HC Deb 01 June 1961 vol 641 cc428-51

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

3.43 p.m.

Mr. G. R. Mitchison (Kettering)

This Clause increases the Excise duty on vehicles in respect not only of the ordinary motor car, but a whole group of commercial vehicles and vehicles owned by local authorities and other people who have to carry out public duties of various kinds. In his Budget statement, the Chancellor of the Exchequer estimated that there would be a yield of about £25 million in the current year from this increase. The question which we wish to raise today is whether it is worth it, particularly in the light of the Bill and the Budget statement which preceded it.

This is a Bill which, taken as a whole, makes some notable concessions in direct taxation. I shall not go into them now in detail, but we are all aware of the concessions which are being made to Surtax payers, to take one obvious instance. We are also aware that there are other proposals, which we debated quite recently, concerning the duty on heavy oils which will bear, to some extent at any rate, on those who are using vehicles whose rate of duty falls to be determined today.

It is obvious that the Excise duty on vehicles presents a temptation to any Chancellor of the Exchequer. The fact is, however, that so far as they are intended to meet expenditure on the roads, such expenditure has still not risen to an inordinate extent for a civilised country. More expenditure is needed. The question, broadly, which arises on this Clause is: ought the users of the roads, both by car and by commercial vehicle, to bear this increase at the moment, an increase by way of indirect taxation, when considerable direct taxation concessions are being made and when there is in the Bill at least one other Clause which will hit them directly?

The present duty on the ordinary motor car is £12 10s. It will in future be raised to £15. This is a substantial increase. It is an increase in the nature of a payroll tax on motor cars. It may not make much difference to comparatively wealthy people who own large cars, but it will make a considerable difference to the large and increasing number of people who have small cars and who take the family to the country at week ends, and so on. Hon. Members and I know from experience in our own constituencies how numerous is the number of people in this class. We are not at the moment concerned with matters of road safety, with the safety of the car, or anything of that sort. We are solely concerned with whether these people should be called upon to pay an increase of one-fifth on the present duty.

I now turn to the other classes who are affected by the proposed increase. I take, first, the farmer. It always seems to me that indirect taxes on farmers should be considered closely, for this reason. Often they result in an increase in the farmer's expenditure one way or another and the necessity of the recovery, or partial recovery, of the increase under the Price Review. In this case, one asks whether it is worth increasing the duty and what other effect it is likely to have. I suppose that the effect will be to increase the inevitable expenditure on a modern farm of any size and to increase it under the heading of expenditure on tractors or other motor vehicles of one kind or another. An increase of that kind will, in the long run, come back to the ordinary consumer.

I turn from the farmer to the vehicles of local authorities. They are specially rated under the Vehicles (Excise) Act, 1949, the amendments to which are introduced by this Clause and the details of which we will consider when we come to the appropriate Schedule. These vehicles are used for public purposes and for carrying out the necessary duties of local authorities. By putting an additional tax on them, the right hon. and learned Gentleman is transferring from the tax account, if I may so put it, to the rate account a certain amount of necessary expenditure. A step in that direction is almost always wrong. We take objection to rates—we always have taken objection to them—on the ground that they come down more heavily on the small man, the small householder in particular, than on the better-off person. Broadly speaking, we regard it as better to meet expenditure of this kind out of taxation rather than out of rates.

What is happening is that the tax is to be increased and that the local authorities will have to pay more in respect of the vehicles that they require for their necessary work. As a result, there will be a burden on the rates transferred from the ratepayer to the taxpayer. We suggest that in this case, at any rate, that is rather doubtful wisdom. Local authorities nowadays are finding it extremely difficult to do the work which they are required to do and an additional burden of this kind is no particular help to them. I suggest that the £25 million here sought by the Chancellor might much more appropriately have been found by some reduction of the concessions which have been made in direct taxation. This is a piece of indirect taxation which will have a bad effect on the public generally.

There are one or two other aspects of this matter with which I should like to deal. Many of us are interested in the difficulties and problems of transport in country districts. Nowadays the closing of branch railway lines and the difficulties consequent on that are telling very hard on the rather remote communities where people find it difficult to keep in touch with the outside world and to get to and from their places of work and their shoping centres. Additions of this kind to a tax on vehicles tell on rural transport. They tell on the transport of individuals and equally on the transport of goods. There are many remote areas, for instance, in Scotland, where the cost of transport of goods bulks largely in the final price to the consumer. The addition of a tax of this kind is bound to have a heightening effect on prices in the remote areas.

Looking at this as a piece of indirect taxation, surely it can be said that a tax on road transport, telling on both passenger and goods transport, is bad in principle and is likely to have a bad effect out of proportion to the revenue-raising factor in it, which we would all agree the Chancellor has to consider. But if the right hon. and learned Gentleman has to consider it, is not a tax on transport of this kind in relation to rural areas, to the functions of local authorities, and to the growing need in the community to get about from place to place, a very doubtful piece of wisdom at the moment? It is unlikely to have a deterrent effect. It will simply impose additional charges on those who use transport and who need the goods which are brought to them by road transport.

I appeal to hon. Members opposite, many of whom are much concerned with farming problems and the difficulties of rural areas and remote communities, to consider whether they are justified in voting for a Clause which will take £25 million out of the pockets of just the people who are concerned and raise it by indirect revenue when it could more properly be raised by limiting the concessions made on direct revenue in the Bill. We on this side of the Committee object to the Clause and we shall show our objection when the time comes.

Mr. Denys Bullard (King's Lynn)

The hon. and learned Member for Kettering (Mr. Mitchison) has dealt with the effect of the tax on transport in the rural areas. I should like to say something on that aspect of the Clause and to protest against what I think will be an increase in the costs of industry and agriculture. In particular, I should like to deal with the effect which the tax will have on the increasing number of farm-workers and other people in similar circumstances who are just coming to the point of owning motor cars and to whom the tax will be a considerable deterrent at a time when rural transport problems are very much in our minds.

I can well understand the Chancellor's wish to incorporate in the Budget and in the Finance Bill some measures which will tend to slow down internal demand and which will add to his very desirable surplus. I know that any such measures are liable to meet objections and I am cognizant of the general purpose of the Budget which I think is good. But, at the same time, I think that it would be wrong if, from the rural point of view, I lid not make a few points about this increased tax.

There is a disposition to regard the motor car as something of a luxury, whereas to many who live in rural areas it is very much of a necessity. It is becoming more and more a necessity these days, with the increasing mechanisation of farming. The Chancellor has made an extremely valuable concession to the horticultural industry in relation to expenditure on glasshouses. The horticultural industry is a great user of vehicles in the transport to market of small quantities of produce. The increased tax will be an added burden to that industry and I am anxious that its burdens should not be increased at present.

The hon. and learned Member for Kettering mentioned the recovery of these costs by agriculture in the Price Review. There is a limit to what can be done in that direction. We know that there is not a complete recovery of increased costs in the Price Review. I do not think that it is a desirable process to add to costs and then add money, by increased grants and guaranteed payments to agriculture, to compensate for the increased costs which the Government themselves have imposed. If the Government are prepared to make that recompense, the community might not be so prepared. There is great danger in saying that in the case of agriculture increased taxation can be put right in the Price Review.

My final and main point is the effect of the tax on farmworkers and on people of similar incomes who must live in the country and who frequently need a car to get to their places of work. The £2 10s. increase in the duty will be a considerable sum to them. We are constantly investigating the whole problem of rural transport. We have had the Jacks Report on Rural Bus Services, but I maintain strongly that the real answer to this problem for most country-dwellers nowadays is a motor car or a motor-cycle. It is difficult to provide a bus service comprehensive enough to cover all rural needs.

I greatly welcome the increase in the number of motor cars run by farm-workers. It is not at all an uncommon sight to see in a field or a farmyard a considerable number of small cars, some of them not very modern, which are used to take workers to and from their places of work. This is very desirable. But I have been forcibly struck by the enormous difference between the use of a car by the farm-worker and its use by his employer, and I speak as an employer.

The employer has many means of recovering increased costs in whole or in part. There is the depreciation allowance, and he can claim the cost against tax. The farmworker, as far as I know, cannot claim anything for the use of his car in going to and from work. This considerable difference in treatment is unjust, and this increase in tax will tend to add to that injustice.

I have great doubt whether the Chancellor will be able to do anything about these two aspects of the matter at this stage, but I want to register a protest at what I consider to be an undesirable increase in motor taxation, particularly from the rural point of view.

4.0 p.m.

Mr. E. G. Willis (Edinburgh, East)

The hon. Member for King's Lynn (Mr. Bullard) has expressed anxiety for those people living in the rural districts of Norfolk. I happen to know Norfolk quite well, but I also know Scotland quite well, where the transport difficulties are infinitely worse. I am attracted by the arguments that he advanced about the necessity for cars and vehicles in those areas, and they are particularly true of the Highlands. The interesting thing is that, unfortunately, in the Highlands and great parts of Scotland, we do not seem to be getting very much out of all this road taxation.

When we come to examine what we in Scotland, for instance, are getting from the Exchequer for roads, we find that Scotland gets about one-eighth or one-tenth of the amount being spent on roads in the United Kingdom, and the Highland areas, where roads are very necessary indeed, are getting about one-fortieth of the amount being spent by the Exchequer on roads in the United Kingdom. Furthermore, the roads that are being made are single-track.

It is a bit of an imposition on the part of the Government to say at this time that people who live in these areas have now to pay not £12 10s., but over £15 for a single track road, which, in many cases, they have not yet got, in an area of the country which is receiving for over one-sixth or one-fifth of the land area of this country, one-fortieth of the amount being spent on roads. This tax, when we look at it from the point of the people who live in those areas, is an imposition.

It is a much greater imposition when we come to consider the fact that it is helping to relieve the tax difficulties of the £5,000 a year people for whom the Chancellor expressed great concern. He was very emphatic and repeated his "great concern" to bring home the difficulties which these people were finding in educating their children. The people for whom I am speaking have not the amount of money coming in which the Surtax payers are finding it so exceedingly difficult to live on.

The people in these areas are finding it even more difficult. Yet to those who, in many cases, are living on well under £1,000 a year, we are saying, "We shall make it much more difficult for you to travel about. We shall not make it easier for you to have a car to get to the nearest village or to a town"—which is sometimes 150 miles away. "We shall make it more difficult by putting on this extra £2 10s." There is no rhyme or reason in the type of argument which the Chancellor advances to the Committee on behalf of his Budget and of this tax.

There might have been a case for increasing the tax on some of the very large cars that seem to take up acres of road space; but to increase the tax for a Mini-Minor by £2 10s. is too much. It is certainly asking too much of those of us who represent and speak on behalf of districts where the use of cars is very necessary. I should have thought that the Chancellor would have had second thoughts about this. If he wants more money for this purpose, let him put a higher tax on the huge cars, which take up about four times the road space of the sort of car which is used by working-class people, and not increase the tax by a flat rate.

That is all that I have to say on this subject, and I was prompted to do so by the expression of opinion of the hon. Member. I could say a great deal more, because one of the problems arising in the remoter areas of Scotland is the increased cost of living resulting from transport charges. We have spent about fourteen mornings in the Scottish Grand Committee during the past two or three weeks discussing precisely these problems. There is a vast area suffering depopulation. The population is declining by 1,000 a year.

The Chairman

The hon. Gentleman is getting rather far from the Clause.

Mr. Willis

I bow to your Ruling, Sir Gordon. I am only trying to relate this tax to the fact that it may add to that depopulation. That, to me, seems to be a very legitimate argument.

The tax will result in increasing the transport charges in those areas. People who carry goods in lorries and vans for the tail-end of the journey will add on the extra cost, and, knowing what some people are like, they will probably add on a bit more. Therefore, the cost of living will go up even further and it will become increasingly difficult to maintain the population in those areas.

The Financial Secretary smiles, but it is not a smiling matter; it is a very serious matter. I can see nothing humorous about it as a Highlander, not even as a Scotsman, and as one who lives in the Highlands. I see nothing humorous about the fact that the population is declining by one-sixth every year. To me, it is a tragedy. Anything that adds to that tragedy will certainly be opposed by me. This proposal seems to increase the difficulties of people who are likely to remain in those areas.

The tax, as framed, is a bad one. Had the Chancellor wanted more money, he could have thought of a better way of getting it. If he held up the tax for a year to see what would be spent on the roads, there might be a better case for it. As the financial provisions of the Budget stand at present, it is a bad Clause, and I am glad that my right hon. and hon. Friends will oppose it.

Mrs. Harriet Slater (Stoke-on-Trent, North)

I wish to reinforce the two points made by my hon. Friend the Member for Edinburgh, East (Mr. Willis). The first is that the cost of this increased tax will be passed on. The hon. Member for King's Lynn (Mr. Bullard) said that it might be given back to farmers in the Price Review. But it might not, because, as he said, there is a limit to how much the public will stand in the way of taxation along these lines. We all know, particularly housewives, that a tax of this kind is never imposed unless it can be passed on somewhere, and usually it is collected from the housewives in the form of increases in the price of commodities. No one need deny that, because we all know that it happens.

This could prove a very serious tax not just for those people who own cars or have to use vehicles, but for ordinary persons, and particularly the poorer sections of the community and the old-age pensioners. We shall be told that we cannot help them. They are not getting any help from this Budget in any case, but they will feel the effects of the increase in the cost of commodities. The price of horticultural produce will be affected, and already purchasers have to pay enough for that, especially at weekends and holiday time.

Many people in the rural areas will be affected not because there are no buses available, but because railways are being closed in such areas and people living there can get from place to place only by means of motor cars which they or their friends may own. Not only rural workers will be affected. The ordinary working man who is trying to meet the cost of owning a car will be affected. It is not easy for a working man to decide whether he can afford to continue to run a car when the price of first one thing and then another is increased. For such people and their families it is often the case that the possession of a car is the only way in which they can all enjoy a holiday together, or enjoy some pleasure at the week-end.

This is a tax on the ordinary working people. As has been said, there are many other and more adequate means of raising the money which will be collected by means of this tax. The tax is thoroughly bad and unjust from the point of view of the majority of the people. Its imposition is, of course, in keeping with the attitude of mind which has dictated the whole of the provisions in this Bill.

The Financial Secretary to the Treasury (Sir Edward Boyle)

First, I should like to say that I meant no discourtesy to the hon. Member for Edinburgh, East (Mr. Willis) because I smiled while he was speaking. I was reflecting on the last meeting of the Scottish Grand Committee which I attended when the hon. Gentleman was addressing the Committee with great eloquence. The then hon. Member for Aberdeenshire, East, the present Lord Boothby, rose to a point of order because he said that so much noise was being made that he could not get on with his correspondence.

The first thing I wish to tell the Committee is that the proposal in Clause 5 to raise £25 million by increasing the motor duty is fundamental to the Budget proposals of my right hon. and learned Friend. This amount of £25 million is essential if my right hon. and learned Friend is to achieve his twin objectives of securing a surplus above the line, a revenue surplus, of over £500 million, and reducing his overall borrowing requirements to well below £100 million.

I must tell the hon. and learned Member for Kettering (Mr. Mitchison) that he overlooked the important point that my right hon. and learned Friend's Surtax concessions do not apply to the current financial year. They affect only the forthcoming financial year and, therefore, they have nothing to do with the surplus at which my right hon. and learned Friend is seeking to aim this year. As a matter of fact, there are only two Clauses in the Finance Bill—perhaps it would not be out of order for me to refer to this, in view of what was said about this Clause—which make any sizeable concessions at all for the current financial year.

One is Clause 13, referring to Income Tax relief for National Insurance Contributions, which will cost about £12 million this year, and the other is Clause 29, affecting Stamp Duty on bills of exchange. The total concessions made in these two Clauses amount to about half the revenue that my right hon. and learned Friend is seeking to raise by this Clause.

4.15 p.m.

Mr. Harold Wilson (Huyton)

By the argument about this year and next year, does the hon. Gentleman mean that his right hon. and learned Friend would be prepared to accept a manuscript Amendment—if you, Sir Gordon, were disposed to accept it—to limit the effect of this Clause to one year on the argument which he has used, and that next year the increase in tax could be dropped altogether and the money recovered by less grandiose reliefs on Surtax? On this argument, is not the hon. Gentleman saying that since the tax does not affect this year and the Surtax applies next year it would be perfectly fair to alter the redistribution of Surtax and the motor vehicle tax?

Sir E. Boyle

No. My right hon. and learned Friend is not able to anticipate his next year's Budget statement to that extent. If, next year, the right hon. Gentleman chooses to put down a new Clause to that effect, it appears to me that he would have a perfectly arguable point upon which the Committee could take a decision. But what has been said by the right hon. Member for Huyton (Mr. H. Wilson) does not in any way invalidate my argument that for this year my right hon. and learned Friend has decided that he must budget for a surplus of a certain figure and that, therefore, this amount of £25 million is essential if he is to achieve that figure.

A number of hon. Members have properly referred to the social effects of the increase in motoring during these last years, and I agree with what was said by my hon. Friend the Member for King's Lynn (Mr. Bullard) by the hon. and learned Member for Kettering and by the hon. Lady the Member for Stoke-on-Trent, North (Mrs. Slater). I do not think that there is any doubt that the increase in motoring in this country in recent years has made a great difference to the freedom which people enjoy, especially those in country districts.

I have referred earlier this Session to the hon. Member for Grimsby (Mr. Crosland) without giving him notice, but I do not think that he will object if I refer to him again now, because I intend to do so in complimentary terms. He once wrote, rightly, that the same car which took people to the seaside could also take them to the historic houses. That is a fair point to make. There is no doubt that the increase in private motoring over the last ten years has had a considerable effect upon the ability of people to enjoy experiences of all kinds, many of them very worth while. At the same time. I do not believe that, after a decade in which the standard of living of the ordinary wage earning families has risen by as much as 10 per cent. the extra amount of £2 10s. on the Road Fund licence will cause large numbers of private motorists to give up motoring.

I think it worth remembering that the average family motorist has for more than seven years, ever since 1953, paid less duty than he or his predecessor with a car of say, 12 h.p. paid twenty years ago; and very little more than he paid as long ago as 1921. The present increase in motor duty does no more than go a little way to re-establishing the earlier rates of duty in real terms. Considering the whole structure of taxation in this country, I do not think that the present rates of motor duty are so high that the increase proposed in this Clause is unjust.

Mr. Douglas Jay (Battersea, North)

Does the Financial Secretary mean that the Government intend to step up all taxation on that basis?

Sir E. Boyle

All increases in taxation of this kind are disagreeable, and whatever type of taxation a Government may choose to increase they must meet one kind of accusation or another.

If we frequently increase a particular indirect tax, like the Tobacco Duty, we are told that we are making one part of the tax structure bear a disproportionate share of the burden. On the other hand, if we say that the motor taxation has not been increased for a number of years, and we feel that this part of the system should bear an increase, we are blamed by hon. Members opposite who ask whether we propose to make increases on this basis right across the field of taxation. Obviously, the Government have to draw a balance. I do not believe that this increase in itself is unreasonable, or that it will discourage a very large number of private motorists.

The hon. Member for Edinburgh, East and the hon. and learned Member for Kettering raised the question of whether we should continue with a flat-rate tax. I think that the hon. and learned Gentleman said that we now had a sort of payroll tax on cars. In the speeches which have been made this afternoon, and also from what was said by the right hon. Member for Huyton during the second Reading debate, I detected a suggestion that we should consider whether we ought not now to return to a graduated tax—

Mr. Mitchison

I did not say that, nor did I intend to. All I said was that this operated as a payroll tax more hardly on the small car owner than on the owner of a large car.

Sir E. Boyle

That might be true in the case of any variation in the duty. But since the hon. and learned Gentleman and the right hon. Member for Huyton raised the point, a flat-rate tax was originally introduced—

Mr. H. Wilson

Do not let us waste time by going over that again. We discussed it during the Second Reading of the Bill. My view was that this had nothing to do with horsepower. I said that the horsepower tax led to distortion of engine design and that I did not want to go back to it. Here, I was referring to space—and there is some connection between the space occupied on the Queen's highway and the ability to pay. Will the hon. Gentleman address himself to that point and not to something which we have not suggested?

Sir E. Boyle

I take note of what the right hon. Gentleman says. I was coming to that specific point in a moment. I do not want to make too much of this, but I was simply saying that it is true that the old tax was dropped in order to divorce engine design from taxation and to ease the export problem of the manufacturers. Lord Dalton said of the change in 1947: …the purpose is to divorce design from taxation and thereby help the industry towards standardisation of models, and to help it to make its contribution to our exports."—[OFFICIAL REPORT, 9th July, 1947; Vol. 439, c. 2276.] I was going to say that we took due note of the point made by the right hon. Member for Huyton in the Budget debate. Anybody who, at any time, has enjoyed reading through that remarkable work of Professor Pigou's, "The Economics of Welfare", will recognise the rather Pigovian nature of the point made by the right hon. Gentleman, which was a fair point to make. But the same argument which led Lord Dalton to abandon the old horsepower tax would also apply very considerably to a graduated tax based on length.

Such a tax would be difficult and costly to administer, compared with a flat-rate tax. Furthermore, this scale would have to be a gradual one if we were to avoid the worst design difficulties. Also, to introduce even one additional check on each of 6 million cars would take time and cost a good deal of money. Some sort of check procedure would have to be instituted, very much on the same lines as the check weighing of goods vehicles, introduced to protect the revenue following criticism from the Public Accounts Committee.

Sir Douglas Glover (Ormskirk)

Would not my hon. Friend agree that, whereas the horsepower tax completely distorted the engine design of British cars and resulted in a great decrease in our exports, if the Chancellor brought in a tax on length or size, it would distort body design, with equally disastrous effects?

Sir E. Boyle

I am obliged to my hon. Friend.

The right hon. Member for Huyton, and some others, have made a point which is worth considering. We do not say that the present structure of motor taxation is right for all time, but one has to consider the effects of the right hon. Member's proposal on design, and also the administrative difficulties that would result. At the moment, having given full consideration to this matter, my right hon. and learned Friend does not think that this is the right time to make the change proposed by the right hon. Gentleman.

The House has always opposed in principle, as being contrary to tradition, the idea of what is often called hypothecated taxation—trying to make a precise comparison between the amount now being gained in motor taxes and taxation on the motorist generally, and what is spent on the roads. On the other hand, it is worth remembering, in the context of this debate, that, as my right hon. and learned Friend said in his Budget statement, Exchequer expenditure on the road programme for Great Britain is at the highest level ever known. Less than ten years ago it was £3½ million; this year it is £88 million, and next year it will be about £100 million. My right hon. and learned Friend said in his Budget statement: I add by way of postscript that these increases will enable me to face with greater equanimity the steadily increasing burden of expenditure upon the roads."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 818.] My right hon. and learned Friend fully realises, as we all do on this side of the Committee, just what the increase in private motoring has meant in social terms in the last ten years. On the other hand, he thinks that the motor taxation can bear this increase and he must invite the Committee to pass this Clause, because the extra £25 million involved is fundamental to his Budget this year.

Mr. H. Wilson

The Committee has to decide what attitude it is to take on the question of whether this Clause should remain in the Bill. I want to deal with one or two red herrings laid by the Financial Secretary to the Treasury. First, he said that this proposal was an integral part of the Budget, that the money was essential in order to get the right disinflationary, above-the-line surplus—that is not the way he said it, but it is what he meant—also to minimise the amount which would need to be borrowed on the Budget, both below and above-the-line.

My hon. and learned Friend the Member for Kettering (Mr. Mitchison) and others asked, "Why not be a little less generous with Surtax concessions?" The hon. Gentleman answered that that had nothing to do with this year, but with next year. When I suggested, in an intervention, that he should limit this emergency taxation to deal with the current financial emergency to one year, and then get his £25 million by knocking it off the Surtax concessions next year, we were told that the Chancellor could not anticipate next year's Budget statement.

The Financial Secretary was anticipating that statement, however, because he suggested that I might like to put down a new Clause next year. If it is appropriate to deal with this point by a new Clause, that means that there will be nothing in the Bill next year dealing with these things, which suggests that the Chancellor has already made up his mind. Or perhaps it is the Financial Secretary who has already made up his mind. We know the powerful influence which he has had on a string of Tory Chancellors, all of whom have accepted "Boyle's Law", apart from the present Chancellor, who has turned it into "Lloyd's Law", which is even worse. Either the Chancellor or the Financial Secretary has decided that there will be no change next year, so we are legislating here not only for this year, but for a year or two ahead.

The other argument, which the Financial Secretary went to great lengths to dispose of—as he thought—was my suggestion that, instead of a flat-rate tax there should be a tax related to space, to the size of cars. He turned out the old argument that we have heard so often by quoting Lord Dalton in 1947. I knew that that was coming. The Government Front Bench becomes more and more predictable on these things. In the Financial Times, before the Budget, I wrote that the Chancellor would increase vehicle licence duties and include a piece about roads in his statement to justify it. I can assure the Committee that there was no collusion between the Chancellor and myself about that matter. That, of course, is what he did, and one can always be sure that the argument about distortion of engine design will be brought up.

Lord Dalton was right in what he did in taking a flat-rate in 1947 rather than continuing with the horsepower tax, because, at that time, the motor car industry—and it was dead right on the facts known then—thought that Britain, to get into the modern export market, must produce larger cars than we were producing then. That was true then, but it is not true today.

In preparation for today's debate—because one can usually see this sort of thing coming up—I put a Question to the President of the Board of Trade some months ago about exports. I asked him what was the contribution to our exports, first, generally to all countries, and, secondly, to the dollar area made by all large, medium and small vehicles. I have not the figures immediately before me, but they are in HANSARD, and they confirm what most hon. Members would expect—that the greater proportion of our export competitors are in small and medium sized cars and not in the larger cars. There are some first-class specialities—one can think of the new Jaguar, for instance, for which there is a long waiting list—but on the Chancellor's age-old argument that one wants to increase taxation to push more of these cars abroad, there would be no loss of exports there.

There is a great deal to be said for placing this tax on space. At present, I am not even arguing about the total amount of revenue that he could get. If he had to have additional revenue, he might have got it that way, however. But one of the major developments in our motoring conditions since Lord Dalton was Chancellor of the Exchequer is the utter congestion in urban areas. We go on building these major roads on an all too inadequate scale, but when the roads debouch in our towns and cities the problem really starts.

For this reason I changed some months ago from a medium-sized car to a small one. I will give the Chancellor a lift in it some time. He would see with what relative ease and nippiness one can get round the traffic in Central London, in so far as one can move at all in Central London, and certainly much better than the larger cars, which are to be taxed at the same rate. There is some advantage, from the point of view of economising in the very scarce road space which we have in our towns and cities and in parking space, in devising this tax in that way.

4.30 p.m.

There is another point which has a direct bearing on the balance of payments. There are some of our fellow citizens, and perhaps it is not for us to condemn them—it is probably more a matter for psychiatrists and economists—Who insist upon having these very large American cars on what are called prestige grounds. I do not mind if people feel like that about it. One must have driven in London, as I expect many hon. Members have done, behind these great flat cars, looking rather like aircraft carriers, holding up the traffic, because of this so-called prestige desire.

If it is the desire of certain people to have these cars, and I do not exaggerate the number, the Chancellor is involved in a certain amount of foreign exchange, and when they come here, whether they are parked or in motion or trying to be in motion, the effect is detrimental to the interests of other road users. Why should they occupy so much of our road space and pay only £15 in taxation, when the Chancellor is laying down that a 10-year-old, second-hand Ford Anglia, a small Morris or Austin, or whatever it may be, should have to pay tax at a similar rate?

Mr. Raymond Gower (Barry)

Surely the right hon. Gentleman will agree that we ought to be diffident when we are talking about these cars. They carry a substantial import duty, and we are trying to export our own cars.

Mr. Wilson

I was speaking with very great diffidence, and I made it quite clear that I am not condemning them, because I think that it is more a matter for a psychiatric or economic approach. Of course, they carry some import duty. The idea of an import duty is to keep them out, but if they do come in they pay an import duty, and to that extent the import duty is failing as a protective device. The hon. Gentleman cannot have the import duty argument both ways.

However that may be, if the Chancellor was to touch vehicle duty at all, he ought to have looked at this proposal. It would not have involved, in my opinion, any loss of exports. The hon. Member for Ormskirk (Sir D. Glover) suggested that just as the horsepower tax led to a distortion of engine design, this might lead to a distortion of body design. I do not believe that for a moment. I believe that in present circumstances we are doing extremely well with our small cars, and I doubt whether there has been any distortion effect as a result of this tax. It would have been of value in encouraging more small cars both for the benefit of the British motorist and our export trade. If there is anything in this distortion argument, it would have been favourable and not unfavourable as in the case of the horsepower tax.

Let us now leave the question whether the Chancellor should have done it in this way, and consider whether this is a fair increase in taxation. The Financial Secretary to the Treasury used some odd arguments. One was that in terms of real value, money changes in prices, and so on, the motorist today is not paying any more, indeed, he is paying less in real value, than was paid by his predecessor or perhaps himself twenty, thirty or even forty years ago. This is a very strange argument, and if this is a new "Boyle's Law" that is to be applied to our taxation system, I advise hon. and right hon. Gentlemen opposite to sell their gin and whisky shares, because there has been no increase in the taxation of gin and whisky for thirteen or fourteen years, during which time most other prices have moved up very rapidly.

If the new "Boyle's Law" is to be applied, there is no doubt that the hon. Gentleman is already advising the Chancellor that to bring it into line with the retail prices index there will have to be an increase in the taxation of gin and whisky. I do not think that the Chancellor will listen to him, because gin and whisky are the sumptuary taxes of interest to hon. and right hon. Gentlemen opposite. I think that probably, on the whole, the Chancellor will not listen to the Financial Secretary.

On the question of the £15 tax, we do not suggest—and I made this clear in the Budget debate—that this will involve a great deal of hardship for every motorist. There are very many who are well able to pay this tax. There is no doubt about that at all. Indeed, I have been arguing that some could pay a vastly increased tax if it were based on the size of the car. I will not suggest that every motorist would be driven into bankruptcy, penury, or hardship, or be forced to sell his car as a result, but there are some who will be hit by it.

As a result of various developments in the past few years, more people have been buying cars, and a lot of them are second-hand. Indeed, the whole motor car boom of the last few years has inevitably been based upon a ready market for second-hand cars. It could not have taken place otherwise. We were always told that it was the hire-purchase boom in motor cars that did more than anything to get hon. and right hon. Gentlemen opposite back into office at the last General Election. Some people thought that it was to be a cut in the Beer Duty, and now the Chancellor is taking power to increase it; and indeed, is giving himself power without coming to Parliament to ask permission. I would be out of order in pursuing that at this time of day, but I would not be out of order in saying that hon. Members opposite, having made so much in the last election of a greater spread of car ownership in this car-owning democracy, are now, the election being over, asking for and insisting upon an increase in the rate of taxation on cars.

I have had a number of letters, as I expect other hon. Members have done, not from the owners of Rolls-Royces—it is Clause 20 to which they object—but from the owners of new or second-hand cars which they are buying on hire purchase, which are mainly family cars used to take people to work and also used for an occasional trip to the seaside. Such a car is used—and this occurs in a great number of my letters—perhaps by old-age pensioners, who have aged cars, which they keep solely for the purpose of taking, say, a sick wife out for a run in the afternoon. These are important considerations in our social life.

Perhaps the people who own many of these old cars are people living on small fixed incomes, or retired people. We all know of them, and we could give examples of them. We all know, too, the dangers which people like this have to face. Because the cars are rather old they may find themselves let in at any time for rather heavy expenditure in making good some damage, breakdown or repair, and on top of all this they are now to be asked to pay a tax of £15 instead of £12 10s. I think that the Chancellor should have approached this problem in another way.

There is also the problem of the scattered rural area, which has been referred to by hon. Members. There is an extent to which cars are now becoming an economic necessity rather than a social necessity in certain parts of the country.

There is one last point which the Chancellor will remember I mentioned in the Second Reading debate, and to which I should like the Financial Secretary to refer. It is the inequality in the composition of the tax between people who licence their cars for a year ahead, and those who licence them only for three or four months ahead. Most people who can afford to do so, and who expect to keep their cars on the road pay for the licence for the whole year, and then, I suppose, go on the road until the 11th or 12th of January before discovering that the licence has expired. Sometimes, they wonder whether they should take the car on the road on the 15th when the licensing authority has not returned the licence.

Many people do not know for a year ahead whether they will keep their car on the road, while others have not got the ready money with which to pay for the licence for the whole year. There may be some doubt whether they will have the car on the road for a few months or longer, and it is a fact, as this correspondence has suggested, that those who licence their cars only from January to April, as opposed to those who licence them until the following December, will now have to pay the higher rate of tax from April onwards, whereas those more fortunate among us who decide to licence their cars for a whole year ahead are in the position of not starting to pay the increased duty until 1st January next.

If that is the case, as I believe it to be, the Chancellor might have put everyone on a par by introducing this new tax on the same date for everyone, namely, 1st January, next year. For the reasons I have given and for the good reasons which my hon. and learned Friend the Member for Kettering (Mr. Mitchison) gave, it is quite clear that we cannot support the Government in this proposal.

The Chancellor obviously decided that motor cars were a sitting target for his predatory instincts. I think that he would have liked to have gone for petrol and I bet that the Financial Secretary was telling him about the need to increase petrol taxation on the line of the argument he used today. We all know why the Chancellor did not increase the petrol tax—because he and I—perhaps only we two—remember the speeches which he made in 1950 and 1951 when the Labour Government increased the petrol tax to a figure not as high as that which stands today. No doubt the Chancellor has enough of a memory and enough of a conscience—which is not something always associated with Chancellors—to realise that if he had he would have been very vulnerable to attack, because his speeches are on the record. They were fine, eloquent speeches all attacking a rate of petrol taxation which is a good deal lower than he is maintaining.

Because he could not increase the petrol tax and because he obviously gets annoyed every time he is approached by the Minister of Transport—and who would not be?—in relation to the road programme, he obviously felt that he must do something about getting taxation out of the motorist. He could not put it on the Purchase Tax on cars and he could not put it on the petrol tax, because he has a fiscal past in this matter, so he decided that an increase of licence duty was the best way.

If he had to do it, why did he not do it on the size of vehicles? We do not feel that he had to do it. In view of his prospective generosity and the extent to which he is anticipating next year's Budget statement in a most unusual fashion in relation to Surtax, it does not seem to us necessary to have this increase

in this flat rate of tax and we propose to show our hostility to the proposal in the Division Lobby.

Question put, That the Clause stand part of the Bill:—

The Committee divided: Ayes 192, Noes 129.

Division No. 181.] AYES [4.43 p.m.
Agnew, Sir Peter Fisher, Nigel Nugent, Sir Richard
Allason, James Fletcher-Cooke, Charles Oakshott, Sir Hendrie
Arbuthnot, John Foster, John Osborn, John (Hallam)
Ashton, Sir Hubert Gammans, Lady Page, John (Harrow, West)
Atkins, Humphrey Gardner, Edward Page, Graham (Crosby)
Barber, Anthony Glover, Sir Douglas Pannell, Norman (Kirkdale)
Barlow, Sir John Glyn, Dr. Alan (Clapham) Pearson, Frank (Clitheroe)
Baxter, Sir Beverley (Southgate) Glyn, Sir Richard (Dorset, N.) Peel, John
Bell, Ronald Goodhew, Victor Percival, Ian
Bennett, Dr. Reginald (Gos & Fhm) Gough, Frederick Pike, Miss Mervyn
Berkeley, Humphry Gower, Raymond Pitt, Miss Edith
Biggs-Davison, John Grant, Rt. Hon. William Price, David (Eastleigh)
Bingham, R. M. Green, Alan Pym, Francis
Birch, Rt. Hon. Nigel Gresham Cooke, R. Quennell, Miss J. M.
Bishop, F. P. Grimston, Sir Robert Rawlinson, Peter
Black, Sir Cyril Gurden, Harold Redmayne, Rt. Hon. Martin
Bossom, Clive Hamilton, Michael (Wellingborough) Rees, Hugh
Bourne-Arton, A. Harris, Frederic (Croydon, N.W.) Renton, David
Boyd-Carpenter, Rt. Hon. John Harrison, Brian (Maldon) Ridsdale, Julian
Boyle, Sir Edward Harvey, Sir Arthur Vere (Macclesf'd) Robertson, Sir David
Braine, Bernard Hastings, Stephen Roots, William
Brewis, John Heald, Rt. Hon. Sir Lionel Seymour, Leslie
Bromley-Davenport, Lt.-Col. Sir Walter Hiley, Joseph Sharples, Richard
Brown, Alan (Tottenham) Hocking, Philip N. Skeet, T. H. H.
Browne, Percy (Torrington) Holland, Philip Smith, Dudley (Br'ntf'rd & Chiswlck)
Buck, Antony Hollingworth, John Smithers, Peter
Bullard, Denys Hopkins, Alan Smyth, Brig. Sir John (Norwood)
Bullus, Wing Commander Eric Hornby, R. P. Spearman, Sir Alexander
Burden, F. A. Hughes-Young, Michael Speir, Rupert
Butler, Rt. Hn. R. A. (Saffron Walden) Hulbert, Sir Norman Stevens, Geoffrey
Campbell, Sir David (Belfast, S.) Hutchison, Michael Clark Stoddart-Scott, Col. Sir Malcolm
Campbell, Gordon (Moray & Nairn) Iremonger, T. L. Studholme, Sir Henry
Carr, Compton (Barons Court) Jackson, John Talbot. John E.
Channon, H. P. G. James, David Tapseli, Peter
Chataway, Christopher Jenkins, Robert (Dulwich) Teeling, William
Clark, William (Nottingham, S.) Kitson, Timothy Temple, John M.
Cole, Norman Lambton, Viscount Thomas, Leslie (Canterbury)
Collard, Richard Langford-Holt, J. Thompson, Kenneth (Walton)
Cooke, Robert Leavey, J. A. Thompson, Richard (Croydon, S.)
Cooper-Key, Sir Neill Leburn, Gilmour Turner, Colin
Cordeaux, Lt.-Col. J. K. Legge-Bourke, Sir Harry van Straubenzee, W. R.
Cordle, John Lindsay, Martin Vaughan-Morgan, Sir John
Corfield, F. V. Linstead, Sir Hugh Vickers, Miss Joan
Costain, A. P. Litchfield, Capt. John Vosper, Rt. Hon. Dennis
Coulson, J. M. Lloyd, Rt. Hon. Selwyn (Wirral) Wakefield, Edward (Derbyshire, W.)
Craddock, Sir Beresford Longden, Gilbert Walder, David
Critchley, Julian Loveys, Walter H. Walker, Peter
Crosthwaite-Eyre, Col. O. E. Low, Rt. Hon. Sir Toby Wall, Patrick
Cunningham, Knox Lucas. Sir Jocelyn Watkinson, Rt. Hon. Harold
Curran, Charles Lucas-Tooth, Sir Hugh Watts, James
Dalkeith, Earl of McAdden, Stephen Webster, David
d'Avigdor-Goldsmid, Sir Henry McLaren, Martin Wells, John (Maidstone)
Digby, Simon Wingfield Macmillan.Rt.Hn. Harold (Bromley) Whitelaw, William
Drayson, G. B. Macmillan, Maurice (Hallfax) Williams, Dudley (Exeter)
du Cann, Edward Maddan, Martin Williams, Paul (Sunderland, S.)
Duncan, Sir James Marlowe, Anthony Wills, Sir Gerald (Bridgwater)
Duthie, Sir William Marten, Neil Wilson, Geoffrey (Truro)
Eccles, Rt. Hon. Sir David Matthews, Gordon (Merlden) Wise, A. R.
Elliot, Capt. Walter (Carshalton) Mawby, Ray Wolrige-Gordon, Patrick
Elliott, R. W. (Nwcastle- upon-Tyne, N.) Maxwell-Hyslop, R. J. Woodnutt, Mark
Emmet, Hon. Mrs. Evelyn More, Jasper (Ludlow) Worsley, Marcus
Errington, Sir Eric Morrison, John Yates, William (The Wrekin)
Farr, John Mott-Radclyffe, Sir Charles
Fell, Anthony Nicholson, Sir Godfrey TELLERS FOR THE AYES:
Finlay, Graeme Noble, Michael Colonel J. H. Harrison and
Mr. J. E. B. Hill.
Ainsley, William Benson, Sir George Bowen, Roderic (Cardigan)
Allaun, Frank (Salford, E.) Blyton, William Boyden, James
Allen, Scholefield (Crewe) Bowden, Herbert W. (Leics, S.W.) Brockway, A. Fenner
Broughton, Dr. A. D. D. Houghton, Douglas Randall, Harry
Brown, Rt. Hon. George (Belper) Hughes, Emrys (S. Ayrshire) Rankin, John
Butler, Herbert (Hackney, C) Hughes, Hector (Aberdeen, N.) Reid, William
Castle, Mrs. Barbara Hunter, A. E. Roberts, Alfred (Normanton)
Chapman, Donald Hynd, H. (Accrington) Roberts, Goronwy (Caernarvon)
Chetwynd, George Janner, Sir Barnett Robertson, John (Paisley)
Collick, Percy Jay, Rt. Hon. Douglas Ross, William
Craddock, George (Bradford, S.) Jeger, George Silverman, Sydney (Nelson)
Crosland, Anthony Johnson, Carol (Lewisham, S.) Skeffington, Arthur
Cullen, Mrs. Alice Jones, Rt. Hn. A. Creech (Wakefield) Slater, Mrs. Harriet (Stoke, N.)
Darling, George Jones, Dan (Burnley) Slater, Joseph (Sedgefield)
Davies, Rt.Hn. Clement (Montgomery) Jones, Elwyn (West Ham, S.) Small, William
Davies, Harold (Leek) Kelley, Richard Stewart, Michael (Fulham)
Davies, S. O. (Merthyr) Kenyon, Clifford Stonehouse, John
Deer, George Key, Rt. Hon. C. W. Stones, William
de Freitas, Geoffrey Lee, Frederick (Newton) Strachey, Rt. Hon. John
Diamond, John Lever, L. M. (Ardwick) Strauss, Rt. Hn. G. R. (Vauxhall)
Dodds, Norman Lipton, Marcus Stross,Dr. Barnett (Stoke-on-Trent, C.)
Driberg, Tom MacColl, James Swingler, Stephen
Dugdale, Rt. Hon. John McInnes, James Symonds, J. B.
Edwards, Robert (Bilston) McKay, John (Wallsend) Taylor, John (West Lothian)
Edwards, Walter (Stepney) McLeavy, Frank Thompson Dr. Alan (Dunfermline)
Evans, Albert McPherson, Malcolm (Stirling) Thomson, G. M. (Dundee, E.)
Fitch, Alan Mallalieu, E. L. (Brigg) Thornton, Ernest
Foot, Dingle (Ipswich) Manuel, A. C. Thorpe, Jeremy
Foot, Michael (Ebbw vale) Marquand, Rt. Hon. H. A. Tomney, Frank
Fraser, Thomas (Hamilton) Mitchison, G. R. Ungoed-Thomas, Sir Lynn
Galpern, Sir Myer Morris, John Wade, Donald
Ginsburg, David Oliver, G. H. Wainwright, Edwin
Gordon walker, Rt. Hon. P. C. Oram, A. E. Warbey, William
Griffiths, David (Rother Valley) Oswald, Thomas Weitzman, David
Griffiths, Rt. Hon. James (Llanelly) Owen, Will Wells, Percy (Faversham)
Griffiths, W. (Exchange) Pannell, Charles (Leeds, W.) White, Mrs. Eirene
Grimond, J. Parker, John Wilkins, W. A.
Hall, Rt. Hn. Glenvil (Colne Valley) Peart, Frederick Willey, Frederick
Hamilton, William (West Fife) Plummer, Sir Leslie Willis, E. G. (Edinburgh, E.)
Hannan, William Prentice, R. E. Wilson, Rt. Hon. Harold (Huyton)
Hart, Mrs. Judith Price, J. T. (Westhoughton) Woof, Robert
Hayman, F. H. Probert, Arthur
Herbison, Miss Margaret Proctor, W. T. TELLERS FOR THE NOES:
Holman, Percy Pursey, Cmdr. Harry Mr. Lawson and Mr. McCann.