HC Deb 28 May 1963 vol 678 cc1215-54

  1. (1) Subject to the provisions of this section, section 3 of the Finance Act 1961 (relief from duty on heavy oils used by horticultural producers) shall apply in relation to heavy oils 1216 used by the applicant as mentioned in the next following subsection as that section applies in relation to heavy oils used by the applicant as mentioned in subsection (2) of that section.
  2. (2) The owner or hirer under any contract of a hackney carriage having seating capacity for twenty or more persons shall be entitled to 1217 repayment under the foregoing subsection in respect of oils used by him as fuel for that hackney carriage.
  3. (3) For the purposes of this section subsection (5) of the said section 3 (which provides for the furnishing of information to the Commissioners of Customs and Excise) shall have effect as if references to the production of horticultural produce by the applicant were references to the transport business of the applicant and as if the word "plant" includes vehicles.
  4. (4) In this section "hackney carriage" has the same meaning as in the Vehicles (Excise) Act 1949; and in relation to the phrase "fuel for that hackney carriage" section 7(1) of the Finance Act 1959 (which, as amended by section 9(2) of the Finance Act 1960, states the circumstances in which heavy oils are to be treated as used as fuel for a vehicle) shall apply for the purposes of this section as it applies for the purposes stated in that subsection (1).—[Mr. Mitchison.]

Brought up, and read the First time.

Mr. Mitchison

I beg to move, That the Clause be read a Second time.

The Temporary Chairman (Sir Samuel Storey)

The following new Clauses are also selected for discussion: "Reduction of duty on heavy oils", "Fuel oils, gas oils and kerosene: rebate", "Heavy oils: rebate" and "Abolition of duty in heavy oils". The first of these can, if desired, be taken to a Division.

Mr. Mitchison

The new Clause which I am moving is a good deal narrower in scope than some of the other Clauses which will be discussed with it. As far as I can make out, no such thing as an omnibus or bus is mentioned in any statute. It is camouflaged as a hackney carriage. The Amendment refers to derv for buses, but derv does not exist in the Statute Book either, nor, curiously enough, does diesel oil.

The intention and effect of the Clause is to allow buses operating anywhere to get their derv free of Customs duty. They would get it, it is intended, by a rebate in the same way that the Finance Act, 1961, allowed relief from duty in the form of a rebate on heavy oils used by horticultural producers. Without going into the matter in detail, Section 3 of the 1961 Act provided machinery for the purpose and, no doubt, it has been operated since then.

Until 1961, we used to bring this or a similar proposal forward and were told that it was administratively impossible. Now that the Government have managed to do it for horticultural producers, there should be no insuperable objection to doing the same thing for buses. It is in that spirit that we seek by the new Clause to apply the horticultural producers machinery to the case of buses. I hope that this will not be another instance of an agricultural tractor getting a rebate only when at sea; I do not think that it is. I always doubted the truth of that accusation. What matters is the substantial point which we are trying to raise, and that is whether the 2s. 9d. per gallon duty on buses should be continued.

The curious position about these heavy oils is that there are rebates, but they do not apply to what in some books is called road fuel—that is, fuel for a mechanically-propelled vehicle on the road. There are exceptions to the rule which I need not go into. This part of the Customs and Excise legislation and corresponding machinery is fairly complicated. The exceptions are curious and devious, and the processes of administration are much the same. The substantial point is simply the one about derv for buses.

This matter came up in Committee on the 1959 Finance Bill, and the then Chancellor, now Lord Amory, recognised the existence of a problem. He pointed out what he called difficulties of principle, but a fair conclusion from what he said is that it was on difficulties of administration that he finally rejected a proposal from the Government side for derv for buses, but only outside built-up areas. That would make matters a great deal more complicated, and I appreciate the difficulties which that proposal involved.

On 15th June, 1959, the then Mr. Amory said: For the reasons I have given, realising all too clearly the problem which exists, particularly in the rural areas—whose case my hon. Friends have argued with such moderation this evening"— we can, of course, expect their support tonight— I must say that I cannot see a solution by way of either of the proposals put forward. The proposals were the rural bus one from the benches opposite and a more general one from this side of the Committee. Although I share the anxieties expressed by hon. Members and agree that we must somehow find a solution to the problem, I must advise the Committee not to accept the new Clause."—[OFFICIAL REPORT, 15th June, 1959; Vol. 607, c. 171.] That was in 1959. It was at about the same time that the Jack Committee was set up to consider this problem of rural transport. It was to review present trends in rural bus services and in particular to enquire into the adequacy of those services; to consider possible methods of ensuring adequate services in future; and to make recommendations. As was said at the time, that Committee was set up only after prolonged pressure. Having been appointed in September, 1959, it made a fairly prompt Report. Ever since then, hon. Members on both sides have pressed the Government to say what they propose to do about it.

Having set up a Committee to investigate the question, the Government have now considered the Report of their own Committee, I suppose, insufficient or unsatisfactory—although they will never say so—and are conducting an inquiry of their own into the whole question. The Ministry of Transport is having what one might call a high old time investigating what happens in buses all over the country. It is a busy Ministry, particularly nowadays. Buses have come to assume an importance that they did not have even in 1959.

Let us see what conclusions the Jack Committee reached. The Committee examined the question of removing the fuel tax as a possible solution and finally rejected it. I want, none the less, to refer to one or two things that were said, and particularly to two dissenting Reports that were given on this point and which are printed at the end of the full Report, and especially to one from Mr. H. R. Nicholas, who was one of the members of the Committee and is well known to all of us on this side, at least, and, I imagine, to most hon. Members opposite.

The solution that the Committee finally reached was that a subsidy would be required. It indicated in paragraph 123 of its Report that that subsidy might entail an initial cost of about £1 million a year, with the prospect of an annual increase over the next few years. I certainly would not regard that as an understatement of what was required. Perhaps that is the reason why the Government have done nothing about it for so long.

8.30 p.m.

When the Committee was considering the fuel tax, it asked for some evidence from groups of bus undertakings. One was called the Public Transport Association, another was Tillings and another was Scottish Omnibuses. These three groups stated their losses on unremunerative rural mileage and then stated the costs of the fuel tax, and the conclusion which the Committee drew—I think it must be correct on the figures—was that the cost of the removal of the fuel tax would be more than the actual loss on unremunerative rural mileage. That was one of the reasons—I think the substantial reason—for its rejecting that solution. It then considered various other forms of doing the same thing, with which I will not trouble the Committee, because the Report has been published.

But Mr. Nicholas, in his dissenting Report, came to a different conclusion. In paragraph 14 on page 54, he said: In my view there is a strong case for an immediate and complete fuel tax remission generally for the industry for many reasons. One is that it would enable operators of stage services to continue the system of cross-subsidisation… I need not go on with that paragraph. It went into the matter in a little more detail.

Cross-subsidisation means, in plain English, the use of a remunerative service to carry an unremunerative one. I live in a rather remote part of Scotland where what would be by itself the unremunerative provision of our electricity supply by the North of Scotland Hydro-electric Board is done because its system of providing electricity has other more remunerative parts and the two things are taken together. That is done in many industries, particularly public ones, but also in others. Cross-subsidisation is, therefore, a very important point when we are considering the position of rural services, and it has a considerable bearing on present circumstances.

Before dealing with that subject, I would add a word or two more from Mr. Nicholas's Report: The eventual sum involved in a subsidy would inevitably be much greater than that envisaged in Chapter 10 of the main Report. That is the part that I read out just now. If the principle of a subsidy is sound there appears to be no reason why it should be restrictive in its application to unremunerative rural services only. That was his criticism of the Committee's conclusions.

Finally, he said—this is what appealed to me—that, in effect, it really would be ridiculous to subsidise a service of this character at one end and tax it at the other. His phrase was: a 'from one pocket to the other' transaction. I agree with that. Therefore, looking at the Jack Committee Report, which found a very great many advantages in this type of arrangement, I still prefer Mr. Nicholas's Report, and I think the time has come for the Government to consider whether this should not be done. That is the intention of the Clause.

I say that I think the time has come for a certain reason. Rural bus services have not been improving. Within my knowledge they have been getting rather worse, if anything. There is a constant tendency on the part of a commercial bus company to give up cross-subsidisation unless it is driven to it by the licensing authorities and to drop unremunerative services. The company is out to make a profit, and it is not particularly concerned with the social consequences of what is done. Therefore, it naturally drops unremunerative services, one by one, quietly. That has been happening. Whether I am right or wrong about that, it is clear that there is considerable pressure to that end.

What is happening at the moment is that the Beeching Report and the views of the Minister of Transport about it will involve a further burden on our bus services—additional services and such wild ventures as the removal of a seat or two in order to accommodate a perambulator. This was one of the devices we had to consider in a debate the other day. Seriously, perambulators or no perambulators, our bus services will be very hard put to it if they are to meet the social needs consequent on any attempt to implement the Beeching Report.

I am not going into the matter in detail, but it is obvious that if one says that a great many of the railways do not pay and, therefore, shuts them down and relies on bus services to meet the gap one has caused, one will not get very much out of the bus services that do not pay. The effect of this tax is to increase the bus services that do not pay. If one could remove it, one would reduce the number of unremunerative services and thus brighten the whole picture. This is not just a question of balancing one service against another. It is getting the undertakings as a whole to perform their social obligations—obligations consequent, after all, on Government actions.

It may be said, "Your Clause does not say anything about all this". I think that is a fair criticism, but there are limits to what one can do in the Finance Bill. It seems to me that the time has come for the Government to accept, in principle if they like, that they cannot go on getting this additional duty on derv for buses without damaging, or increasing the damage already done, to the bus services in the country.

In talking of rural bus services, I do not mean to exclude other bus services, but I do see the particular importance of those in rural areas, whether they be local or long distance. It is, indeed, impractical to try to limit the effect to one category or another. If we try to do it by using a built-up area as a criterion, as hon. Members opposite suggest, one may get the ridiculous position of bus services running alternately through built-up and rural areas. We will have to go the whole hog.

I can see no real objection to this at all. I cannot see that the administrative difficulties, although I would be quite prepared to agree that they exist, are insuperable in view of what has been done since Mr. Amory, as he then was, made the observation I referred to. What was a critical problem in 1959 has not only continued to be one but is a great deal worse, and at the moment it threatens to be even more serious and of even wider social effects than it was in those days. It really is an important matter, as Lord Amory recognised even at that time.

I am not here to argue the case for a further reduction of duties on fuel generally. That is not the purpose of my Clause. The case will no doubt be argued by those hon. Gentlemen who have put down new Clauses accordingly and which are being discussed with this one. It is an entirely different matter. It is different for one outstanding reason—that the moment one considers a fuel tax simply as a matter of fuel, whether one is considering this, that or the other type of heavy oil, one inevitably has to consider other fuels and obviously among these is coal.

The days when motor cars or motor buses were driven by steam generated by coal are past, and in practice derv accounts for 90 per cent. of the fuel used by buses. That is why only one derv has a substantial case today. When one comes to reducing taxation on other fuel, one is on a different and very much broader question.

The best estimate I can make is that something like a loss of £30 million a year would be involved to the National Coal Board, allowing for diminution of gross revenue and some savings of costs, if the new Clasues proposing to reduce the fuel tax as a whole were accepted by this Committee. I say no more about that than that, given conditions in the north of England, Scotland and elsewhere, and given the state of the coal industry at the moment, it would be madness to attract the social dislocation that would be involved by the more sweeping proposals in the other Clauses we are considering with mine. This is not the moment, with mines closing all over the country, and with grave unemployment in and near the coalfields, to do anything of the sort.

But that does not arise on the Clause that I am moving, and on this Clause I say with confidence that the case that has existed for many years, that has been recognised on both sides of the Committee, that was recognised by the Chancellor of the Exchequer in 1959, has not only continued but has grown, and now it must be met if anything is to be done to implement the Beeching proposals or any part of them.

Mr. T. H. H. Skeet (Willesden, West)

Sir Samuel, you have been good enough to call for discussion of the two new Clauses in my name, one dealing with rebate of duty on fuel oils, gas oils and kerosene, and the other with lubricants, and the right hon. Member for Kettering (Mr. Mitchison) has indicated that the coal industry requires a certain degree of protection. I think that we on this side of the Committee, as well as hon. and right hon. Gentlemen opposite, will appreciate that the arguments in favour of the coal industry have been put before the Committee on many former occasions.

Mr. Neville Chamberlain said this: I have received very strong representations from the coal industry, supported by the gas and electricity supply industries, and by the railway companies that in the interests of British coal and allied industries, I should review what they regard as an anomalous position".—[OFFICIAL REPORT, 25th April, 1933; Vol. 277, c. 52.] Starting from that, a duty of 1d. per gallon was placed on heavy oils. Rather curiously, with the passage of time, there have been repercussions, and when we come to another Chancellor of the Exchequer, Mr. Hugh Dalton, he stated These arrangements will…I hope…result in conversions from coal to oil to the maximum extent possible."—[OFFICIAL REPORT, 1st August, 1946 Vol. 426, c. 238.] He removed the ld. per gallon from heavy oils and gas oils. Industry was persuaded by the Chancellor of the Exchequer at that time to go over to oil. Now it has been told by subsequent Chancellors of the Exchequer that it is to be penalised for doing so.

My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) on 17th April, 1961 said: …I consider that for revenue reasons heavy oils should now bear some duty. I propose, therefore, to reinstate the duty, at the rate of 2d. a gallon on heavy oils at present free of duty…".—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 819–9.] I think that is perfectly consistent with what my right hon. Friend the Minister of Power at the opening of the B.P. terminal at Angle Bay, as reported in The Times on 21st April, 1961, said: Some have suggested that it is naive to suppose its purpose was to raise revenue and not to give protection to coal. I emphatically deny this…because I am convinced that coal is in no need of such protection. There seems to be some Ministerial confusion about it. On the one hand, we have the recognition from the Chancellor that industry should convert from coal to oil because of the difficulties experienced at the time.

In a fairly recent Budget it was indicated and confirmed by the Minister of Power that the coal industry was in no need of protection. That is not the end of the story, because in my right hon. Friend the Chancellor's recent Budget he said: I have to decide whether the quick reductions in the costs of certain industries which would result from the removal of the duty would outweigh both the immediate damage to the coal industry and the risk of disrupting and even preventing the long-term recovery of the full competitive position of the industry…I have, therefore, decided that the time is not ripe to reduce the duty"—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 486,] 8.45 p.m.

I find it difficult to reconcile this with the statement by the Chancellor of the Exchequer when he was Paymaster-General. During the fuel and power debate in this House on 4th May, 1959, he said: I should have thought that a duty designed for the protection of coal would probably also be contrary to our international obligations."—[OFFICIAL REPORT, 4th May, 1959; Vol. 605, c. 55.] My right hon. Friend said in the first place that he wanted it for the protection of the coal industry; a previous Chancellor of the Exchequer, my right hon. and learned Friend the Member for Wirrall said that it was not necessary but he wanted it for revenue purposes; and my right hon. Friend the Chancellor of the Exchequer said in 1959 that it was probably contrary to our inter-national obligations.

On this basis hon. Members may wonder how an industry can plan ahead if it finds that its fuel policy is changed almost overnight, that distortions are introduced from different angles, and that we are pursuing a policy in this country which has already been rejected in Western Europe. I should have thought that in 1960 there would have been a turning point when the Report of the Robinson Committee was published, which indicated that what Europe required was a plentiful supply of low cost energy with freedom of choice to the consumer… These views received broad acceptance by the Government, and my right hon. Friend the Chancellor of the Exchequer said: Our aim must be a cheap and abundant supply of fuel. Our policy is to obtain it by proper freedom of choice for the user and competition between suppliers…"— [OFFICIAL REPORT, 4th May, 1959; Vol. 605, c. 45.] This would seem economic sense, but what do we find in this Budget? We find that my right hon. Friend is refusing to allow proper freedom of choice or competition between suppliers, and my right hon. Friend's views were supported by the Ridley Committee when it said: …the right policy…is to leave the pattern of fuel use to be determined by the consumers own choice between competing services. The position is that while Europe is going over to a liberal fuel policy, Her Majesty's Government are moving further and further towards protection, and while European industry is having its costs thrust down to compete effectively abroad, our fuel prices are being chained more and more to high cost coal with the result that we have imbalance.

Mr. Chapman

It is not high cost coal.

Mr. Skeet

It is compared with the cost of coal in Europe and some of the coal exported from Virginia in the United States to Europe. That is why at one stage the Minister of Power would not allow the steel industry of Wales to import Virginia coal.

Having paid lip-service to what is known as a liberal fuel policy, what has happened here? Industry has had considerable increments added to its fuel bill. For example, the steel industry has had between £6½ million and £7 million added to its fuel bill. The engineering industry, on which we depend for exports, has had £2¼ million added to its bill. Food processing has had £22½ million added. These figures are significant if one tots them up. The textile industry, which is going through a difficult phase, has had about £2 million added to its bill, and a number of other industries, like the ceramics and pottery industries, have had £1 million added. I could enumerate a number of other industries which have suffered this severe affliction.

It is extraordinary that when a clear line of policy has been laid down in Western Europe, where it appears that they are on the right lines trying to get their costs down, we should either be adding to or keeping these high costs which are an embarrassment to industry, at a time indeed when rates are rising substantially through re-rating, and when the prices of electricity and gas have risen considerably.

I wonder whether the Committee would care to consider some of the technical advantages to be derived from the use of oil? Not only is it cleaner to use and store, but on a calorific basis there is less sulphur content than there is in solid fuel. Therefore, I think that one of the factors which my right hon. Friend should take into account is that if he is trying to clean the air of Britain this is one way in which to do it. If, on the other hand, he is going along with the present policy—

Mr. R. E. Winterbottom (Sheffield, Brightside)

rose—

Mr. Skeet

If the hon. Member will please wait until I have finished my sentence—of shoring up the markets in the hope that by assisting one part of the economy he will vastly strengthen the other, he will find that this policy will not act in the way he wants.

Mr. Winterbottom

Just to get the record straight, I wish to point out to the hon. Member for Willesden, East (Mr. Skeet) that his statement about electricity is the best understatement I have come across for some time. Taking the area which I represent, the increase budgeted profits for electricity for the next five years range to something like a f14 million increase on a former budget of £18 million. The estimated profit is about 360 per cent. In other words, electricity is helping to price some industries—particularly those connected with the steel industry—out of the market.

Mr. Skeet

The hon. Member should bear in mind that if the suggestion which I put forward of halving the duty, or the suggestion regarding the removal of the tax, is adopted, the electricity industry will benefit. Its tax bill each year from this levy is about £13 million. It is a factor, therefore, from which the electricity industry would benefit. That is, of course, the total bill for fuel oil duty.

If we consider the relative tax position in Europe and compare the situation in the countries of the Six and the United Kingdom we find that in Western Germany the tax is 2.8d. per imperial gallon. We can say, therefore, that Western Germany is top of the league. We come second with a figure of 2d. There are a few other countries like Belgium, 1.8d.; Italy, 1.7d. and the Netherlands, 1.1d., with France at the bottom with a figure of (Ad. Therefore, from the angle of the tax on fuel oil we are virtually right at the top of the league for the European cup. We have not got into the Common Market. But we have to compete with the Common Market countries and taxwise we are well and truly up against it.

Mr. Denis Howell (Birmingham, Small Heath)

And it is the fourth division.

Mr. Skeet

It may be the fourth division.

For what are we considering this special privilege? For an industry which accounts for at least 70 per cent. of the total energy requirements of the United Kingdom against the oil industry which accounts for only 29 per cent. The total hydro-carbon tax works out at about £590 million. The fuel oil tax works out at something like £60 million. Who foots the bill? Industry, to the extent of 86 per cent.

I wish to point out to the Committee that this would total less than 1 per cent. of the total tax receipts of the Government. Yet in some industries it has an impact on increased fuel costs of about 25 per cent. Surely this makes economic nonsense. One quotation which I have here from industry relates to Associated Portland Cement: This time last year I foretold the damaging effect that the hydro-carbon oil duty would have on our export trade. Events have, unfortunately, borne this out as our exports fell by one third equivalent to some 300,000 tons. We had no alternative but to withdraw from many of our old traditional markets because the oil duty turned a profit, already only marginal, into a loss. How long can we expect these things to continue? The duty of about £4 million on kerosene is a little hard on two sections of the economy. In the United Kingdom there are about 13 million oil heaters. People who have them have to pay this tax. Would it not be right to assist those on lower incomes to utilise those devices by reducing this duty? Kerosene is also used for vapourising and there are about 150,000 tractors in the United Kingdom. Are we to say that the duty should not be removed to their advantage?

Perhaps the Chancellor may address his mind also to the important aspect of lubricants. This tax is exceedingly high, and I think that my right hon. Friend could well afford to release approximately £3 million in this respect. Where is the competition with the coal industry in lubricants? The coal industry itself uses lubricants and has a tax bill on this account. If, on the other hand, the tax is for revenue purposes and not for the protection of the coal industry, then it should be recognised that industry has not been doing quite so well in recent years and the amount of lubricants which has been consumed has fallen quite significantly. Therefore, an advantage should be conceded.

Where we have a fuel which enters into the cost of production it should not be taxed. Where industry in Europe has access to cheap fuels such as natural gas, an abundant supply of liquid fuel and also a large quantity of American coal, we should do something to secure the position of British industry. After all, it is British industry which is largely responsible for the exports of this country.

It may be a happy circumstance if we could export a little coal, but that is purely marginal. Are we to say that industry must carry the heavy burden because the coal industry cannot keep its own house in order? [HON. MEMBERS: "Nonsense."] I sympathise with anyone who has to face being rendered redundant, but this is a charge which should be put on the nation as a whole and not on a particular section of industry. I think that many hon. Members will agree with that sentiment.

I have asked, quite modestly, that this tax should be halved. Some of my hon. Friends have suggested that it should be deleted entirely this year. The Government should consider on what ground they continue the tax. A couple of years ago it was said to be for revenue purposes. This year it appears to be for the protection of the coal industry. It seems that they are rather confused. It is up to the Chancellor to clarify these matters.

Mr. Donald Wade (Huddersfield, West)

It is generally recognised that the closing down of bus services, particularly in rural areas, is a serious matter and one has to take into account the social consequences. On these grounds, there is a case for relief from the duty on heavy oils so far as it affects bus services, but I do not think one can limit this question to derv for buses. As the hon. Member for Willesden, East (Mr. Skeet) has pointed out, this fuel tax has very serious implications for industry.

You, Sir Samuel, have been good enough to indicate that in this debate we can discuss the Liberal new Clause—"Reduction of Duty on Heavy Oils". The object of that Clause is to increase the rebate, or in other words to cancel the increase of 2d. a gallon which was imposed in 1961. Like the hon. Member for Willesden, East, I am rather puzzled by the change of attitude which has been adopted by way of justification for the tax. From what the right hon. and learned Member for the Wirral (Mr. Selwyn Lloyd) pointed out when he was Chancellor in 1961, it is quite clear that the tax was for revenue purposes. He said: …I consider that for revenue reasons heavy oils should now bear some duty."—[OFFICIAL REPORT, 17th April, 1961; Vol. 638, c. 818–19.] 9.0 p.m.

The ground has obviously been changed, and the Government's view is now very different. The Chancellor's observation has already been quoted, and I need not quote him again at length. But, in his Budget speech on 3rd April, he said: Against this background I considered whether do reduce the duty on fuel oil. I have been pressed to remove this duty to lower industrial costs. I cannot consider this solely from a revenue point of view…"—[OFFICIAL REPORT, 3rd April, 1963; Vol. 674, c. 485.] He gave his reasons far not removing this burden and referred to the problems of the Coal Board. One cannot ignore that aspect. I fully appreciate the Coal Board's problems, and I will refer to them in a few minutes, but we must consider industry as a whole, and it cannot be denied that the duty on heavy oil has been passed on to the consumer probably in all relevant products. This affects both home industry and the export trade, and a wide range of industries. The public utilities are prominent among them.

Electricity generation alone absorbed 5,700,000 tons of gas, diesel and fuel oil last year. A further 2,800,000 tons was absorbed in the iron and steel industry, while miscellaneous engineering industries together accounted for well over 1,900,000 tons. I could give other examples of important consumers. Reference has been made to cement, and there is also the fishing industry.

Among those who have turned increasingly to oil fuels over recent years are those employing central heating. Last year more than 2,600,000 tons of gas, diesel and fuel oil, as well as considerable quantities of burning oil, were utilised in central heating installations, and the users of the heavier oils included schools, medical and welfare establishments.

But it is among the industrial users of oil that the effect of the new duty has been most far-reaching. I hope that the Chancellor is aware that much plant is designed to operate on fuel oil because it offers certain natural advantages by comparison with solid fuel. For example, it has a higher calorific value, ease of handling, convenience of storage and cleanliness in use. The relatively low price of fuel oil, in particular, has been an important factor to firms whose competitive ability depends largely on keeping down their manufacturing costs. That is the essence of the case. We must consider the vital importance of the competitive element in manufacturing costs, because this is essential if we are to compete overseas, particularly against some Western European countries.

The Chancellor recognised this, but he came to the wrong conclusion. The industries which are heavy users of fuel oil include cement, steel and parts of the chemical industry. In effect they are being penalised, and the result has been a blow at the export competitiveness of a significant sector of British industry.

I will give an illustration in connection with cement, which has already been referred to. Exports of cement have been particularly adversely affected. The tax of 2d. a gallon increased cement-making costs by 8s. per ton, or about 12½per cent., at oil-fired works, which is the case in all the major United Kingdom export- ing works. I have some figures here which bear this out.

The effect on the exports of British cement is clearly brought out by the following figures from the Trade and Navigation Accounts, which I have here. I shall not give a great many details. I will give a summary. In 1960 the value of the exports was £7,115,306. In 1961 —hon. Members should remember that the fuel tax which I am discussing was increased in April, 1961—the figure fell to £5,300,908. In 1962 it fell to £3,124,526. I do not think it can be denied that in industries such as this the fuel tax has had a serious effect on our exports.

Mr. Mitchison

Is not the fall to which the hon. Gentleman refers at any rate connected with the increasing practice of that particular outfit to manufacture more cement abroad?

Mr. Wade

Yes, but I do not think one can get away from the fact, both from the quotations we have had from the hon. Member for Willesden, East (Mr. Skeet) and those which I have given, that this tax must have had an adverse effect on the competitiveness of the cement industry.

I will give one last quotation. It is from an article in the Guardian of 15th March, 1963, which sums the matter up in this way: Probably no single step could do more to reassure the world that Britain is really intent on achieving faster economic growth than a clear and unequivocal positive answer to the question: 'Does Britain want cheap fuel?' The Government have come down on what I regard as the wrong side, namely, they prefer to keep fuel prices in this country artificially high.

As I said at the beginning of my brief speech, I am aware of the problems of the coal industry. I believe that Lord Robens is doing a good job. I do not want him to be handicapped in his task. However, if the choice has to be made, I would prefer some form of subsidising temporarily to help the coal industry to carry out its reorganisation rather than impose this very serious burden on the remainder of industry.

Mr. Frank McLeavy (Bradford, East)

Will the hon. Gentleman tell the Commitee the amount of tax per gallon for industrial use?

Mr. Wade

If I might ask the hon. Gentleman a question, does he mean over the whole country?

Mr. McLeavy

Yes.

Mr. Wade

The amount I propose as a reduction is 2d. per gallon.

Mr. McLeavy

I do not think the hon. Gentleman has understood me. He is arguing that the fuel oil tax imposes an extremely heavy burden on industry. Will he tell us for our guidance precisely what the tax is per gallon for industrial use?

Mr. Wade

I think it is 2.2d. I would have to check that.

I think that the Chancellor of the Exchequer made a fair point when he said that he has to take into account the problems of the coal industry, but, if the choice has to be made, it would be better for industry as a whole to face this squarely and provide some kind of subsidy over a period of years rather than continue this fuel tax which, I repeat, is a serious impostion on industry. It is for that reason that I advocate this reduction in duty.

Sir Hugh Linstead (Putney)

In this short debate on the proposed new Clause two points have been adduced which must have been in my right hon. Friend's mind when he made his Budget announcement. The first is the revenue aspect of the duty—which amounts to about £55 million a year—and the second is the impact on the coal industry; and however much one desires to see the abolition of the duty, one must recognise that at the very time when the coal industry is turning the corner—is getting its head above water, to mix metaphors—is probably not the most fruitful time at which to encourage the further development of the use of a competitive fuel.

While these two points must have been in my right hon. Friend's mind, there is a third point which is of importance to him and to industry as a whole—the value of a reduction of fuel oil tax as a general incentive to industry, in reducing both the costs of production and of distribution. Although I appreciate why this year my right hon. Friend does not propose to make a change, I hope that the possibility of using a reduction of this tax as a means of stimulating industry—as a type of regulator to be used at this parti- cular period of time as an incentive—will not be overlooked by my right hon. Friend in his calculations for next year's budget.

Mr. Skeet

My hon. Friend referred to the coal industry being in the process of "turning the corner". Realising that it has been doing that for the last thirty years, is he suggesting that the Chancellor should take the sort of action he is describing next year or the year after that? When does he consider that this tax should be remitted?

Sir H. Linstead

I was hoping that it would be next year, but it is important that industry should not be left any longer than is absolutely necessary in a state of uncertainty.

Mr. Skeet

Hear, hear.

Sir H. Linstead

Industry can work subject to almost any conditions provided that it can be reasonably certain of what those conditions will be. It cannot work satisfactorily on the basis of uncertainty. The sooner we get a clear statement from my right hon. Friend on his intentions the clearer the road will be for industry.

Of the representations that have come my way, some of the most interesting have come from the glass industry. I have no financial interest in this industry, but it would seem that it is very representative of a fuel-using type of industry; and a few figures representing the effects of the oil tax on it are worth considering by my right hon. Friend and worth having on the record. There can be no doubt that, for the glass industry, oil is far and away the most efficient fuel it can use. It is also extremely valuable from the clean air point of view, particularly with the increasing number of smokeless zones. Both the Government and the nation fully support the clean air policy, but some sections of industry may be considerably prejudiced if they are not permitted to use coal and yet are discouraged from using oil by the present tax.

It is important when my right hon. Friend considers the effects of the tax on the coal industry for him to remember that a large number of the most efficient industries and firms have already changed over to oil. He is not protecting the coal industry by maintaining the tax on fuel oil because no one will change back from fuel oil to coal firing.

It is interesting to note that, although the glass industry carries 2½ per cent. of the £55 million tax, it employs only one-third of I per cent. of our total labour force, and has only half of I per cent. of our total industrial turnover. It is, therefore, bearing a very much higher proportion of the cost of the tax than are some of our other industries, and can put forward many very strong commercial and economic arguments why this burden on it should be lightened. It is one of a number of highly-modernised industries that are battling to compete with foreign imports and at the same time increase exports. It has succeeded in effecting a very substantial reduction in the ratio of imports to exports. Its exports now stand as £22½8 million, and are still rising.

9.15 p.m.

West German oil prices—and the West Germans are substantial competitors of our own glass industry—are 28 per cent. below our prices; Belgium, 21 per cent.; Holland, 25 per cent.; Sweden, 40 per cent., and Italy 7 per cent. Somehow or other, our own industry has to keep up its rate of increase of exports in the face of competing oil prices like that. I believe that we must put the efficiency of our industries, and their ability to succeed in a highly competitive export market, very much higher than my right hon. Friend has seemed to be prepared to do—at any rate, in relation to this tax.

Most of our industry is very responsive to Treasury policy, and I believe that this tax represents an extremely valuable regulator of industrial policy. If my right hon. Friend really wants a reduction in costs at home and expansion in a highly competitive world, he has in this tax a very valuable instrument. I hope that he will be able to tell us tonight that he is satisfied that the coal industry no longer requires the kind of support he indicated in his Budget speech he thinks it still needs, that in his next Budget—let us assume that he will be Chancellor next year—he will find it possible to use the remission of this tax as an encouragement both to productivity and to more economical distribution.

Mr. McLeavy

If the Chancellor had unlimited money to dispose of in this Budget, it would have been well had he undertaken a general review of the whole question of the taxation of fuel oil as used in industry and in public transport. One outstanding thing about this tax is its serious effect on the transport industry. While, in happier financial circumstances, I would be anxious to support hon. Members who have spoken of the need for relieving industry, I am not satisfied that the incidence of fuel oil taxation on industry generally is at present such a serious hindrance as some hon. Members have stated.

I want, in the main, to confine myself to the tax as it affects road passenger transport vehicles. I have spoken in the House for many years on this subject. I was one of a delegation from both sides who had an interview with the noble Lord, Lord Amory, about fuel oil taxation as it affected passenger transport. I am quite satisfied that Lord Amory accepted the very strong case which we put forward for immediate relief, but he found some difficulty, possibly because of Treasury opposition, in being able to help us. He appeared on television and said that he was sorry that in that Budget he was unable to give some relief to the passenger transport service. In view of what Lord Amory said, it was rather astonishing that when the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) brought in his regulator and put a 10 per cent. surcharge on a certain group of articles petrol tax was included and, in consequence, went up from 2s. 6d. to 2s. 9d. a gallon.

The right hon. and learned Gentleman then made out a case that, while the passenger transport industry was not entirely satisfied about the increased charge, nevertheless it accepted his implied statement that this increase of 3d. per gallon was merely temporary and would disappear when the 10 per cent. surcharge was removed. To our astonishment, when he removed the surcharge on the other commodities in this group he excluded the fuel oil and consolidated the 3d. into what is now known as the fuel oil tax of 2s. 9d.

It was astonishing that when the matter was raised with the Chancellor, the then Financial Secretary to the Treasury, in defending the retention of the extra 3d. on fuel oil, said that the Treasury could not afford to lose the revenue. The transport industry and other sections of industry which were affected by the 3d. increase regarded this action by the then Chancellor of the Exchequer as nothing short of sharp practice. They said so, and they were very resentful that having accepted a temporary increase because of the economic conditions which the Chancellor described to Parliament the right hon. and learned Gentleman then, took the opportunity of consolidating it in fuel oil taxation itself. It was a disgraceful thing to do, which did not reflect credit on the right hon. and learned Gentleman.

There is no other section of industry which has a stronger case for the abolition of the tax than the road passenger transport service. The undertakings have to provide a public service, in the early morning, during the day and in the evening, whether it pays or not, and they have to set against the unremunerative routes the more profitable routes which they run.

I remember very well that the Traffic Commissioners, who have a good deal of influence and control over road passenger transport, were extremely anxious to press municipal and private bus undertakers to provide unremunerative services in the countryside and elsewhere, setting them off against the more profitable routes in the towns. It is to the credit of bus undertakers generally that they tried to meet the wishes of the Traffic Commissioners throughout the country in providing these services.

The situation is now much changed. The bus undertakings, municipal or privately owned, are not now able to carry the amount of unremunerative services which they were carrying some years ago. It is simply the reduced volume of traffic which has caused the difficulty. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) referred to the Jack Committee. Let us be clear about the Jack Committee. It was set up to consider one section of the passenger transport industry, the rural bus services. Hon. Members on both sides who take a close interest in our bus services know how shamefully the Government have, for many years, neglected the rural bus services. Time and time again, we on this side of the Committee and hon. Member opposite representing rural constituencies have raised the matter with the Minister. Promises have been made. We have been put off from month to month, until, today, nothing is being done effectively for the countryside although its services are dwindling day by day.

The Chancellor must, therefore, consider the passenger transport industry as a very special case. We cannot compare our bus services with an ordinary commercial service such as road haulage. The road haulier is in an infinitely better position. He is able to decide whether he will take a load from A to Z, and he decides whether it is profitable for him to carry it over that particular distance. It is done on the basis of profitability. But the bus undertakings have to run a schedule of services and have to provide a service for the community at times when the number of passengers does not warrant running bus services at all. The traffic commissioners have been most emphatic in pressing the bus undertakings to provide the maximum number of services.

9.30 p.m.

The bus undertakings feel that the Government have not been fair to the industry. They have not accepted the case put before them and have not realised the serious situation of the industry. It is very difficult to get staff for the bus services because wages and conditions of employment commensurate with those in other industries are not provided. That is why, apart from the heavy burden of the fuel oil tax, many services are having to be curtailed. This is a very serious matter. The Chancellor of the Exchequer should make up his mind about the municipal transport undertakings.

When this matter was raised on a previous occasion, all sorts of arguments were put forward as to why it was not possible to give relief to the bus undertakings. I have no hesitation in saying that unless special relief is given, and given quickly, the bus services in the rural areas and townships will be serious handicapped by financial difficulties. The Minister of Transport proposes to cut train services and to close unremunerative stations and to rely on substituting bus services. How on earth will he get the staff to do that when the bus undertakings cannot get it? Unless the Government are prepared to recognise the financial difficulties of the industry and to give it a fair deal, it will not be able to provide the service which the nation requires.

I urge the Chancellor of the Exchequer to consider the financial difficulties which are arising mainly because of the heavy fuel oil tax. If the tax were abolished in respect of the road passenger transport industry, it would enable it to restore many of the services in the rural areas and to provide a better service not only in the rural areas but elsewhere.

No industry has served the nation so well and no industry has been dealt with so shamefully by the Government over the past few years as the road passenger transport industry. As one who has spent a lifetime in the passenger transport service, I apply for common sense and justice. My hon. and learned Friend the Member for Kettering, knowing the financial limitations of the Chancellor of the Exchequer, has made a reasoned case why there should be special treatment for the transport industry. Failure to give justice to the industry will strike a blow at one of the most public-spirited industries that this country has.

Mr. John E. Talbot (Brierley Hill)

As sometimes happens in dealing with the Finance Bill, we are discussing two rather different matters at the same time. We are discussing the proposal of the hon. and learned Member for Kettering (Mr. Mitchison) related solely to passenger transport, but we are discussing also other new Clauses, in particular those of my hon. Friend the Member for Willesden, East (Mr. Skeet), which seek in varying degrees to give wider relief from this tax.

I am concerned on a constituency basis in both respects. I live in the country and am dependent sometimes on a country bus service. It is getting worse and worse and I have continual complaints from constituents that they do not have the services that they had. I am concerned that this process will continue and I believe that this tax is a major part of such a process. What is the good of applying the Beeching principle to the railways when perhaps, we will have to do the same thing to road transport, whose costs have been inflated by this unnecessary tax? To that extent, I support the hon. and learned Member for Kettering and I hope that my right hon. Friend the Chancellor of the Exchequer will have something to say which might make that support waver.

On the second issue, I, too, like my hon. Friend the Member for Putney (Sir H. Linstead), am concerned in the glass trade. I am very interested in it. I have no money in it, but many of my constituents work in it and I speak from personal experience of seeing the working of the glass trade in Brierley Hill. The manufacture of cut glass is a craft industry and is dependent in great degree on the skill of the individual. Mass production methods are not easy to apply. This industry is feeling the impact of the tax with peculiar vigour. I am told that something like 10 per cent. of its costs is accounted for by fuel, which is a high proportion.

I will not go over the figures again, but I believe and am fully satisfied that it would be not only in the interests of the glass trade in particular, but of industry in general, for something to be done at an early date to relieve the burden of this tax, which seems to have universal unpopularity on all sides of the Committee and does far more damage in relation to the income that it yields than anything else on the Statute Book.

Mr. Edwin Wainwright (Dearne Valley)

I did not intend to intervene in this debate until the hon. Member for Willesden, East (Mr. Skeet) made such an attack on the Coal Board. I am sorry that the hon. Member is not in his place.

Sir G. Nabarro

I am.

Mr. Wainwright

Once more, the hon. Member for Kidderminster (Sir G. Nabarro) interjects in his complacent manner. He does not even stand up to make his comments.

Statements have been made by the hon. Member for Willesden, East that on every occasion when hon. Members opposite want to denigrate the Coal Board because it is a nationalised industry, they attempt to do so.

Sir G. Nabarro

Certainly not.

Mr. Wainwright

I fully remember when coal was in short supply and it had to be imported from the United States of America at £2 or £3 a ton more than the cost of our own coal. Private industry did not have to pay that difference in the price, but was allowed to have coal supplied to it at home prices, resulting in the fact that the Coal Board had to pay about £70 million to help private enterprise to have cheap fuel.

I cannot remember reading in the OFFICIAL REPORT of that time that any hon. Members opposite who were then in the House said that private industry should pay the difference in price between home coal and imported coal. They were content that private industry should have the benefit, and for the sake of the nation at that time. Also, there was not a great deal of criticism from the N.U.M. on the issue. We wanted our production rates to rise. If the tax on fuel oil imposes a burden on private industry, hon. Members opposite ought to realise that a heavy burden was placed on the coal mining industry when coal had to be imported. There were other factors which the National Coal Board had to stand which private enterprise never stood and never would be responsible for in the days when it ruined the industry. We have no proof that private enterprise could run the industry as it is being run today.

It seems that at present we are reaching saturation point in taking fuel oil from crude oil. The proportion is about fifty-fifty. The process of refining crude oil to obtain the petrol that we require means that fuel oil is being left. Not many years ago it was left in abundance, but even today it is sold mostly at a lower price than crude oil. Consequently, it looks as if the oil industry is to a certain extent subsidising fuel oil.

Are we certain that this type of fuel can be guaranteed to this country in the years to come? Would it be wise to run down the coal mining industry to such an extent that 50 per cent. of our power needs would have to be imported? Regardless of my connection with the coal mining industry, I believe it would be a great mistake for us to do so. If we did that, I feel sure that in years to come we should be criticised for such action by whatever Government there was at the time. Who can vouch that oil will be allowed into our country at the present price? Who will vouch that the price of oil will not jump tremendously in the near future? Does not the oil come from an area which is very unstable politically? Could not any action taken in those countries gravely affect our fuel oil supplies?

If we were dependent upon oil to the extent that some hon. Gentlemen opposite would like us to be, there would be a cry of "spilt milk" from them. They would want to blame someone else for the action they had taken. I am certain that to take such action would be a grave injustice to our nation and to the people who work in it. I do not believe that hon. Members opposite are bothered about the social consequences of a rundown of the coal mining industry.

Sir G. Nabarro

Drivel.

9.45 p.m.

Mr. Wainwright

It may be that if the hon. Gentleman were to say what was in his mind I could describe it as drivel. He likes to interject from a position from which he is not entitled to interject. If he cares to stand up and say what he wants to say, I will be glad to give way.

Sir G. Nabarro

I do not think that it would be appropriate, in the middle of this Committee stage, for me to make a dissertation upon the Tory Party's policy for coal. The hon. Member represents, I understand, the Dearne Valley, in Yorkshire. I shall be addressing the summer school of the National Union of Mineworkers at Bingley, Yorkshire, in July, and I invite him to listen to my discourse on that occasion, which will be entitled, "A Tory M.P. looks at the future of coal". That is the proper answer now to the hon. Member.

Mr. Wainwright

I occasionally waste my time in listening to the hon. Gentleman in this place and I do not propose to go to a summer school in order to listen to him in the summer. Despite his bombast, if he is fair and just, honest and sincere, he will find a responsive audience but I must warn him that after he has spoken they will be convinced that what he has said was drivel. I want now to return to the subject of oil.

Sir G. Nabarro

Hear, hear.

Mr. Wainwright

I could spend quite a few minutes relating what has been accomplished in the coal industry since the National Coal Board took over. I could describe to the Committee the price paid by the miners in deaths, injuries and a great many other things to the old private owners. But I shall not dwell on these things tonight. I want instead to warn the Committee about the area where most of our oil comes from and about what kind of oil it will be in years to come.

Our present oil supplies come mainly from the Middle East. It is heavy, crude oil. There are limited supplies of it in the Middle East—more limited than the supplies of coal in this country. And remember that one can stop oil from flowing and then quickly start up production again, but that if one stops a pit it takes a long time to put it back into production.

Another important factor is that the oil from the Sahara, a new source, is lighter oil than that found elsewhere in the Middle East. The result is that there will be less percentage for fuel oils after refining. Therefore, fuel oil could easily be in short supply. If it is in short supply, prices will rise.

The more we depend upon oil, the greater could be the adverse effec on our industry. I hope that the Government do not take notice of what many of their supporters have been saying on this issue. Let the Chancellor accept the Clause moved by my hon. and learned Friend the Member for Kettering (Mr. Mitchison). I hope that the Government will appreciate that we have been putting our views in all sincerity, because we believe that the nation would be put in a dangerous position if it had to depend too much on a source of power from such a dangerous area as the Middle East.

Mr. Geoffrey Wilson (Truro)

I do not want to enter into the coal-oil war between by hon. Friend the Member for Kidderminster (Sir G. Nabarro) and the hon. Member for Dearne Valley (Mr. Wainwright). I agree with the hon. Member for Bradford, East (Mr. McLeavy), who indicated that he thought that the most important of the Clauses before us was the one dealing with derv, which is very much heavier taxed. The hon. and learned Member for Kettering (Mr. Mitchison) referred to the Jack Committee and pointed out that it referred to this problem, and in one section of its Report observed that the bus industry for many years—this Report was written in 1961—had been complaining of the excessively high tax on the bus industry, which, of course, has since been increased.

Both the hon. Member for Bradford, East and the hon. and learned Member for Kettering referred to the Jack Committee, and the hon. and learned Member for Kettering pointed out that although the Committee turned down the sugggestion that a reduction in fuel tax would be a particular help to the rural bus industry, the minority report of Mr. Nicholas did so. There was also another minority report by Mr. James of the same Committee which sets out the reasons more clearly. But neither hon. Members referred to the fact that the Jack Committee's principal reasons for turning down the reduction of the fuel tax as a means of helping rural buses was that it would be too sweeping and would apply to the whole of the bus industry and not only to the rural buses. If we are to try to help the rural buses by taxation I would much prefer to revert to the new Clause which we, on this side of the House, attempted to put in in 1959 to which the hon. and learned Member for Kettering referred. That was to make an exception for derv outside the built-up areas on the ground that a similar sort of exception had been made for motor fishing vessels. But that Clause is not before the Committee and we cannot discuss it.

In so far as a rejection of this Clause would cause a rural bus service to be adversely affected by the Beeching Report, I think that both the hon. Members who have spoken and some hon. Members on this side of the Committee also have not observed that that really does not arise because Clause 4 of the Transport Act, 1962, preserves for the Railways Board the agreements arising under the Railway Road Transport Acts, 1928, under which the Railways Board could call upon a bus company to run an alternative service to a closed railway service and could if the bus service refused to undertake it on the ground of expense give it a subsidy for doing so. Thus the fact that the bus company might find such a service rather expensive and one which upset its cross-subsidisation arrangements would not really arise, and I do not think that that was a good point.

The suggestion was made on this side of the Committee that my right hon. Friend should give some indication that the fuel tax on derv would be looked at in due course. We appreciate what he said in his Budget statement about this matter, and I thought that I detected then a slight glimmer of hope that he would be able to do it. I do not know whether a general reduction on fuel tax would he possible at the present time. I should have thought that that might be doubtful, and I do not know whether that would be the full solution of the problem that has been mentioned.

The Chancellor of the Exchequer (Mr. Reginald Maudling)

The debate has really fallen into two different sections. Because we are discussing the broad question of hydrocarbon oil duties, I think that it is right to start by pointing out that, as my hon. Friend the Member for Willesden, East (Mr. Skeet) said, these duties raise nearly £600 million a year in revenue. They are extremely important duties from the point of view of the Exchequer, and one must safeguard their integrity with some care.

The points made in the course of the discussion fall under two heads: those raised by the hon. and learned Member for Kettering (Mr. Mitchison) in opening the discussion and the hon. Member for Bradford, East (Mr. McLeavy) and others about bus services and the duty on the fuel that they consume, and those raised by my hon. Friend the Member for Willesden, East, the hon. Member for Huddersfield, West (Mr. Wade), my hon. Friend the Member for Putney (Sir H. Linstead) and others on the duty on heavy oil used in industry. Finally, I think that two of my hon. Friends, the Member for Brierley Hill (Mr. Talbot) and the Member for Truro (Mr. G. Wilson) mentioned both subjects in the course of their speeches.

Perhaps I might start by discussing the point about the heavy fuel oil used in industry. The actual amount of duty collected as a result of this tax is in the neighbourhood of £60 million, and to abolish it would, I think, involve too large a sum to be contemplated. The alternative, as some hon. Members have suggested, would be to halve this duty, at a cost of £30 million. This was a possibility which I considered with care. In fact, at the beginning of my study of the Budget proposals this was one which I might describe as one of the most vigorous runners. It seemed a good possibility.

Strong reasons for reducing this tax have been adduced by many hon. Members in this debate, although I think possibly the arguments have occasionally been a little overdone. The hon. Member for Huddersfield, West, for example, referred to the change in the export position of the cement industry, and I agree that there has been a big change. He said that the new duty would cost about 8s. a ton, but I am told that in the last two years the export price of cement has risen not by 8s., but by 48s., a ton, so it may be that the cost of the fuel oil duty is not necessarily a major factor in this matter.

The fuel oil duty is a serious one for certain industries. Glass was referred to by my hon. Friend the Member for Brierley Hill and by my hon. Friend the Member for Putney. The iron and steel industries, to which reference has been made, are also substantial users of fuel oil. Cement is another example, as are certain chemicals. There is a wide range of industries which consume heavy oil in substantial quantities and whose costs are affected by the tax. Clearly, there would be considerable advantage in reducing the tax or halving it this year, and I felt that on revenue grounds this was a possibility.

As has been said, when this duty was imposed it was made quite clear by my predecessor that it was imposed as a source of additional revenue. Therefore, my first reaction in looking at it this year when there was an opportunity to make tax deductions, was that here was an opportunity, on revenue grounds, to reduce the duty. I would not have abolished it, because £60 million is too much, but there was a case on revenue grounds for reducing the duty by half, at a cost of £30 million.

I then had to consider the effect on the coal industry, and I think that we must be realistic about this. We depend on the coal industry—end will do so for many years to come—for a preponderant part of our industrial energy, and therefore the progress of the coal industry is important to industry as a whole, and possibly more important to industry as a whole than anything else. I felt that it was important to look at the stage actually reached in the progress of the coal industry.

In the last year or so it has been making substantial progress. Productivity has been rising. I think that the figure that Lord Robens quotes is 8 per cent. per year. He is hoping to get a big increase in exports this year. The streamlining of the industry and the reduction in the labour force has been taking place with remarkable smoothness, and it would be a great pity to disturb that.

10.0 p.m.

Finally, I was encouraged by what Lord Robens had been saying about beginning the long trek of bringing down coal prices. It would be an immense value to industry if a start could be made to bring down coal prices. I have been explaining to the Committee as clearly as I can the sequence of the arguments which I followed. Against that background, I had to look at the effect of cutting the fuel duty this year. It would have had a considerable effect on the coal industry and its financial position at a time when it is at last struggling out of the red into the black. It would be a great pity if there were a setback to the industry extending to £20 million or £30 million competitively. I attach the greatest importance to all the nationalised industries showing a proper return on their capital. I believe that the coal industry is in sight of doing so, and the effect of driving it back into the red—the effect on the morale of the industry, which I consider of the greatest importance, and on those engaged in the industry—would have been very serious. In the long run it would have been worse for fuel costs as a whole than a reduction in the fuel oil duty.

It has been suggested that the alternative would be to subsidise the industry. I think that this would be quite wrong, and I should not like to start on that process. If the nationalised industry can go on, as at the moment, earning a profit in competition on the present basis of protection, they should be encouraged to do so.

I therefore came to the conclusion that this year was not the time to make a reduction in the duty.

> Because this year is not the time it does not mean that I regard this as by any means a permanent and proper level of protection. It is not. It is one which I wish to reduce as soon as possible. My sole concern is the course of the coal industry, and the progress achieved, and the possibility of a setback to the morale and progress of the industry at this critical stage.

Mr. Skeet

The Chancellor has indicated that he is against giving a subsidy. But does not he appreciate that industry is being made to give a subsidy to the coal industry, and is not that rather an unfair burden?

Mr. Maudling

I do not think so. One could say that of any tariff which is imposed. My hon. Friend the Member for Willesden, East will find that most countries which have indigenous fuel resources protect them to a certain degree. As I say, this was an extremely hard decision to reach, and one which I reached with the greatest reluctance. There are obvious advantages to be gained from cutting the duty. But, after long consideration, and balancing the arguments, I decided against making any change this year—I emphasise "this year". No one would be happier than I should be if on a future occasion, and as soon as possible, I were able to make a reduction.

Mr. Eric Lubbock (Orpington)

The Chancellor has talked about "this year" several times with great emphasis. To what extent would existing users of coal-fired equipment have changed to oil firing had he made this reduction in this year's Budget? The right hon. Gentleman must have made some estimate of the effect on the relative positions of the industry.

Mr. Maudling

It is hard to say. The loss to the coal industry might have been something like £20 million in a full year. That is about the best estimate I can make.

Sir Derek Walker-Smith (Hertfordshire, East)

In order to get the picture clear, will my right hon. Friend say whether the position is this? Two years ago the then Treasury Minister made expressly clear that this was purely a revenue duty and disclaimed any protectionist intent. My right hon. Friend has now used the word "tariff", which is, of course, a word appropriate only to a protective duty and not to a revenue duty. Are we now to understand that it is retained for its protectionist and not for its revenue aspect, and it is by that that it will be judged in future?

Mr. Maudling

I think absolutely and clearly I should answer "Yes" to that. It was imposed as a revenue duty. From purely revenue considerations I would have felt justified this year in making the reduction, but I had to take into account the effect on the coal industry and I am looking at the effect on this industry at this moment.

Sir G. Nabarro

I claim an interest in this matter only because I was the only Tory to vote with my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) against this tax originally. What has caused this change of attitude at the Treasury? Surely there should be some continuity of policy at the Treasury? My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), when he was Chancellor, proclaimed over and over again when I attacked the imposition of this duty and voted against it on 16th May, 1961—with a Liberal as a Teller to help me—"This is not in any circumstances a protective measure for coal." Now my right hon. Friend says that it is a protective measure for coal. I want some assurance that between this year and next he is not going to turn another somersault.

Mr. Bence

He will not be there.

Sir G. Nabarro

He will be there all right. There is only one other possibility—that I shall be there in his place. I am trying to get from my right hon. Friend an assurance that we are to have some continuity in fuel policy and that he is not going to turn another somersault.

Mr. Maudling

The prospect of my hon. Friend the Member for Kidderminster (Sir G. Nabarro) standing at this Box as Chancellor of the Exchequer and carrying out all the proposals he has made in the last few years almost makes me wish to give way to him.

I have done my best. One must look at this sort of matter in the light of the purely practical consideration of what the effect in this year will be of making a reduction of this kind, which I readily accept would be extremely valuable, and I thought that on balance this year was not the time to do it.

Turning to the point about the duty on fuel used in buses, the cost of that proposal in a full year would be about £31 million, but it would go much wider than that. It would be very difficult to draw the line at that particular point. This is always the trouble with this type of problem, that we have two forms of fuel used, petrol and diesel. It is very difficult to maintain the duty on one and not on the other. In the past the main problem was to preserve the position of petrol duty. Secondly, if one started to do something for road passenger transport it would be very difficult indeed to prevent it spreading to other forms of transport. Road haulage and other forms of transport could make a good case for it. The hon. Member for Huddersfield, West, pointed out how difficult it would be to limit this merely to derv for buses.

Mention was made of the effect of the Beeching Report on the bus situation. My hon. Friend the Member for Truro made an apposite point on that and disposed of a great deal of the argument. I do not think that the closure of a number of railway lines which at present compete with bus companies should make it harder for those bus companies to continue their services. If one of two competing services is closed down, that puts the other service in a better position.

In general, with the hydrocarbon oil duty, as with so many other things laid before the Committee, clearly a reduction would be welcome and any Chancellor welcomes anything that everyone welcomes; but I could not accept a new Clause of this kind, which would cost £31 million in a full year. I am convinced that if the proposal were accepted it would lead to even further concessions and to a reduction in heavy oil duties as a whole. Therefore, I must recommend the Committee to reject these proposals.

The Committee divided: Ayes 161, Noes 205.

Division No. 127.] AYES [10.10 p.m.
Alnsley, William Grimond, Rt. Hon. J. Oswald, Thomas
Allaun, Frank (Salford E.) Hale, Leslie (Oldham, W.) Padley, W. E.
Awbery, Stan (Bristol, Central) Hamilton, William (West Fife) Pannell, Charles (Leeds, W.)
Bacon, Miss Alice Hannan, William Parkin, B. T.
Heaney, Alan Harper, Joseph Pearson, Arthur (Pontypridd)
Bence, Cyril Hart, Mrs. Judith Pentland, Norman
Bennett, J. (Glasgow, Bridgeton) Henderson,Rt. Hn. Arthur (RwlyRegle) Popplewelf, Ernest
Benson, Sir George Herbison, Miss Margaret Price, J. T. (Westhoughton)
Blyton, William Hill, J. (Midlothian) Probert, Arthur
Boardman, H. Hilton, A. V. Pursey, Cmdr. Harry
Bowden, Rt. Hn. H. W.(Leics, S.W.) Holman, Percy Redhead, E. C.
Bowen, Roderic (Cardigan) Houghton, Douglas Reynolds, C. W.
Bowles, Frank Howell, Denis (Small Heath) Rhodes, H.
Braddock, Mrs. E. M. Hoy, James H. Roberts, Albert (Normanton)
Bradley, Tom Hughes, Cledwyn (Anglesey) Robertson, John (Paisley)
Bray, Dr. Jeremy Hunter, A. E. Rogers, G. H. R. (Kensington, N.)
Broughton, Dr. A. D. D. Hynd, John (Attercfife) Ross, William
Butler, Herbert (Hackney, C.) Irvine, A. J. (Edge Hill) Short, Edward
Butler, Mrs. Joyce (Wood Green) Irving, Sydney (Dartford) Silverman, Julius (Aston)
Callaghan, James Janner, Sir Barnett
Carmichael, Neil Jay, Rt. Hon. Douglas Silverman, Sydney (Nelson)
Collick, Percy Jeger, George Skeffington, Arthur
Corbet, Mrs. Freda Jenkins, Roy (Stechford) Slater, Mrs. Harriet (Stoke, N.)
Craddock George (Bradford, S.) Jones, Dan (Burnley) Slater, Joseph (Sedgefield)
Cronin, John Jones, Elwyn (West Ham, S.) Small, William
Crosland, Anthony Jones, J. Idwal (Wrexham) Smith, Ellis (Stoke, S.)
Cullen, Mrs. Alice Jones, T. W. (Merioneth) Soskice, Rt. Hon. Sir Frank
Dalyell, Tam Kelley, Richard Spriggs, Leslie
Davies, G. Vied (Rhondda, E.) Kenyon, Clifford Stewart, Michael (Fulham)
Davies, Harold (Leek) Lawson, George Stones, William
Davies, Ifor (Gower) Ledger, Ron Strachey, Rt. Hon. John
Deer, George Lee, Frederick (Newton) Swingler, Stephen
Delargy, Hugh Lee, Miss Jennie (Cannock) Taverns, D.
Dempsey, James Lever, L. M. (Ardwick) Thomas, George (Cardiff, W.)
Diamond, John Lewis, Arthur (West Ham, N.) Thomas, Iorwerth (Rhondda, W.)
Dodds, Norman Lubbock, Eric Thompson, Dr. Alan (Dunfermline)
Duffy, A. E. P. Mabon, Dr. J. Dickson Thornton, Ernest
Edwards, Rt. Hon. Ness (Caerphilly) McBride, N. Tomney, Frank
Edwards, Robert (Billston) MacDermot, Niall Wainwright, Edwin
Edwards, Walter (Stepney) McInnes, James Warbey, William
Fernyhough, E. McKay, John (Wallsend) Watkins, Tudor
Finch, Harold Mackie, John (Enfield, East) Whitlock, William
Fitch, Alan MacPherson, Malcolm (Stirling) Wigg, George
Fletcher, Eric Mallaliu, J.P.W. (Huddersfield, E,) Wilkins, W. A.
Foot, Dingle (Ipswich) Mapp, Charles Williams, LI. (Abertillery)
Foot, Michael (Ebbw Vale) Mason, Roy Williams, W. R. (Openshaw)
Forman, J. C. Mayhew, Christopher Willis, E. G. (Edinburgh, E.)
Mendelson, J. J.
Fraser, Thomas (Hamilton) Millan, Bruce Winterbottom, R. E.
Galpern, Sir Myer Milne, Edward Woof, Robert
George, Lady MeganLloyd (Crmrthn) Mitchison G. R. Yates, Victor (Ladywood)
Ginsburg, David Morris, John Zilliacue, K.
Gourlay, Harry
Grey, Charles Oliver, G. H. TELLERS FOR THE AYES.
Griffiths, David (Rother Valley) O'Malley, B. K. Mr. Charles A. Howell and
Griffiths, W. (Exchange) Oram, A. E. Mr. McCann.
NOES
Agnew, Sir Peter Brooke, Rt. Hon. Henry Crawley, Aldan
Allason, James Brooman-White, R. Critchley, Jullian
Arbuthnot, John Brown, Alan (Tottenham) Currie, G. B. H.
Ashton, Sir Hubert Buck, Antony d'Avlgdor-Goldsmid, Sir Henry
Atkins, Humphrey Bullard, Denys de Ferranti, Basil
Awdry, Daniel (Chippenham) Butcher, Sir Herbert Donaldson, Cmdr. C. E. M.
Barber, Anthony Campbell, Gordon (Moray & Nairn) Drayson, G. B.
Barlow, Sir John Carr, Compton (Barons Court) du Cann, Edward
Barter, John Carr, Robert (Mitcham) Eden, Sir John
Batsford, Brian Cary, Sir Robert Elliot, Capt. Walter (Carahalton)
Bennett, Dr. Reginald (Goa & Fhm) Chataway, Christopher Elliott, R. W,(Newc'tle-upon-Tyne, N.)
Berkeley, Humphry Chichester-Clark, R. Emmet, Hon. Mrs. Evelyn
Bidgood, John C. Clark, Henry (Antrim, N.) Farr, John
Biffen, John Clark, William (Nottingham, S.) Fell, Anthony
Birch, Rt. Hon. Nigel Cooke, Robert Finlay, Graeme
Bishop, F. P. Cooper-Key, Sir Neill Fletcher-Cooke, Charles
Bossom, Hon. Clive Cordeaux, Lt.-Col. J. K. Freeth, Denzil
Bourne-Aston, A. Corfield, F. V. Galbraith, Hon. T. G. D.
Box, Donald Coulson, Michael Gammons, Lady
Brewis, John Courtney, Cdr. Anthony Gibson-Watt, David
Gilmour, Ian (Norfolk, Central) Litchfield, Capt. John Roots, William
Gilmour, Sir John (East Fife) Loveys, Walter H. Ropner, Col. Sir Leonard
Glyn, Dr. Alan (Clapham) Lucas-Tooth, Sir Hugh Russell, Ronald
Glyn, Sir Richard (Dorset, N.) MacArthur, Ian Scott-Hopkins, James
Goodhew, Victor McLaren, Martin Sharples, Richard
Gower, Raymond Maclean, SirFitzroy(Bute & N. Ayre) Shaw, M.
Grant-Ferris, R. Macleod, Rt. Hn. Iain (Enfield, W.) Shepherd, William
Gresham Cooke, R. McMaster, Stanley R. Smith, Dudley (Br'ntf'd & Chiswick)
Grosvenor, Lt.-Col. R. G. Macphereon, Rt. Hn. Niall(Dumfries) Smithers, Peter
Gurden, Harold Maddan, Martin Smyth, Rt. Hon. Brig. Sir John
Hamilton, Michael (Wellingborough) Markham, Major Sir Frank Spearman, Sir Alexander
Harris, Frederic (Croydon, N.W.) Marten, Neil Stodart, J. A.
Harrison, Col. Sir Harwood (Eye) Matthews, Gordon (Meriden) Stoddart-Scott, Col. Sir Malcolm
Harvey, Sir Arthur Vere (Macclesf'd) Maudling, Rt. Hon. Reginald Studholme, Sir Henry
Harvey, John (Walthamstow, E.) Mawby, Ray Summers, Sir Spencer
Harvie Anderson, Miss Maxwell-Hyslop, R. J. Talbot, John E.
Hastings, Stephen Maydon, Lt.-Cmdr. S. L. C. Topsell, Peter
Heald, Rt. Hon. Sir Lionel Mills, Stratton Taylor, Edwin (Bolton, E.)
Henderson, John (Cathcart) Miscampbell, Norman Taylor, Frank (M'ch'et'r, Moss Side)
Hendry, Forbes Montgomery, Fergus Teeling, Sir William
Hiley, Joseph Morgan, William Temple, John M.
Hill, Mrs. Eveline (Wythenehawe) Nabarro, Sir Gerald Thatcher, Mrs. Margaret
Hill, J. E. B. (S. Norfolk) Heave, Airey Thompson, Sir Richard (Croydon, S.)
Hirst, Geoffrey Nicholls, Sir Harmar Thornton-Kemsley, Sir Colin
Hobson, Sir John Orr, Capt. L. P. S. Tiley, Arthur (Bradford, W.)
Hocking, Philip N. Osborn, John (Hallam) Touche, Rt. Hon. Sir Gordon
Holland, Philip Osborne, Sir Cyril (Louth) Turner, Colin
Hollingworth, John Page, Graham (Crosby) Turton, At. Hon. R. H.
Hopkins, Alan Page, John (Harrow, West) Tweedsmuir, Lady
Hornsby-Smith, Rt, Hon. Dame P. Pannell, Norman (Kirkdale) van Straubenzee, W. R.
Howard, John (Southampton, Test) Partridge, E. Vaughan-Morgan, At. Hon. Sir John
Hughes-Young, Michael Pearson, Frank (Clitheroe) Vickers, Miss Joan
Hutchison, Michael Clark Peel, John Vesper, Rt. Hon. Dennis
Iremonger, T. L. Pickthorn, Sir Kenneth Waider, David
Irvine, Bryant Godman (Rye) Pilkington, Sir Richard Walker, Peter
James, David Pitt, Dame Edith Walker-Smith, Rt. Hon. Sir Derek
Jenkins, Robert (Dulwich) Pott, Percivall Wall, Patrick
Johnson, Dr. Donald (Carlisle) Price, David (Eastleigh) Ward, Dame Irene
Johnson Smith, Geoffrey Prior-Palmer, Brig. Sir Otho Webster, David
Jones, Arthur (Northants, S. Wells, John (Maidstone)
Profumo, Rt. Hon. John Whitelaw, William
Kahorry, Sir Donald Proudfoot, Wilfred Williams, Dudley (Exeter)
Kerr, Sir Hamilton Quennell, Miss J. M. Williams, Paul (Sunderland, S.)
Kershaw, Anthony Rawlineon, Sir Peter Wilson, Geoffrey (Truro)
Langford-Holt, Sir John Redmayne, Rt. Hon. Martin Wise, A. R.
Leavey, J. A. Rees, Hugh Wolrige-Gordon, Patrick
Legge-Bourke, Sir Harry Renton, Rt. Hon, David Woollam, John
Lewis, Kenneth (Rutland) Ridley, Hon. Nicholas
Lilley, F. J. P. Roberts, Sir Peter (Heeley) TELLERS FOR THE NOES;
Linstead, Sir Hugh Robinson, Rt. Hn. Sir. (B'pool, S.) Mr. Ian Fraser and Mr. Pym.