HC Deb 23 February 1962 vol 654 cc898-908

Motion made, and Question proposed, That this House do now adjourn.—[Mr. M. Hamilton.]

4.2 p.m.

Mr. R. Gresham Cooke (Twickenham)

I wish to draw the attention of my hon. Friend the Economic Secretary to the Treasury to the problems surrounding the manufacture and selling in this country of Formula I racing cars. Formula I is the exact and exacting formula drawn up by the Federation Internationale de 1'Automobile which defines grand prix racing cars in the very highest class, with engine capacities of 1,300 to 1,500 c.c., single seaters, which cars have gained this country enormous success in grand prix racing all over the world. I am surprised at the volume of support which I have received from all over the country, and indeed in this House, since it became known that I intended to raise the matter today.

After the war, the immediate efforts of everyone in the motor industry were directed towards re-establishing civilian production and towards exports, but in the late 'forties, the B.R.M., the British racing car produced by the co-operative efforts of several firms under the guidance of Mr. Raymond Mays, was the first to try to win success. It became apparent at the end of 1949 that the B.R.M. might become chargeable to Purchase Tax, and that was generally regarded as a stupid use of the tax. I recall that the National Advisory Council of the Motor Industry, of which at that time I happened to be joint secretary, was consulted about this, and after strong representations had been made about the great importance of grand prix racing, the Ministry of Supply hit on an ingenious device called the "countervailing subsidy" in 1950. I wish to quote from the Press notice which the Ministry of Supply put out on 3rd April, 1950: The Ministry of Supply announces that arrangements have been made—subject to approval of the estimates by Parliament—for Purchase Tax to be refunded on racing cars. This decision was taken by the Government, in discussion with the R.A.C., because of the benefits to technical development and prestige to be expected from British successes in international racing. The Ministry of Supply estimates, published last Friday, March 31, provide a sum of £30,000 for this purpose … The arrangements provide for a 'countervailing subsidy' i.e., the repayment to manufacturers of the amount paid out in Purchase Tax on racing cars of approved types. That notice also said that the subsidy would apply to cars constructed to carry only a driver and designed for use in racing in national or international calendars.

This helpful device, which has now been in operation for twelve years, enabled two or three firms to enter this field with growing success, as I will unfold. I should mention that the makers of these cars are not the giant corporations of the motor industry employing tens of thousands of people. Quite the contrary. They are tiny specialised concerns, some employing less than a dozen people making and preparing the cars. With teams of mechanics at the pits and so on, I do not suppose that these firms and teams employ more than 200 or 300 people altogether. In my view, they are all the better for being so small, because motor racing is an art as well as a science.

The companies at present involved are Lotus, Cooper and B.R.M., with another smaller one called Lola which is on the fringe and occasionally makes one or two grand prix cars, and the Jack Brabham organisation which might come into the matter in the future. I think that all these companies would be deterred from going on with international grand prix motor racing if Purchase Tax were reimposed. Only about two dozen such cars are made a year, and so the Purchase Tax would be very heavy on each one.—£1,500 or £2,500 per car. As there are only five or six teams driving the cars, an outlay of £10,000 per team would obviously be a staggering blow for the works teams or for the two teams outside the works teams which I have mentioned.

In any event, the first three companies I mentioned, together with the Vanwall car, made by Mr. Vandervell, have had some staggering successes in motor racing in the last few years. They have won twenty-six grand prix championships, and British cars were world champions in 1958, 1959 and 1960. That says much for the countervailing subsidy, which, I admit at once, was introduced by the Labour Government.

Great drivers have grown up with these teams—Stirling Moss, regarded as the best driver in the world of his time; Mike Hawthorn and Peter Collins, both now, unfortunately, dead; Roy Salvadori, Innes Ireland, Tony Brooks and Jack Brabham, to mention a few. Both Mike Hawthorn and Jack Brabham were world champions in their year. Out of twenty-four active grand prix drivers in the world at the present time, over half are British, which is something of which we can all be proud.

Second to football, motor racing is now Europe's greatest sport. Few people in this country have any conception of the mad enthusiasm which motor racing creates in Europe. For instance, 300,000–400,000 people attend the German Grand Prix at the Nurnberg Ring in Germany. There are similar scenes in France, Italy, Belgium and other countries. This enthusiasm is matched in South America also and, though to a somewhat less extent, in the United States of America.

Success brings great prestige to British engineering generally. Let us face it—our image in Europe is a little staid and solid. Therefore, it is unexpected and refreshing for Britain to have these exciting triumphs. It must be a proud moment for all who take part when the green-coloured British cars pass the chequered flag first and our national anthem is played.

These things bring trade in their train. Before the war the export of German typewriters, fountain pens and other goods to South Africa was built up to an enormous extent through the racing successes of Mercedes and Auto-Union. In the last ten years British motor exports have more than doubled, and the sharpest increases have been shown in the years when our racing cars have had successes.

Technical developments in connection with disc brakes, independent rear suspension, oils and tyres, have been nurtured, too, by these racing cars. In fact, I am told that the grand prix cars of every country in the world now run on British tyres, and our electrical equipment has found its way into foreign cars.

It was, therefore, a great shock to hear, two or three months ago, that the subsidy would be withdrawn. I understand that there was no consultation with the leaders of the motor industry. If his £2,500 Purchase Tax is levied on each car it will cost £200 or £300 per start for each car, because these grand prix cars run for only one season, and have only about twelve starts. If the tax were to be reimposed I do not believe that the Treasury would get it, because the firms would try to find every possible way round it. For instance, these racing teams could be established in Switzerland, where such things are free of duty. It would be very unfortunate if the Swiss colours were to flash first past the line and the Swiss national anthem were to be played every time a British car won a race. But that is what would happen. Furthermore, this would be a bad moment for it to happen, because Russia and Japan, to take only two examples, are now considering entering the grand prix field.

Therefore, I ask the Chancellor of the Exchequer, through my hon. Friend, to see whether he can continue the subsidy in order to help these three or four very small firms and teams, or reconsider the definition of Purchase Tax. These racing cars are not road vehicles; in fact, they are carried to the races on lorries or trailers, and I do not believe that they fall within the words of the Second Schedule, Group 27, of the Finance Act, 1958, which defines as mechanically propelled vehicles, subject to a tax of 60 per cent.: Road vehicles not comprised below in this Group, being vehicles constructed or adapted solely or mainly for the carriage of passengers or having to the rear of the driver's seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows. Racing cars could be exempted either by the interpretation of the Statute or, in case of doubt, specifically by an Order in Council. I am sure that we could place in the exempted class all racing cars falling within Formula I for use in international events.

It has been said by Ministers that the motor industry should try to raise the necessary sums of money to pay the tax, which could be as much as £50,000, but it is difficult for any industry to draw up a scheme to pay tax for the benefit of three or four firms. In any event, the industry feels that it provides general overseas publicity for British products, and sees no reason why it should be singled out to pay.

In my view it would be a great psychological blunder to put this tax on racing cars. It would be just as mad as to put it on racehorses. I hope that that will not be the outcome of this suggestion. My hon. Friend would be subjected to an even greater outcry in that case than he has been over this matter. I want him to tell us today, either that in the case of these cars there is legally no appropriation to a taxable purpose, or that he will try to find an interpretation of Purchase Tax which will exclude these cars, which are not road vehicles, are not adapted for the carriage of passengers, and are not run on the roads at all.

It should not be too difficult to differentiate grand prix racing cars from ordinary sports cars. This was done in connection with the payment of the counterveiling subsidy in 1950. If the Chancellor could accede to my request he would gain the approbation of the whole country.

Mr. James Allason (Hemel Hempstead)

As a participant in motor racing before the war, I support all that my hon. Friend has said. This is a very serious problem for motor racing. Without the achievements of our racing cars our motor industry would have a very much lower prestige than it now has. I therefore hope that the Minister will be kind on this occasion.

4.15 p.m.

The Economic Secretary to the Treasury (Mr. Anthony Barber)

I am sure that the House is grateful to my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) for taking this opportunity to raise a subject which has undoubtedly attracted widespread support and which touches very closely our concern with industrial progress and trade competitiveness. In passing, I should like to thank my hon. Friend the Member for Hemel Hempstead (Mr. Allason) for his brevity, giving me an opportunity to reply fairly fully on this important matter.

I should like to say at the outset that I accept the view that motor racing is not only a sport, but a source of general prestige for the country as a whole, and a useful means of testing and developing new ideas and techniques which are of value to other industries. I can assure my hon. Friends that the Government do not minimise those things. Indeed, we attach great importance to the continuing progress and success of British motor racing. Only yesterday I had the benefit of meeting representatives from the Royal Automobile Club and from the Society of Motor Manufacturers and Traders to discuss this question of Purchase Tax on racing cars. My right hon. Friend the President of the Board of Trade, who was responsible for the scheme of grants to manufacturers of racing cars, has been dealing with quite a number of letters on the subject from hon. Members.

My hon. Friend the Member for Twickenham raised two sets of questions. The first was whether we ought to raise revenue by means of Purchase Tax on the sale of a certain type of motor car; and indeed whether racing cars were at present legally taxable. The second was whether a particular industry or sport should continue to be financially assisted at public expense—in other words, whether the public at large ought to pay some of the expenses of motor racing, either through a scheme of Government grants, or by forgoing a contribution to the Exchequer.

Although one can define these questions quite simply, it is not so simple, especially at this time of the fiscal year and within the limits of an Adjournment debate, to do full justice to all the arguments, on all sides, which should be taken into account. Before coming to the legal aspects, I want to say something about the more general question, that is to say, about the case for and against Government financial assistance to a particular industry, the case for and against terminating the scheme of grants to manufacturers of racing cars.

My right hon. Friend the President of the Board of Trade is answerable in the House for the scheme of grants which has been mentioned, and my right hon. Friend and his colleagues have already explained the Government's position on this aspect of the matter, both in answer to Parliamentary Questions in the House and in statements in another place. But perhaps I can say this—the Board of Trade has, naturally and quite rightly, over the years kept under review the justification for this expenditure on grants to racing car manufacturers. I know that my two hon. Friends who have spoken would be the last persons to object to this practice of submitting existing items of public expenditure at intervals to fresh scrutiny and to reexamining the original arguments in the light of changed circumstances.

As my hon. Friend the Member for Twickenham pointed out, one has to go back to the period of the late 1940s to get at the origin of this rebate scheme, and it requires no stretch of the imagination to appreciate that the arguments which were relevant then are not necessarily so today, and that the condition of British motor racing and of the motor oar industry and other industries associated with it has changed significantly since those years shortly after the end of the war.

I think that it is fair to say that in a nutshell the case which the racing car interests put to the Government in 1948 was this: "We cannot meet all the expenses incurred in our business. But it is in the national interest to help us financially because of the general export benefits associated with the prestige of racing successes and because racing provides the best means of testing new developments of value to the motor industry generally". That was their case.

I think the House will agree that it was only incidentally relevant that one of the costs of the business was Purchase Tax, or that one of the means originally explored for giving assistance was exemption from Purchase Tax. What was sought really was financial assistance of one form or another.

The Government of the day, the Labour Government, with the support of all parties, agreed that at that time some assistance for racing cars at public expense was justified. But it does not follow from that decision that racing cars were never a perfectly reasonable object of taxation, or that racing cars should enjoy a subsidy from the State to the end of time.

The Government take the view that assistance for racing cars was sensible in 1948 as a pump priming measure, as an indication of the national interest in seeing that British prestige in motor racing was restored and maintained, to the point when the benefits would become apparent to the many other trades and industries affected by motor racing.

Surely the real questions which we have to consider are these. If in the course of the sport of motor racing new developments are tested which are of value to other motor car manufacturers, should a contribution to that testing nowadays be paid for out of the public purse? My hon. Friend the Member for Twickenham mentioned by way of examples developments in disc brakes and suspension.

Another question is, if some of the prestige of British racing success brushes off on to the suppliers of oil or tyres, or the sponsor of the team, is it not reasonable that they should make a greater contribution?

In the last financial year the Board of Trade grants to motor racing amounted to £59,000. It is no mere debating point to mention that the profits of the motor industry are now measured in tens of millions of pounds, to say nothing of the resources of the oil industry, or of the tyre manufacturers, mentioned by my hon. Friend.

My hon. Friend referred to the legal position, and this is, of course, highly relevant. In a Question which I answered on 21st December he asked why it was thought that racing cars which, as he put it, were not designed to go on the roads or to carry passengers."—[OFFICIAL REPORT, 21st December, 1961, Vol. 651, c. 174–5.] bore Purchase Tax at all, and he made the same point again this afternoon.

There are two main points in the argument: first, whether a single-seater car is a passenger vehicle, and, secondly, whether a car which it would not be legal to drive, without adaptation, on the public highways can be said to be a road vehicle.

Since these matters were raised Customs and Excise has looked into the matter again, and the advice it has re- ceived is that the answer to both questions must be "Yes". The statutory words of Group 27 of the tax Schedule are really, I think, reduced to nonsense if one assumes that the driver of a vehicle is not to be included among its passengers.

If that were so, the exemption for invalid carriages which is laid down in the Group would never have been necessary, and a motor cycle would be chargeable with tax only when it had a pillion seat. I am sure that this cannot have been what the House of Commons intended when the statutory provisions were passed.

Moreover, as I think my hon. Friend knows, because this matter has been discussed in the House in previous years, we have always regarded a vehicle "constructed … to carry twelve passengers"—which is on that account exempt from tax—as meaning one which has seats for the driver and for eleven other people, and, indeed, this has been accepted by the motor industry.

On the other legal point, the advice which we have received can, I think, be summed up by saying that the phrase "road vehicle" means a vehicle that is designed to run on a road surface, whether the road be a public or a private one. Racing cars are designed to run normally on what are in effect private road circuits, and they are, therefore, in the view of Customs and Excise, road vehicles.

But even if there were doubt about that, which I do not think there is, I would remind my hon. Friend that there are occasions, not only abroad, but in this country, when racing cars are run on roads to which the public normally has access, but whose use is temporarily restricted for the purpose.

That leads to my hon. Friend's alternative suggestion. Assuming, for the point of argument, that I am right in saying that racing cars are taxable under the present law, could they not be specially exempted by some statutory amendment? My hon. Friend will, I am sure, appreciate my difficulty in discussing any such possibility at this time of the year, although it is, I think, permissible to say that this suggestion takes us back, as it were, to the very beginning of the story. It was only after the most careful examination of this very possibility by the Customs and Excise and the R.A.C. in 1949, which revealed that there was no satisfactory way of defining racing cars as a class of vehicle, that the arrangement for refunding tax on individual vehicles was introduced in 1950.

My hon. Friend referred, in passing, to sports cars. My recollection, from having gone into the matter pretty carefully since it was raised, is that one of the principal difficulties which faced the Customs and Excise in 1949—and the R.A.C., with which it was working in close co-operation—was to define a racing car in such a way that the exemption would not be applied also to certain types of sports car which, although they may not have been in existence in 1949, would, I have not the slightest doubt, have soon been manufactured when it was realised that, by so doing, Purchase Tax could be avoided. As far as I am aware, the difficulties are just as formidable today as they were then.

My hon. Friend mentioned the possibility of Purchase Tax on race horses; I would only say that as the St. Leger is run in my constituency, I had better steer clear of that one.

British racing cars, and their drivers, today occupy a position in the world that was, in a sense, only being dreamed of in 1948. As my hon. Friend made clear, the names of the drivers are household words. Public interest has been captured, and the commercial value of the resultant prestige is undeniable. The sport and the industry have grown up again, and there are now compelling reasons for saying that they can keep going without dependence on public funds, and without being exempt from meeting a fair share of the tax liability which falls on so many other sections of the nation.

In view of the comparatively recent decision to cease the payment of the countervailing subsidy I have thought it right to go into the merits of the case for assisting motor racing one way or the other, more fully than I would otherwise have done at this time of the year. For this debate, whichever way one looks at it, raises a matter of taxation. While, therefore, I want to leave the House in no doubt about the position, it is only right and courteous to my hon. Friends and those concerned with motor racing who came to see me yesterday that I should also make it clear that we will certainly bear in mind the points that have been made, and particularly what has been said by my hon. Friend this afternoon.

Mr. G. R. Mitchison (Kettering)

Perhaps I may add one word of consolation to the hon. Member for Twickenham (Mr. Gresham Cooke). It will not do him very much harm if the Swiss national anthem is played instead of the British one—the tune is the same.

Question put and agreed to.

Adjourned accordingly at half-past Four o'clock.