Clause 4.—(HYDROCARBON OILS (MINOR AMENDMENTS.) (Hansard, 15 May 1962)

§ Mr. Mitchison

The Clause contains what are described as minor Amendments and I have no doubt that they are. Apparently, judging from the White Paper, the effect of the Clause is to extend the definition of "fuel oils" to include any heavy oils which contain in solution an amount of hard asphalt of not less than one tenth of 1 per cent.—who puts it there, I wonder—and a closed flashpoint of 150 deg. Centigrade or below.

The change appears to be in the reference to the closed flashpoint, because the Customs and Excise Act, 1952, contains this definition of fuel oils: heavy oils which contain in solution an amount of hard asphalt of not less than one half of one per cent. The change appears to be in the introduction of the words referring to the closed flashpoint.

Can the Government tell us what kind of oils are covered and the extent of the change made? Is it an appreciable amount of revenue one way or the other? Why are the Government now resorting to a form of definition of this type of oil which appears to be rather different from anything which appeared in the original 1952 Act? The 1952 Act contains references to the asphalt and to other methods of estimating 1282 something or other connected with the oil, in that case by distillation. Here, apparently, we are to have a flashpoint definition. It appears that the Customs authorities themselves prescribe the tests for applying all this and there is no doubt some good and probably some simple reason for having it. Those are the points which occur to me in connection with subsection (1).

As for subsection (2), we ought to be told why the arrangements about the licensing of persons selling unrebated heavy oils are being withdrawn. The rebate, I gather, is that allowed in connection with heavy oils for home use and was, in fact, the rebate we were discussing when the 2d. tax was put on heavy oils last year. I suppose that the unrebated heavy oils are those which have not yet qualified for rebate or which, for some reason or other, are unrebated. Can we be told, in plain English, what these people are doing and why those activities are no longer to be licensed?

Subsection (3) is rather complicated. Why have the Government thought out the word "extractant"? The word does not occur in the Oxford Dictionary and can only be found in the most modern edition of Webster's. Whatever it means—and I think that I can guess its meaning—could they not have discovered a less inelegant word?

§ Mr. Barber

The hon. and learned Member for Kettering (Mr. Mitchison) asked four questions. The first was what would be the revenue effect of the provisions in subsection (1). I am told that the only appreciable effect on the revenue arises from this subsection and it is estimated that there will be a revenue loss of under £100,000 per year.

The hon. and learned Gentleman's second question, also in connection with subsection (1), was what oils were involved in the change. I should remind the Committee that imported hydrocarbon oils falling within the definition of fuel oils—gas oils and kerosene—are liable to 2d. a gallon duty. Other heavy imported oils—which means mainly lubricating oils—are liable to a duty of 3d. a gallon. Before last year the first category was not charged at all while the second was charged 1d. a gallon. This is a differential which has been in existence for a long time.

1283 The present definition of fuel oils originally appeared in the 1947 Act. The hon. and learned Member for Kettering read a passage from the 1952 Act, which was a consolidation Measure and which was, therefore, the same. He mentioned the content of hard asphalt as being not less than one half of 1 per cent. I did not follow the hon. and learned Gentleman's argument from then on, but he will see that the Bill refers to one tenth of one per cent. so that the reason for the change will, I think, become obvious to him.

Perhaps I can explain why we thought it necessary to do this. The position is that since the original definition of 1947, additional sources of crude oil have been brought into production and pure oils derived from some of these sources tend to have less than the prescribed minimum of hard asphalt, which was one half of one per cent. in the original definition and on which, therefore, there had to be paid a duty at the rate of 3d. per gallon instead of 2d.

This was really anomalous, because I am told that these oils were, in character, function and price, similar to the oils which were already paying a duty of only 2d. So the existing criterion of hard asphalt content retained in the revised definition introduces the additional alternative criterion in terms of a lower content of hard asphalt combined with a flashpoint limit. Oils which can satisfy the new criterion as well as those which satisfy the old definition in the 1947 and 1952 Acts will now bear a duty of 2d. instead of 3d.

The third question asked by the hon. and learned Member was why the previous licensing system has been withdrawn. I can probably answer that simply by reminding him that in 1960 we passed legislation—it was the Finance Act of that year—in which the Customs and Excise was given power to introduce a scheme for marking oil to differentiate between heavy oil used as road fuel—which bears the same duty as light hydrocarbon oils, such as petrol—and heavy oil otherwise used, which pays the lower rate of duty; 2d. or 3d.

Previously, there had been no physical difference between the two and this complicated licensing system placed a burden 1284 on those who had to operate it—and I refer not only to the Customs and Excise. Thanks to the working of that scheme, resulting from the 1960 legislation, it is now working quite satisfactorily and we have been able to clear away, in terms of the provisions of the Acts, a considerable amount of dead wood.

It might save the time of the Committee if I refer to the next schedule, the Seventh, which is related to the Clause and which contains a number of provisions which, at first sight, look somewhat ominous. The whole of it is nothing more than consolidation. We have included it simply for convenience and to cut out some of the dead wood. What remains has been amended and brought together in this one Schedule for convenience.