil fuel that would normally be subject to duty? It may be that they are vehicles used in factories, and so on.

Here there is being introduced a discrimination in regard to oil duty, in that these vehicles are being exempt from payment of duty. Yet whenever we on this side of the Committee have suggested that there should be certain categories of vehicles exempt from duty, such as public service vehicles, the Treasury spokesman has always said that there cannot be introduced discriminatory taxation of this kind because it would be too difficult to administer. I therefore hope the Paymaster-General will explain how he will be sure that there will be no abuse by operators of such vehicles, who will, presumably, be drawing oil from the same source as those who use vehicles on the roads and who may even own and operate some vehicles which are on the road, and others which are not, and that a black market is not developed as a consequence.

When I put a Question to the Chancellor recently and asked him the estimated cost of remission of duty on diesel oil used in public service vehicles—which we are not debating now, but may be debating later during the Committee stage as there are new Clauses to that effect on the Notice Paper—the right hon. Gentleman replied partly to the following effect: …since relief from hydrocarbon oil duty could not be limited to oil used for particular purposes, such remission would put in issue the entire duty …"—[OFFICAL REPORT, 14th April, 1959; Vol. 603, c. 803] The present case is comparable to any exemption of any category of vehicles. Here certain vehicles are being exempted, but in this case presumably the Chancellor does not consider that it will put in issue the entire duty. It would be helpful to the Committee to obtain an assurance from the Paymaster-General that now the Treasury has decided that it is possible to administer discriminatory taxation as regards all fuel duty consumed by vehicles on the road there will be no future objection, on that score at any rate, to further proposals which may be made later in our debate.

Further, in the same connection, the Chancellor, in reply to a supplementary question following the Question to which I have referred, said that the question concerning a public service vehicle was discrimination between diesel oil and petrol and that, therefore, it was not practical administratively. Yet here we have a proposal that there should be discrimination between oil and petrol. Here we are concerned only with heavy oils. If, in this case, heavy oils can be differentiated from the light oils, it could be done in other cases.

The arguments produced previously fall to the ground, and this gives us con- siderable encouragement about future concessions which would be in order and which, we trust, the Treasury will be able to make. Would the Paymaster-General, therefore, tell us, first, exactly the category of vehicles to which this Clause applies? Is it confined (a) to the engines of vehicles not used for propelling them along the road; (b) to vehicles not used on the road? If so, what vehicles are they? I believe that there is a third category, (c), comprised of vehicles used in road construction.

On this side of the Committee we have no objection to such vehicles being exempt in this way, but we want to be sure that the way I have endeavoured to explain the position covers all of them and goes no further. Also, would the Paymaster-General clarify the administrative side, so that we can be sure there will be no abuse? I hope he will tell us that the Treasury has decided that there can be discriminatory taxation as between different categories of vehicle and as between diesel and petrol.

Mr. Maudling

I will gladly answer the hon. Gentleman's question. I thought that when he began to speak on this Clause he would probably try to establish a bridgehead for further exploitation at a later stage, but I shall have to disappoint him, because there is no change of principle involved in this Clause. A line has always been drawn between the use of heavy hydrocarbon oils for road purposes, which are subject to duty, and the use of heavy hydrocarbon oils for making gas or electricity, which are not subject to duty. All we are doing here is slightly to redraw a line between what is dutiable and what is not, to clear up one or two anomalies.

I will explain the categories affected. The vehicles involved are, first, an engine mounted on a road vehicle, for example, a concrete-mixing machine on a vehicle. That piece of machinery will no longer have to use duty-paid fuel, any more than a static piece of machinery used for the same purpose. This is important because there are more heavy hydrocarbon oil-using machines being used with processing machinery on them. Secondly, vehicles which do not use public roads and are not licensed. The hon. Gentleman referred to vehicles used inside factories or in quarries or on large estates. Those vehicles which are not licensed will in future be able to use duty-free heavy oil.

There are two further additions to the categories of specialist vehicles which can use heavy hydrocarbon oil free of duty. They are, first, road construction vehicles and, secondly, vehicles used on public roads only for passing from one part of the owner's land to another and for distances of not more than six miles a week. That, I think, is a distinction which is already made for licensing purposes, and is an easily understood one.

The main point is that, as the Committee is aware, all light hydrocarbon oils, which are mainly petrol, are liable to duty. The heavy oils are liable to duty only if they are intended for use in road vehicles and would, therefore, be competing with the light hydrocarbon oils. In other words, diesel oil or gas oil used in a lorry is taxed because otherwise there would be unfair competition with petrol used in a petrol-propelled lorry.

The definition used up to now distinguishing between the two types was based on exempting certain specialised vehicles such as tractors and mobile cranes, which have always been able to use duty-free heavy oil so long as their use on the roads was limited to special purposes.

We have felt that in the case of the vehicles which I have described—the ones used off the roads, for example—it is an anomaly that they should have to continue to pay duty on the diesel oil which they use when the duty is designed to balance up competition in road use with the light hydrocarbon oils.

That is the purpose of the Clause. The effect on the revenue will be very small indeed. It does not involve any change in principle whatever. It involves merely a small redrawing of the line of distinction already existing between duty-free and duty-paid user of heavy hydrocarbon oils, and so far as the change is made, it will result in a reduction of duty to certain taxpayers.

Mr. Jay

I am not sure that the Paymaster-General has answered the main question asked by my hon. Friend. I realise that there have been certain vehicles not on the roads up to now which have been unable to use duty-free fuel. The Paymaster-General says that he is now widening the definition; but we have always previously been told that if the definition were widened to any material extent it would lead to a situ- ation in which duty-free petrol would be used, that it would be extremely difficult to police the situation and that abuses would be liable to follow.

How is it that one can safely, apparently, so we have now discovered—we were never told this previously—make this extension without there being any abuses, whereas when we have argued, for example, that there might be exemption or partial exemption for public service vehicles using diesel fuel we have always been told that it is quite impracticable? Here we are discussing the identical heavy fuel oil which in one case will be taxed and in the other will not.

Can the Paymaster-General explain how the provision will work administratively? Will people using the duty-free fuel purchase it duty-free with a certificate, or from a certain source, or by some other method, or will they purchase ordinary duty-paid fuel in the same way as would be done for a heavy lorry on the road and then claim the duty back from the Customs and Excise? Perhaps the Paymaster-General will explain how it will be done in practice and why, in the light of the actual administrative method, it is practicable to do it without abuses in the way now proposed whereas it is said that it would be impracticable if the provision were extended any further.

Mr. Maudling

I am sorry that I did not deal with the point previously. The right hon. Gentleman is wrong in saying that there is a large extension here. The extension is very small. As I have explained, the effect on the revenue will be negligible.

As to the administration, all these heavy oils are dutiable but a rebate is claimed when the oil is delivered from Customs charge. Clearly, in present circumstances there is machinery for establishing whether the rebate is properly claimed. Obviously, similar machinery would be able to apply in the other limited category of classes as the other machinery has applied in the past. There are existing exemptions. I am advised by the Customs authorities that they see no difficulty whatever in administering this provision.

Mr. Jay

As a matter of administration, ought it not also to work in the case of passenger public service vehicles?

Mr. Maudling

That is the wider question of the use of heavy hydro-carbon oils in vehicles competing on the roads with vehicles using petrol. This is the case of an extremely limited number of vehicles which are not doing that.

Mr. Jay

Does the Paymaster-General agree that, as a matter of administration, this could be done in the case of passengers public service vehicles?

Mr. Maudling

That will arise when a new Clause is debated later.

Question put and agreed to.

Clause ordered to stand part of the Bill.