New Clause.—(RELIEF FROM DUTY ON HEAVY OILS USED AS FUEL FOR CERTAIN HACKNEY CARRIAGES.)

HC Deb 10 June 1964 vol 696 cc457-94

(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 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) The owner or hirer under any contract of a hackney carriage having seating capacity for twenty or more persons shall be entitled to repayment under the foregoing subsection in respect of oils used by him as fuel for that hackney carriage.

(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) 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 sub-section (1).—[Mr. McLeavy.]

Brought up, and read the First time.

4.6 p.m.

Mr. Frank McLeavy (Bradford, East)

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

The Deputy-Chairman

With this new Clause can be discussed also the new Clause 19—"Fuel oils, gas oils and kerosene: rebate."—the new Clause 36—"Rebates on heavy oils used for purposes other than propulsion."—and the new Clause 38—"Abolition of duty on heavy oils."

Mr. McLeavy

The case for the exemption of buses from the fuel oil duty is unanswerable. The tax cannot be justified on rational grounds. When we raised the matter on last year's Finance Bill, the Chancellor of the Exchequer was so obsessed with a desire to reduce the industrial oil tax from 2d. a gallon to 1d. a gallon that he was unable even to consider a reduction of the 2s. 9d. a gallon tax paid by the workers travelling to and from their employment. This is how the Tory mind appears to work.

This policy of soaking the workers with heavy taxation has brought about a situation on the buses which is resulting in higher travelling costs and reduced services. The Chancellor claims that he is anxious to avoid an increase in wages, which would endanger the country's economy. Yet he well knows that ever-increasing travelling costs incurred by the workers spark off further demands for wage increases. I wonder if he is aware that the cost of weekly travel to and from work for the ordinary working man is a big item of expenditure out of his weekly wage packet.

On the broad issue of the part the buses must play in solving the congestion on the roads the Minister of Transport said this: Our large cities cannot survive on the basis of 'one man one car' commuting: the answer must be public transport in one form or another. … In present circumstances we are in no position to ignore the benefits which an efficient bus system can give in tackling the urban traffic problem. The Buchanan Report, referring to road congestion, stated: Given a different financial policy, travel by public transport could be made relatively cheap, and this may prove to be the key to the problem". There followed the recent Report of the Committee of Inquiry to Review the Pay and Conditions of Employment of the Drivers and Conductors of the London Transport Board's Road Services. That Committee was appointed jointly by the Minister of: Labour and National Insurance and the Minister of Transport. I draw the attention of hon. Members to what that Committee stated in paragraph 58 of its Report: There is, however, one financial charge at present laid on the London bus service, in common with all others, which we would raise for separate consideration. At present the Board pays fuel oil tax to the extent of some £4.7 million a year—more than its target surplus. We recognise that, like all other taxes, the fuel oil tax has its advantages as well as its disadvantages, and must be considered in its place in the structure of public finance as a whole. I stress the concluding part of that paragraph: But we would point out that when the maintenance of bus services in towns has been accepted as an essential part of public policy to meet a growing threat of congestion, a tax that adds so much to the cost of just those services becomes increasingly anomalous. Despite the views expressed by the Minister of Transport, the Buchanan Report and that Committee of Inquiry, the Chancellor is unmoved. It is regrettable that he is absent from this debate. It shows a lack of understanding of the serious problems raised by the proposed new Clause.

We must spend vast sums on improving our road system, yet the Chancellor refuses to spend so little on improving the nation's bus services, which are regarded at all levels as something which play an important part in solving the congestion on our roads. It shows that the Chancellor is out of touch with the nation's transport difficulties.

The main problems of the bus undertakings can be said to be service, manpower and finance. The service which the buses render to the travelling public is unique. Buses are licensed by the traffic commissioners to carry out a scheduled daily service. This involves the runnning of services which are unprofitable during most of the day and, in the rural areas, are entirely unprofitable, depending on the subsidy received from the urban sections of the particular undertaking.

The general pattern of service has always been to provide, both in the urban and rural areas, reasonable facilities of transport according to the needs of the people. The decline of services in the past few years is causing unreasonable difficulty and hardship to the travelling public, and if this trend is allowed to continue we shall have progressively decreasing services.

Buses represent a vital part of our industrial and national life. They are essential to industry for the transportation of its workers and they are essential to the housewife for her daily shopping. They also provide the only means for millions of people to make social contacts. Great resentment is growing on all sides because of the shortage of buses, the infrequency of services and so on. The worker is finding it increasingly difficult to travel by bus to and from his employment and the housewife finds that her shopping time is greatly increased because of the lack of adequate bus services. In some rural areas there are few, sometimes no, bus services.

4.15 p.m.

The shortage of bus drivers and conductors is presenting a serious problem to the industry. The training of both drivers and conductors is a costly item and often they are recruited and trained only to leave the industry within a short while because other industries offer better wages and conditions. Before the war employment on the buses represented a well-paid job and the men employed in the industry were the best obtainable. Although today we see at every hand that the standard has been lowered, it is not possible to find sufficient staff to provide an adequate public service.

On the financial side, the amount of money involved in this remission of the fuel oil tax on buses is about £30 million a year. To make this concession would represent a major contribution towards improving urban and rural bus services and would bring about some stability in the industry. The duty comes second only to the item of wages. In mileage costs it represents charges varying from 3½d. to 5d. per mile. It is an artificial addition of 20 per cent. to running costs, it is a super luxury tax which is placed upon the travelling public, and it is an indirect tax upon the industry itself.

Lord Amory, when Chancellor of the Exchequer, was impressed during the latter part of his term of office by the case which my hon. Friends put forward for a reduction in this duty on buses. He expressed regret—I believe he was sincere—that he could not then reduce them. Then we had the "little Budget" brought in by the present Leader of the House when he succeeded as Chancellor of the Exchequer. It placed a temporary 10 per cent. tax on a range of goods which included fuel oil. It was regarded as a temporary increase —the Chancellor at that time made it very clear to the House—to meet a difficult financial situation. It put an extra 3d. per gallon on fuel oil, making the total tax 2s. 9d. per gallon. But when the emergency was over and the Chancellor found that he could take off the extra 10 per cent. tax, he decided, presumably on the advice of the Treasury, not to withdraw the 10 per cent. additional tax on fuel oil.

Frankly, the motor industry generally and the motorists were resentful that the Chancellor should have done something which they felt at the time was unreasonable and unjust. The tax of 3d. per gallon on petrol, imposed along with other items to meet a temporary financial emergency, was deliberately retained because of the dead hand of the Treasury. I cannot be too strong in my condemnation of the decision of the Chancellor at that time, which we in the motor industry generally felt was a breach of faith and ought never to have been taken.

We have had a statement this afternoon by the Minister of Transport about the setting up of a Committee to go further into the question of congestion on the roads. It is high time the Government realised that their policy of taxing road passenger transport means that it is incapable of providing the right kind of service and the wages and conditions of employment for its staff which will retain the men it has and attract to it men from other sections of industry. Today we are losing our staff and are in a very critical position. But the Chancellor is not interested. He is not even here this afternoon to listen to the debate.

I want to make it perfectly clear—I want the country to understand this—that the difficulty about our road transport is not created by the staff. It is created by the policy of the Government, who are determined to tax it out of existence. Take the rural services. We have had debate after debate about the rural services, and we have had the Minister of Transport making plausible speeches and setting up committees to examine this, that and the other, but we have had no action. Meanwhile, in many cases a rural transport service is nonexistent; in other cases it is so remote that it is not really a service at all. It is high time people in the rural areas knew precisely why they are not getting an adequate transport service.

In the more profitable days of the bus undertaking it was possible for the more prosperous sections in the urban areas to offset the loss on the rural services. I had a lot to do with it. I was very proud that the bus industry had a sense of social responsibility. We were very proud that, through the financial success of our urban services, we were able to extend our services in the rural areas, providing for the rural community services at the expense of the urban services. Frankly, it is no good the Minister talking about minibuses, about using the Post Office mail for the purpose of helping to subsidise a rural service, and all that kind of nonsense. If we want a rural service, we must relieve the bus industry of the heavy taxation imposed on it, and the traffic commissioner, although he has not the direct power, has tremendous power of influence and persuasion, and it should be his job to ensure, as he did in the past, that the undertakings are restored in some of the rural areas where they have been discontinued because of the industry's financial position.

Hon. Members opposite who represent rural areas have been bluffed time and time again. They have often joined with me in complaining about the lack of rural bus services, but they know very well in their hearts that the Minister has been merely bluffing them all along the line. I realise from the fact that the Chancellor is not here that we shall have a refusal by the Government to meet this case. It is a scandal that the Chancellor should not be here. When we have discussed this subject previously we have always had the courtesy of the attendance of the Chancellor. This shows the contempt in which this matters is regarded by the Chancellor.

I ask hon. Members who are determined that we must in all circumstances have an improved service in the urban and rural areas to join us and vote for the new Clause when we go into the Division Lobby. I believe that it provides one of the solutions to a very serious problem. If the Chancellor is not prepared to accept it—this is his last chance to do it—when the Labour Government come into power in a few months' time they will at long last give justice to the travelling public.

4.30 p.m.

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

I thought that I had an opportunity of convincing the Chancellor of the Exchequer last year of the desirability of cutting the fuel oil duty from 2d. to 1d. a gallon. Apparently on that occasion I was a little too sanguine, but I hope for better results on this occasion.

Listening to the hon. Member for Bradford, East (Mr. McLeavy), I must say that I agree with him in one respect, and that is that a temporary tax is inclined to become permanent. To mention one example, Purchase Tax which was imposed in 1940 is still with us today. The hon. Member was sanguine enough to express the belief that in October there was likely to be a change of Government. On that point I must disagree with him. Even if he feels that he is right in that assumption, I would say that no Labour Government are likely to alter the fuel tax. The total duty on oil amounts to £590 million and this is equivalent to or exceeds the total royalties which are paid to the producing Governments in the Middle East.

I am particularly concerned with new Clause No. 19 which is concerned with "Fuel oils, gas oils and kerosene: rebate". I wish to point out that 89 per cent. of the tax of approximately between £61 million and £67 million is borne by industry itself, the balance being borne partly by the domestic consumer and partly by agriculture. It should be borne in mind that while the sum of approximately £67 million represents barely 1 per cent. of the total receipts of the Chancellor of the Exchequer, it represents as high as 25 per cent. or 30 per cent. of the fuel bills of a number of industries.

Therefore, if we are trying to secure a fuel policy which will work in the industrial climate today, this is a golden opportunity to reduce this tax. What would it cost my right hon. Friend?—about £32 million. I agree that last year was more propitious than this year because he has not got all this money to give away. He said on the last occasion that the purpose of the tax was to protect the coal industry. We have learned with considerable interest that Lord Robens has persuaded the Chancellor of the Exchequer, or vice versa, to make a concession of 2s. 6d. a ton on coking coal. The Committee should, however, recognise that in 1960 coking coal went up 8s. 11d. a ton. If it is to come down in September by 2s. 6d. a ton, that means that it will still be up by 6s. 5d. in 1964.

Unfortunately, the steel and metallurgical industry finds that the additional cost per ton of finished steel has gone up by 7s. 6d. because of the imposition of this tax in 1961. Therefore, if my calculations are right, it means something like 13s. 11d. per ton on the price of steel. That is due to the high cost of coal on the one hand, and taxation which has been levied by the Chancellor himself on the other.

The argument which was advanced last year and, I think, on earlier occasions was that the coal industry is in need of protection. I do not think any member of the Committee would consider that the National Coal Board was a tender flower which required a little assistance. If one considers the N.C.B. in a European context, it is the third largest industrial combine in the whole of Europe with net sales totalling 2,489 million dollars. This is a gigantic undertaking which is further protected in this country, as nobody can import coal and sell it. The Steel Company of Wales found that out some time ago. The National Coal Board, with a certain degree of consultation with Parliament, has the right to charge what it likes, and private consumers will find when they return from their holidays later this year that the price of coal will have gone up by 7s. 6d. a ton. Therefore, one either takes one's coal or one leaves it.

I do not think that I should simply indicate the size of the industry as we find it in Europe. My right hon. Friend the Member for Bridlington (Mr. Wood), when he was Minister of Power, mentioned on 21st April, 1961, that coal is in no need of such protection as had been outlined by the Chancellor of the Exchequer a little earlier. One only has to read the Annual Report of the National Coal Board and take into account some of the utterances of Lord Robens. He said this: The National Coal Board is well on the way to being able to offer the British industrialist fuel as cheap as or cheaper than the fuel offered to any of his competitors abroad. That is what he is recorded as saying in New York in the Financial Times of 19th September, 1963. He went on to say: Despite the recent attractiveness of heavy fuel oil among consumers, coal can compete with any other fuel on its price, quality and service. The more he extols the coal industry, the more the Chancellor must be prepared to accede to the reasonable request that if he is not prepared to eliminate the duty it should at least be prepared to halve it.

However, those are not all the remarks of Lord Robens. Take another example. Lord Robens, speaking to the Federation of Co-operative Coal Managers' Associations Conference at Llandudno, is reported in the Financial Times of 3rd June, 1964 as follows: Lord Robens … claimed a big lead for solid fuel systems in the growing domestic central heating market … solid fuel is winning as much new business as all other fuels put together. The National Coal Board would appear to be in rather a prosperous situation.

What we have to argue about is whether it is desirable in the interests of the Board and not necessarily in the interests of the revenue that this levy should be continued. I maintain, and I think reasonably, that a tax on energy is a tax on our economic prosperity. Its principal effect is on industry which is engaged in the export market. All of us will appreciate some of the remarks of the Robinson Committee's Report which stated that the right fuel policy for a country like the United Kingdom and elsewhere is an ample supply of low-cost energy with freedom of choice available to the consumer, and also that where distortions appear in the economy they should be compensated or eliminated. In addition, there should be the right to look at the various sources of energy and the consumer should make his choice.

In fact, this has been the policy of Her Majesty's Government. My right hon. Friend the Minister of Power indicated in a speech in London on 19th February, 1964: Within the broad framework of Government policy, we believe that the fuel industries should be free to compete, and the consumer be free to choose. This, I am convinced, is the best means of ensuring efficiency and economy and of avoiding the kind of rigidity and waste that results from over-centralised decision-making. If there is to be freedom of choice, it can only be on the basis that one can go out into the open market and buy fuels at reasonable prices. But if a tax is put on one at the expense of another so as to bring them both up to about parity, it means that the consumer no longer has a freedom of choice.

Therefore, one of the difficulties that we experience is that while the Government may be prepared to pay lip service to European policy which has been ordained as sensible, when it comes to action we are faced with the Treasury decision that, in the last year at least, this tax must be continued. The Chancellor of the Exchequer had this to say in 1959: 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.] Where is the competition between suppliers if, by taxation, we bring them all up to parity? These matters are worth considering.

May I mention one or two reasons why I think the tax should be halved. First, it is a discriminatory levy. In many industries, the fuel bill represents a very high percentage of total costs. In the electricity supply industry the fuel cost is as high as 50 per cent.; in the cement industry, 33 per cent.; in the steel and metallurgical industries, 20 per cent.; in the glass and ceramic industry, about 10 per cent.; in general engineering, taking fuel costs both direct and indirect, the proportion may be as high as 8 per cent.; and in the chemical industry it is 7 per cent.

The effect on industry of what the Chancellor is doing is that, if the fuel content in one's costs is low, one is not hit hard by this imposition, but if, on the other hand, the fuel content is high, one is hit extremely hard by a levy brought in in 1961 and still maintained today.

There is this further factor. Industry likes to have an opportunity of taking advantage of stability of prices. In the oil industry, there has been this stability, but the coal industry has not maintained stability of prices. We have been reading recently about whether the miners will accept the new terms offered by Lord Robens. If they are accepted, the costs of coal production will go up by £6 million, and it is hoped to absorb this increase in increased productivity. If productivitiy does not rise as high at it did last year, then, unless more export orders are obtained, the price of coal may well go up again. Therefore, an element of instability comes into the question and industrialists may be further affected.

There is also a problem in investment. Certain industries are concerned about this because they have their oil appliances which they must use, and pay the tax. Looking at it in another way, they are concerned with temperature control and technological adjustments. If they use fuel oil, they have to pay the tax. If they do not want to go ahead with technological advances, they must resign themselves to the decision to go in for some other source of fuel.

I make an earnest plea to the Chancellor of the Exchequer and the Economic Secretary to do something about this tax. If he can find ways and means to accommodate the £32 million or so involved, he would make a great concession.

Mr. Eric Lubbock (Orpington)

In using his figure of £32 million, is the hon. Gentleman assuming that none of this revenue is returned to the Exchequer through increased Profits Tax and Income Tax on the companies which at present pay the fuel tax?

Mr. Skeet

No. I am concerned about the total of £67 million which comes from the tax and, if there is to be a remission bringing it down to 1d. per gallon instead of 2d., one can think in terms of roughly half that figure.

Mr. Lubbock

The hon. Gentleman has not quite got my point. If the costs of these industries are reduced, they will make bigger profits, and, accordingly, some of the loss to the Exchequer will be made up by increased Profits Tax and Income Tax.

Mr. Skeet

I see what the hon. Gentleman means. Industry may well make additional profits On the other hand, we are very anxious to encourage British industry to be more competitive internationally. Companies may well wish to reduce prices to their buyers, in which case they will obtain more orders, bringing more foreign exchange to Britain, though not necessarily adding to their profits. In this connection, I mention what happened to cement manufacturing. As a result of this very tax, the cement industry was driven from the export market. I have no doubt that most hon. Members would be only too glad to see the cement industry get back into the European market, although, of course, there is the problem that, once one has been excluded from certain markets, it may be very difficult and costly to get back again.

I do not wish to detain the Committee much longer. I have stressed several important points and have a little more to say in conclusion. Moreover, I am, unfortunately, suffering from laryngitis this afternoon.

Mr. Cyril Bence (Dunbartonshire, East)

It is a good job the hon. Gentleman is not in perfect health.

Mr. Skeet

I did not speak last night, and as I saw that these Clauses would be coming up for consideration today, I took the advantage of a few hours' rest in the hope that, with some of the good medicine which the country provides, I should soon be right again.

I hope that we can persuade my hon. Friend the Economic Secretary to realise that it is most important at this juncture to consider all the arguments on this matter very seriously. It would be, I suggest, an act of the greatest discourtesy to his own country if he were to continue this tax in existence for as long as we have had the Purchase Tax, for example. If the coal industry, for which it was imposed, must be assisted, I am perfectly prepared to consider at some other stage whether it might be assisted by some form of subsidy. This is what is done in certain European countries, for example, in France. If that were to be the method, it would not be an imposition on the ceramic and glass industry, on building contractors, on the steel and metallurgical industries and on all the others with which I am concerned and which are prominent in the export trade on which this country so much depends.

4.45 p.m.

Mr. Arthur Holt (Bolton, West)

I am very glad to support what has been said by the hon. Member for Willesden, East (Mr. Skeet) and the hon. Member for Bradford, East (Mr. McLeavy). The new Clause No. 38 put down by my right hon. and hon. Friends and myself goes further than new Clause No. 19 to which the hon. Member for Willesden, East was speaking, but this whole series of new Clauses deals, in one way or another, with a tax which we all agree, I am sure, has a most undesirable effect (a) on our public transport system and (b) on industrial costs. Whatever they do or do not do about these new Clauses, the Government must seriously study this tax and endeavour to find another way of raising the money. It is having an extremely bad effect at present. Following the sentiments expressed by the hon. Member for Willesden, East, I shall now adduce arguments in support of our new Clause, endeavouring not to repeat what the hon. Gentleman has already said in covering the subject very thoroughly.

Last year, The Times commented that it was one of the great disappointments of the 1963 Budget that the duty on heavy oils had not been removed. There has been a difference of view expressed by the Government, and it would be useful to know today what reason they now hold for continuing the duty. As the hon. Gentleman the Member for Willesden, East reminded us, the Leader of the House, then the Chancellor of the Exchequer, said when he introduced the tax that he was doing it for revenue purposes and denied, as the Minister of Power also emphatically denied at the time, that it was being introduced in any way as a method of protecting the coal industry.

In his Budget Statement in 1963, the present Chancellor said: I have been pressed to remove this duty to lower industrial costs. I cannot consider this solely from a revenue point of view, but must take into account the widest long term economic interests. To remove the duty now would change the terms of competition against coal and in favour of oil."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 485.] Although only 2d. a gallon, this duty has a real impact, not a marginal one, on the costs of many industries. In electricity generation alone about 5.7 million tons of this oil are used per year. The iron and steel industry uses 2.8 million tons and the engineering industries are using 1.9 million tons a year. Two other important consumers, cement and fishing, each use about 700,000 tons a year. In addition, it is being widely used in central heating, which again is rather in conflict—this is something of which we are very much aware in my part of the world—with the Government's policy of encouraging smokeless zones. It is estimated that central heating systems are using about 2.6 million tons of fuel oil.

Fuel oil is being used in such places as hospitals, schools, welfare establishments, offices, catering establishments and homes, and I think that it is essential that some basic decisions on fuel policy should be made and adhered to. Having judged the relative merits of one type of fuel or another, difficulties are caused when decisions are turned upside down by a sudden change in Government policy which slaps a tax on the fuel which appeared to industrialists the best and most economical for them to use. Many people who have decided to burn oil must be put in this difficulty. Perhaps in their case it was just marginally the most economic, and then a fuel tax is imposed and they wonder whether they took the right decision.

The hon. Member for Willesden, East referred to the troubles of the cement industry. In 1960, the cement industry's exports were worth £7.1 million. In 1961, its exports were reduced to £5.3 million—the tax was put on in the middle of the year—and in 1962 they were down to £3.1 million. This is a clear indication of the incidence of this tax, which in the case of the cement industry is, I believe, estimated to be about 8s. per ton, or about 12½ per cent., at their oil-fired works.

The tax operates to a lesser extent on other industries. Perhaps I may refer to its effect on the textile and leather industries, which are a matter of interest in my constituency. In 1963, the cost of this duty to those industries was estimated to be £1.8 million. The cost to the engineering industry, which also provides extensive employment in my constituency, was estimated at £4.6 million in 1963. The hon. Member for Willesden, East said that the total cost of the tax to industry, commerce and home users was £61 million. The figure which I have is £55.7 million. I should be glad to compare figures with him to see whether my figure is wrong. However, I understand that this is an estimated figure. It is not very dissimilar from the one which the hon. Member gave. It is an extremely large sum for industry to bear. If it is suggested that for a matter of two or three years, until some further reorganisation takes place, protection of the coal industry should continue, it would surely be far better to do this by a direct subsidy for some of its activities rather than by putting this fantastic extra cost on industry which has to earn our exports.

I hope that the Economic Secretary will not give us a negative answer. If he does, I hope that he will make it clear beyond doubt on what grounds the Government insist on continuing this tax and how they can urge industry to make greater efforts to improve the export trade, which I understand is causing even the Treasury some concern, when this kind of gratuitous increase in costs is placed by the Treasury on the cost of many industries which at the moment are endeavouring to increase our export trade.

Mr. T. L. Iremonger (Ilford, North)

I want to direct the Committee's attention to new Clause No. 36—"Rebates on heavy oils used for purposes other than propulsion"—which reads: Section 6(1) of the Finance Act 1959 (which requires that heavy oils used as fuel for vehicles must be unrebated whether or not they are used to propel the vehicle) shall not apply when the engine which normally propels a vehicle is being used for purposes other than propulsion, provided that the supply of the oil to that engine exclusively for such other purposes is regulated by a mechanical device approved by the Chancellor of the Exchequer, and rebates shall be allowed on heavy oils so used. The object of this new Clause is to allow rebate on fuel for vehicles when the engine using that fuel is not propelling the vehicle but is performing some other function—for example, when the engine is rotating the drum of a mobile concrete mixer and the vehicle itself is stationary.

The immediate objection which might be taken is that owners of vehicles whose engines are used for both purposes—propulsion and industrial—might be tempted to use rebated fuel for propulsion and so evade the tax due. However, the new Clause refers to a mechanical device which makes it impossible for the engine to draw on the rebated fuel tank unless the vehicle is immobilised and stationary. The British Ready Mixed Concrete Association has perfected such a device, and I think that my hon. Friend the Economic Secretary will agree with me that it is technically satisfactory for the purpose of safeguarding the Revenue provided that it is not tampered with.

Subject to this safeguard, it is, on the face of it, obviously both logical and desirable that fuel used for purposes other than propulsion should be allowed rebate. It is logical because the principle, if one were to elevate it by such a term, is that the tax is levied on transport fuel used on public highways, and transport on public highways is identified, for convenience, with licensing of the vehicle. For example, tractors which do not go on the public highway are not licensed and use rebated fuel. This is, really, not so much a principle as a device of administrative convenience, but even if we accept that there is a principle which has some intrinsic merit it still would not be breached by my new Clause.

It is desirable that this rebate should be allowed because it would be for industrial and productive processes which are more economical and more efficient. It provides encouragement to investment at home, and it would also provide encouragement to exports because it would promote the development of concrete-mixing machinery, which is greatly in demand and which this country is well qualified to produce. My hon. Friend the Member for Sevenoaks (Mr. J. Rodgers), who hopes to catch your eye, Mr. Thomas, speaking as he will be from his great experience as Parliamentary Secretary to the Board of Trade, will wish to impress upon my hon. Friend the Economic Secretary the importance of the export aspect of the case.

5.0 p.m.

My hon. Friend the Economic Secretary will be aware of the British technological progress which has been made in mobile concrete mixers over the past three or four years. Machines are—

Mr. Arthur Lewis (West Ham, South)

The hon. Member has made a long statement—

The Temporary Chairman (Mr. George Thomas)

Order. If the hon. Member for Ilford, North (Mr. Iremonger) does not give; way, the hon. Member for West Ham, North (Mr. A. Lewis) must resume his seat.

Mr. Lewis

He started to give way.

Mr. Iremonger

I started to give way, but when I saw that it was the hon. Member for West Ham, North (Mr. A. Lewis), I thought better of it.

Mr. Lewis

On a point of order. Is it in order, Mr. Thomas, for an hon. Member to suggest that the Chair might call an hon. Member who is not even present or attending the Committee? The hon. Member for Ilford, North (Mr. Iremonger) suggested that his hon. Friend the Member for Sevenoaks (Mr. J. Rodgers) might catch your eye. How can you call him when he has not put in an appearance?

The Temporary Chairman

That is hardly a point of order, although it is remarkable what can be done.

Mr. Iremonger

I was saying that my hon. Friend the Economic Secretary will be aware of the technological progress which has been made in mobile concrete mixers over the past three or four years. Machines are now in service in which the drum is rotated hydrostatically through fluid power supplied from hydraulic pumps interposed on the main engine and gearbox of the vehicle. This is a great improvement in efficiency and economy over the old method which makes those who use it eligible for rebated fuel and which involved a separate engine to drive the drum.

It seems to me quite wrong that those who have perfected these developments should be handicapped in exploiting them by virtue of the fact that others who operate these drums by uneconomic and superfluous separate motors can run these second motors on rebated fuel. This is to put a premium on industrial efficiency in the interests of bureaucratic convenience.

Admittedly, the rebated fuel would, strictly speaking, be used in propulsion engines in licensed vehicles, but I cannot accept that any principle that matters is involved. Let the distinction of principle, if one wants to make one, be not whether the vehicle is licensed and the engine is the same engine as that used for propulsion on the public highway, but whether the engine is actually used for propulsion at the time when the rebated fuel is consumed. If there is any principle, it is evidently not sacrosanct, because it is already breached in the case of fairground operators, mobile cranes, road rollers, roadmaking machinery and mowing machines.

I am not convinced that my hon. Friend the Economic Secretary can sensibly resist the new Clause on grounds of any valid or important taxation principle. He may feel that it should be resisted on the ground that there would be difficulty in policing the device and safeguarding the revenue. To be fair to my hon. Friend, he may say that if this concession is allowed, the owners of thousands of Landrovers which are fitted with power take-offs will install the approved device and then tamper with it and take the family to the seaside on tax rebated fuel. I think that that fear is highly exaggerated because, in the first place, those with secondary separate motors are already now entitled to rebated fuel for them and they can perfectly well fiddle the fuel if they are minded to do so. Secondly, however, in the matter of policing, the Excise officers would have a pretty good guide in sniffing out offenders simply by considering the amounts of rebated fuel claimed for allegedly dual-purpose engines. If large claims are made, it will be obvious that they are from the people upon whom a check should be made to see whether the device has been tampered with.

What I and my hon. Friends who support new Clause No. 36 are asking my hon. Friend the Economic Secretary is that he and his Department should take cognisance of technological progress and adapt the administration of the Excise to it. I do not under-estimate the awkwardness of doing so, but I suggest that the virtues of flexibility are greater than the merits of regarding the existing procedure or principle as something handed down from on high and inscribed on tablets of stone.

I therefore ask my hon. Friend sympathetically to consider the new Clause, if only because of the acknowledged practicability of the device upon which it is based, and to put his Department to the task of thinking out afresh the principles and the expedients involved, not from the defensive point of view of standing pat on the status quo, but in a genuine effort to meet the plea which I have made to him.

Mr. Anthony Wedgwood Benn (Bristol, South-East)

Even if the Government do not concede the new Clauses, it will be a memorable debate, Mr. Thomas, for the Ruling which you have given from the Chair, which I noted: "That is hardly a point of order, but it is amazing what can be done." If that could be inscribed in the next edition of Erskine May, it would commend itself to back benchers on all sides of the House.

We are having two debates on these new Clauses, and they are quite separate one from another. One is the debate on fuel policy, with which some of the Clauses deal, and the other is the debate on transport policy on new Clause No. 9 introduced by my hon. Friend the Member for Bradford, East (Mr. McLeavy). I wish to confine myself to his new Clause. I was interested in one of the implications of New Clause No. 36, that if a vehicle is stationary there should be a rebate on the fuel which is used, because with congestion rising at its present rate this might have implications for the Treasury if rebate devices started ticking away as soon as a road vehicle was held up in a traffic jam.

The case underlying new Clause No. 9 is not in itself a case against the present level of revenue from the fuel tax. Indeed, it is strongly arguable that the transport revenue drawn through the fuel tax and in other ways is not excessive when one considers the cost of the roads, repairs to them, policing and the accidents and congestion which follow from road use, when one takes into account the fact of supply and demand for scarce urban land which is required for roads and when one takes into consideration the multiplier factor—that is to say, as incomes rise, the demand for transport rises too. It is a well-known fact that when a family's income rises above a certain point, its use of the roads rises even more rapidly. Finally, there is the fact that transport is legitimately taxable like any other activity.

The key question of transport policy to be considered by the Committee is whether, in the light of our present developments in transport, it makes sense to put any barrier whatever, in the form of fuel tax, against the further development, strengthening and extension of public transport. This is the key to the whole argument. The case for the rural areas is a separate one, and I shall refer to it presently.

We have a situation of growing congestion in our cities. The Minister of Transport, although I am m many ways a critic of his, certainly has tackled the problem of urban congestion with rather greater zest than his predecessors. He is, coming along with his parking meters and increased prices for them and he is examining the necessity even for a congestion tax, so that people who bring their vehicles into the centre of our cities may have to pay more. The inevitable consequence of this process, if the present production of the motor industry continues, is that there will come a point when it simply will not be practicable to permit everybody with his own vehicle to come freely into our cities. That is a matter not of policy but of fact. It cannot be done physically.

It is no good simply taking a negative approach to this question. I have always been on the side of tthe Minister of Transport when he has been combating the more ignorant members of the pure motor lobby who think that the motorist should be allowed absolutely free choice, because it is not a matter for the Minister of Transport alone but embraces the scarcity of land and the urban planning problems which are involved. However, if we are to try to deal with this problem, then there has got to be official encouragement not only by the Minister of Transport but also by the Chancellor of the Exchequer for a further development and strengthening of public transport, and particularly buses.

If we look at the position of bus companies now operating in our major cities, we find that it is becoming increasingly difficult for the drivers of the vehicles and the planners of the timetables to get effective services because of the difficulty they are having in coping with the increasing volume of private motor traffic. Wages and conditions have not kept up with those outside, and so there is a staffing problem as well. It is apparent in many cities, and there is in some places and actual decline of effectual services. On top of that a heavy burden of tax has to be borne by the buses, which are, by any measurement of operative efficiency we like to make, much more efficient than privately-owned motor cars. If we take the extreme cases, it may be 500 times as efficient on the sq. ft. basis. Officials who represent the bus interests have limited themselves to a claim of 54 to 1, but even this is sufficiently great a difference to justify special consideration for their case.

Of course, if we did remit fuel tax on buses it would open up a series of policy choices, and it does not follow, if we make such provision, that we are automatically committed to follow any one of the choices which are available. One point which was made by my hon. Friend was that it would make, or it might make, possible a reduction in fares. That certainly is one of the alternatives which would be opened up, and if fares could be reduced it would be of benefit to those who have to travel to and from their work by bus. A second alternative would be one which makes possible the offer of better wages and conditions for those who work in the bus industry. Unless these men are available in sufficient numbers the bus services will suffer increasingly in the future.

The third alternative choice opened up, which I think may be the most important of all, though it is hard to compare them, is the possibility of further investment in new equipment so that the public transport services can meet the much more sophisticated needs of the travelling public when they consider making their choice as to the means by which they will enter the city in the mornings and leave it in the evenings.

I recall a story about Lord Curzon who, it is said, had never travelled by bus, and a friend of his persuaded him one day to try the bus. The following day he met Lord Curzon and he asked him, "How did you get on?" Lord Curzon replied, "It was no good." His friend asked, "Why not?" Lord Curzon said, "Well, I got on the bus and I said 'Carlton House Terrace' but the man would not take me there." That was his approach to the bus as a rather bigger private vehicle.

However, the fact is that if the commuters in our large cities increasingly use private transport, one of the reasons is because of the convenience. It offers a greater degree of comfort and convenience than that which they can get on our existing bus services. It is no good simply limiting oneself to attempts to stop this process—by the Minister of Transport or anyone else—by means of applying niggling restrictions and higher prices. The public transport services must be prepared to offer a greater degree of comfort and convenience than are now made available. Certainly one effect of a reduction of fuel tax would be to speed up the development of more sophisticated bus services in our cities.

As for the rural areas, I must say I listened with some incredulity to the hon. Member for Willesden, East (Mr. Skeet) who was talking about the sacred right of freedom of choice. When we apply that to the people who live in the rural areas it was interesting to hear him speak about freedom of choice being an essential part of the Government's policy. What does that mean to a man who saw Dr. Beeching come along and say, "We are taking away your railway" when the local bus company, which then provides the only service open to him, has to pay a fuel tax which makes it increasingly difficult for it to operate in that area? Of course, in some areas there simply are not rural bus services available, and it is really no good, as was shown by a recent survey, for the Minister to say that most people do not use the public transport in rural areas when, in fact, there is no public transport to meet their needs.

5.15 p.m.

The case for remission of the fuel tax is that inadequacy of rural bus services is one of the factors which encourages people to go into the towns and so increase the congestion in the towns. The case for remission of fuel tax in the rural areas can be made more briefly than that for remission of tax in the urban areas, but it is none the less important.

The fact is that this new Clause has to be looked at not as a minor niggling Amendment of the Government's Finance Bill but as something which has to be seen in the context of a major shift in transport policy, and this is a shift to public transport. If we say it like this it sounds commonplace; we have talked about it so much. In terms of better public transport, everyone will agree and say that of course we want better bus services and it sounds like a truism. But it may be seen also as a blinding flash of light, illuminating many other problems as well, depending on how deeply people have thought about the significance of this. The simple truth is that our towns and cities were constructed in a period when the motor car had not been dreamed of, and the question is how it is going to be possible to plan the movement of people on the basis of private ownership of vehicles by everybody.

A major shift has to be made from private ownership of vehicles to the increased renting of vehicles. When we say "renting vehicles" we think in terms of hiring a car, and that is one aspect of the matter, but another is hiring a bus. When a man boards a bus he hires that bus and rents that bus in exactly the same way—though not with the same control over the route which it follows as Lord Curzon hoped for. But he is in a sense renting that vehicle, and the advantages of renting a vehicle as an objective of policy over the next few years are legion.

First of all, we can get a greater variety of use. A man's need for a vehicle varies from day to day. A single person entering or leaving the city, to and from his work, wants one comfortable seat from home to work and back. A man taking his children on holidays needs a different type of transport, and so on and so forth. Only by making available rented vehicles, including buses, express buses, standee buses and so on, can we meet this need.

Another thing, among the wider issues we have to consider, is the effect of the fuel tax on safety and maintenance. If we want to make good use of roads and reduce road casualties we are bound to see the great advantage there is in centralised maintenance, which can only be done when vehicles are rented. Buses are safer on the roads than are privately-owned cars. A third advantage is, of course, more economical use of road space. There is nothing more wasteful of our limited road space than the fact that vehicles are parked on the highway. Rented vehicles are much less often out of use than privately-owned vehicles. For these reasons, I think we have got sooner or later to face the necessity of getting Government policy, not only transport but fiscal policy, working side by side to achieve this major shift, if we are to meet our transport needs.

It will be a massive psychological shift which has to be made, because people are wedded to their own private vehicles. If they have them, they love them. If they do not have them they lust after them. I am a private car owner, as most Members of the Committee are, although I try to resist the urge to worship by polishing on Sundays. Of course, it is the right of every man to have transportation. On the other hand, if we are to solve this long-term problem of transportation and preserve reasonable stands of amenity in urban life there must be a shift in this direction, towards better public transport. It is no good the Minister looking at it purely from a Treasury point of view. If he does then he really is engaged in direct policy combat with his colleague the Minister of Transport, who is trying by all the means at his disposal to stem the flood but who knows in his own heart that he will be as unsuccessful as King Canute.

If the Minister resists this new Clause he will just be putting one more decision into the pigeonhole waiting to be tackled later on. This matter cannot be left as it is. For while it is left as it is we cannot have the public transport service that we need, and while the public transport services are starved then increasingly we shall be faced with the unplanned onrush of the private motor vehicle.

For this reason, I very much hope that in his reply the Minister will not just confined himself to the narrow financial point but will try to have some useful comments to make on the wider items of policy to which I have tried to refer.

Mr. Geoffrey Johnson Smith (Holborn and St. Pancras, South)

I wish to speak in support of my hon. Friend the Member for Ilford, North (Mr. Iremonger). This is not because I do not support the wider arguments in the question of fuel policy as employed by the hon. Member for Bristol, South-East (Mr. Benn) and by my hon. Friend the Member for Willesden, East (Mr. Skeet).

I think that this is a miserable tax on heavy oil, and I only regret that the Government did not take the opportunity of abolishing it last year. I do not propose to go over the ground which has been covered so well by hon. Members on both sides of the Committee, except to say that I would like to support many of the arguments that have been put forward. My contribution to the debate will be a brief comment in support of my hon. Friend the Member for Ilford, North. I hope that the fact that only two of us in the Committee have referred to this Clause will not give the impression that hon. Members on both sides of the Committee do not attach some importance to new Clause 36. I do not believe that for one moment.

The tax is an anomaly. My hon. Friend the Economic Secretary, must admit this. The Clause does not strike at the basic principle of this wretched tax. We as realists know that it is not really in this year for the Chancellor of the Exchequer to come to the House and suggest in his Budget speech that the tax should be abolished. We recognise that, and there is no intention on our part to embarrass the Economic Secretary this afternoon, but, to my mind, there are two reasons why my hon. Friend should look with some favour on new Clause 36.

One reason is the argument put forward by my hon. Friend, namely, that it is unreasonable in this day and age when we spend so much of our time exhorting industry to invest in new plant and techniques and to apply the products of research to find that it should be penalised as it is in this respect, Secondly, as hon. Members on both sides have said, it increases the costs in both housing and industrial building matters. We all know that there is a huge construction programme in both these fields.

However small the assistance that can be given to help reduce the cost of the provision of school building programmes, house building programmes and offices, or whatever it is, cannot but be welcome. The Economic Secretary rejects our arguments. In other words, he is doing exactly the opposite; he is ensuring that those who seek to see that costs are reduced are not helped but hindered by this miserable tax. Therefore, I hope that when he replies, just because this does not strike at the wider aspects of the debate and, the very important arguments that have been put forward this afternoon, he will not altogether forget that though this is a small point it is, nevertheless, an important one. Perhaps as the matter does not strike at the basic principle this is an occasion when he might at least give encouragement to those of us who hope that the basic principle will be tackled one day, that when it comes it will not cost the Treasury anything worth speaking of, that common sense can prevail and that he can give us hope for the future.

Mr. Neil McBride (Swansea, East)

I hope that the hon. Member for Ilford, North (Mr. Iremonger) will forgive me if I do not follow him into the field of concrete mixing. While one is glad to see the Economic Secretary to the Treasury looking so resilient after his rough handling last night, one is regretful of the fact that he is not flanked by the Chancellor of the Exchequer and the Minister of Transport, whose interests in the matter are coincidental. It seems to me that the country will draw the conclusion that it is a matter of secondary importance.

The new Clause was moved in a very able manner by my hon. Friend the Member for Bradford, East (Mr. McLeavy). Everyone in the country is aware that the imposition of this tax has been causing great concern for some time. It seems to me that we in the Labour Party and on this side of the Committee are acting as advocates, or agents, for bus companies which are suffering from the maladministration of the taxation system in the country. It would seem that we are being asked to save many of those operators from their friends on the benches opposite.

Speaking to the Public Transport Association in May, 1962, Mr. R. J. Ellery, its chairman, said: I remember that at the annual dinner last November I likened this surcharge to Peel's tax; that, too, was introduced as a temporary measure. Looking back, it seems to me that my analogy was not unfair. What is the Government thinking about? Surely they do not want to see a further withdrawal of bus services priced out of the market by fuel tax. Nevertheless, with that in mind, there is no denial of the fact that the imposition of this tax of 2s. 9d. per gallon on fuel oil used in hackney carriages, such as public service vehicles, penalises operators and pushes up fares and thereby increases the cost of living and militates against the granting of concessionary fares to old-age pensioners. In my opinion, the abolition of this tax would help the low wage earner who, because of the necessity of local authorities having to build beyond the boundaries of, and in many cases on, the perimeter of their areas, has to travel quite a distance to work and is thereby involved in considerable extra expense due to the cost of bus fares forced up by the imposition of this tax on fuel oils.

I come now to a constituency point, because I believe that it is an hon. Member's primary duty to help the people who elect him. The effects of this tax are felt particularly in Swansea, which is a town large in area, where many fine housing estates have been erected by the borough council. Despite great care in land buying, the Swansea council has had to construct these estates in places which are very desirable indeed but which are inevitably some distance from the centre of the town and involve travel to and from work by my constituents.

It follows, therefore, that the matter of bus fares in a situation such as I have described is of extreme importance to the people involved, particularly as there has been held recently a traffic commissioners court to consider applications for fare increases by the bus operators who provide the passenger bus service in Swansea. The effect of this tax on heavy oils used as fuel on passenger service vehicles is that the running costs are forced up by 20 per cent. and no one can doubt, least of all this Government, that this percentage makes all the difference to the economic viability of many bus companies. Indeed, when one considers this it seems to me that this tax inflicts a form of apartheid on many people by confining them to their own immediate areas because of the cost of bus fares made higher by the tax. Indeed, on 31st May, fares went up in Swansea, and the chairman of the traffic commissioners court said that this increase was undesirable from the passengers point of view, but inevitable. This occurred despite objections by 50 local authorities in South Wales to the applications for increasing the fares.

It may be that hon. Members opposite would adduce the argument that relief in tax would be absorbed in wage increases. That might or might not be true, but it would certainly mean static or reduced fares which would be of considerable advantage to those I represent. It is a singular fact that the Tories have always opposed remission of this tax. A logical question which arises is whether they think it an easy revenue to raise. The removal of the tax would be seen as a hope by the fare-paying public of fares being held back from their upward spiral and possibly an indication of a downward trend.

5.30 p.m.

A downward trend of fares would certainly be welcomed by short distance passengers, who always bear the brunt of fare increases. The Economic Secretary will be aware of the feelings of the deputation from the Joint Fuel Tax Committee which saw him on 18th February. Many of these gentlemen hold political views akin to his and their comments were forcible in the extreme. I understand that the deputation made the hon. Member aware of the bitter feeling as they protested against what was described as a huge artificial addition to costs holding back the industry's efficiency.

Furthermore, the deputation spoke in strong terms of this tax disability in the maintenance of unremunerative services, particularly in rural areas, which are of great importance in a country like Wales. I quote from the notes of the meeting: … fuel tax relief would be merely a once for all relief. This argument had not been raised by the Treasury but had appeared originally in the majority report of the Jack Committee. In fact, of course, relief would be reflected not just temporarily in the year in which it was given but permanently in a permanently lower level of fares. In other words, there would always be one twist less in the inflationary spiral.

Mr. R. W. Birch, chairman of the company operating in Swansea, told its annual meeting earlier this year: The industry has tried, year in, year out, to secure the removal or at least a substantial reduction of this ill-conceived tax of 300 per cent. on the basic cost of our fuel, and once again the Chancellor of the Exchequer has completely ignored us in his Budget. I can see no sense in this harsh special taxation of a public service which is vital to the community. The social effects will be further emphasised, if the tax is retained, by the effects of the Beeching axe. Bus services and fares, with railway lines being closed, become even more a matter of importance. They become of supreme importance. Then again, social effects are involved even in the question of balancing a visit to relatives against the cost of the fares.

The retention of this penal fuel tax is one of the greatest among the many blunders committed by the Government. It may be argued by hon. Members opposite that the position is not desperate but many of them have slender majorities and the electors have a singularly retentive memory. There is no case for the retention of this penal tax. It adds tremendously to the cost of living. It means a considerable burden for the wage-earner with a family because of the cost of travelling to and from work. Equally important, as some of my constituents have complained, there is the high cost in bus fares of sending children to school. Parents in Swansea have made urgent representations about fare reductions.

The Government have promised much in this election year. I am not using any election gimmick in this. I am representing my constituents, as I should. From time to time we hear of the amputation of this tax and I put it to the Economic Secretary that it should now be removed. Last year, the Chancellor said that he was not worrying too much about the total cost entailed in remission. The urgency of the situation defines the necessity for this Clause, which I hope hon. Members will support.

Mr. R. E. Prentice (East Ham, North)

The Committee seems to be in a rather curious position in that we are having two debates in one. One is a debate on fuel policy and the other on transport policy. It is, perhaps, significant that all the speeches on fuel policy have come from hon. Members opposite on an issue in which private vested interests are paramount and in which the public interest is only affected to a fairly small degree, whereas all the speeches on the transport issue are coming from this side of the Committee, and in transport it is the private interest that is of smaller account and the public interest that is of real significance.

I support the Clause with particular enthusiasm, partly as a member of the Transport and General Workers' Union—and I pay tribute to my fellow union member, the hon. Member for Bradford, East (Mr. McLeavy), to whom I now pay tribute for his efforts over many years in trying to get this anomaly removed—and partly as an hon. Member with a constituency interest. Both the borough council of East Ham and the local chamber of commerce have written to me on this problem urging removal of the tax. I think they represent a great body of public opinion on the issue, and I am sure that many hon. Members will have had similar approaches from representative bodies.

It is a paradox that, on the very day that the Minister of Transport made a statement about traffic problems, the Economic Secretary should be sitting here presumably to put up the stock Treasury excuses for not meeting the proposal in this Clause. I am not a great fan of the Minister of Transport, but at least he brings into his pronouncements some sense of urgency about the serious social problems we face because of traffic congestion. We face problems which will become almost intolerable in ten years' time when, we are told, there will be twice as many vehicles on the roads.

It is against that background that the Government should have regarded the Clause. Many of the answers we shall need to the problems of living with the car will be complex, but the contribution offered by the Clause is simple. The proposal has been made many times in this Committee, and was reinforced by the recent Report of the Committee, presided over by Professor Phelps Brown, which looked into the question of the pay and conditions of those working for London Transport. I have three brief comments on that.

First, we should not tolerate a situation in which the burdens of the bus companies are put more and more on the shoulders of those who work for them. In the last fifteen years or so, the relative position of bus drivers and conductors has declined. In the 1930s, the busmen were among the best paid of manual workers. They have become the victims of a financial situation in the bus industry which is in large part due to the fact that the Government have failed to take steps they might have taken for the industry. These employees have thus seen their conditions falling further and further behind those of other workers.

It is well known—and this was brought out in the Report of the Phelps Brown Committee—that busmen in the London area regularly have to work very long hours of overtime in order to take home an average wage. We should be against excessive overtime for anyone, but it is particularly unreasonable in the case of a bus driver who is responsible for the lives of his passengers in the modern traffic congestion of a city like London, and it is something with which we should be concerned.

Sir William Taylor (Bradford, North)

On a point of order. What has this to do with the new Clause?

The Temporary Chairman

I think that the hon. Member for East Ham, North (Mr. Prentice) will take steps, if possible, to relate it to the new Clause.

Mr. Prentice

I would have thought that it was perfectly clear that the purpose of the new Clause was to relieve the desperate financial position of the bus industry. I was reminding the Committee that because of this desperate position a number of unfortunate circumstances have developed, including the fact that busmen have had a pretty raw deal and have themselves been subsidising transport for the rest of us. If this subsidy has to be made, it should fall on the taxpayers as a whole and not on a group of people who give good service to the community.

I was about to say that this is self-defeating in that staff starts leaving the industry, so that bus schedules cannot be maintained, thus adding another twist to the spiral of the industry's serious condition. Secondly, there is clearly a limit to which the problems of the bus industry can be relieved by increases in fares. Increases in fares are a hardship to those with low incomes, particularly pensioners, and again are self-defeating in the sense that as fares go up people become more and more reluctant to make journeys by bus.

A couple of weeks ago, I had a conversation with an elderly woman in my constituency who told me of a journey which she made once a week to a meeting of her co-operative guild. She travels by bus, having to make a change, so that she makes four bus journeys to go to the guild and back home. With a bus fare of 3d., that costs her 1s., but with a fare of 4d. the cost has become 1s. 4d. She is over 80 years of age, but she has concluded that she will have to walk one way every time she goes to a guild meeting or, if the weather is too bad, miss the guild meeting. When we allow increases in fares without doing anything about it in terms of public policy, that is precisely the sort of result which occurs.

The third point is inherent in this difficulty. It is that bus companies should not have to continue to try to surmount their financial predicament by a further closing of routes. This case was made by my hon. Friend the Member for Bristol, South-East (Mr. Benn), but we should have a statement from the Government about their view of the effect which all this has on the bus industry itself. The Economic Secretary should tell us to what extent anyone in the Government is making an assessment of the social costs of traffic congestion. If we are making a proposal which will cost the Treasury a certain amount of money, we are also making a proposal which will lead to a saving of costs in terms of traffic congestion. This is the sort of situation which should be costed by the Government in the way that the Victoria tube extension was costed—in terms of the social cost as well as the balance sheet.

All these arguments make the case for the new Clause overwhelming. If we get a stock Treasury reply again today, it will be further evidence of the Government's failure to deal with the major social problems of our time.

5.45 p.m.

Mr. Emlyn Hooson (Montgomery)

I entirely support the case for the abolition of the fuel oil tax in its entirety, but I wish to confine my remarks to new Clause No. 9. For the life of me I cannot elevate the matters which we have been discussing to the status of principles. The Treasury traditionally—and the tradition is fully maintained—adopts the attitude, "What we have, we hold". If the Treasury has its hands on money, however obtained, it is extremely reluctant to give it up, and this is true of the Treasury whichever party is in power, and we may as well face it. Nevertheless, it is one of the traditional weaknesses of the Treasury—and the weakness has been manifest in the debate today so far—that it is reluctant to appreciate the social and economic consequences of pursuing the policy of "What we have we hold".

I entirely support new Clause No. 9. Fuel oil tax for buses costs 2s. 9d. a gallon which, I am told, amounts to about 17 per cent. of bus running costs, or about 12½ per cent. of total costs, including capital depreciation. In other words, the fuel oil tax makes a substantial increase in the cost of public transport and in particular has two harmful effects. First, it makes many more bus routes uneconomic than would otherwise be the case. Secondly, it makes the whole structure of fares higher than it would otherwise be and therefore drives people away from buses to other forms of transport. This is obviously very harmful, especially in the light of two Reports, the Beeching and Buchanan Reports.

The Beeching Report especially affects my constituency, for, as hon. Members know, I represent an entirely rural constituency where the railways have largely been cut off because of the effects of the Beeching Report. I do not want to go into that Report's merits or demerits today, save to emphasise that it makes it much more essential to have many alternative rural bus services. The position, which was adequately described in the Jack Report of 1961, is therefore aggravated. The Jack Report emphasised that the cutting of rural bus services was already having serious social consequences which should be reversed by an element of subsidy, but from the Government we have had neither subsidy, nor any tax concession which would make it more economic to run rural bus services.

The odd thing about the Government is that they are the most urban-minded Government in history. Yet they derive a great deal, of their strength from rural areas and I accept that there are many hon. Members opposite who are concerned about the countryside, but they do very little about it. Although they derive much of their strength from the countryside, they are for ever favouring urban as opposed to country areas. Indeed, they are more responsible for the depopulation of our countryside than any Government in history. They are making the countryside a countryside in which only Conservatives can afford to live.

To talk of choice of transport in my constituency is ridiculous. There is no choice. One can use the local bus, if it can afford to run, or have a car, or walk. Many bus operators are unable to operate bus services because they are uneconomic, but many of them are marginally uneconomic. If there were a tax concession at this time, these services might be economic. Yet there is no element of concession.

My constituency is part of the Mid-Wales area and it is odd that this area has the lowest average earnings of any part of the United Kingdom and at the same time the highest number of cars per head of the population. The reason is that if one is to get around at all one has to have a car, however dilapidated it may be. I know that hon. Members opposite do not appreciate the intense hardship caused to rural dwellers, old-age pensioners, youngsters in their teens and other people unable to afford cars, simply because public transport services just do not exist. If hon. Members opposite want to know why they are losing strength in the rural areas, it is because they are totally ignoring the plight of these people.

Mr. F. A. Burden (Gillingham)

The hon. and learned Gentleman is saying that if the fuel tax were abolished, the buses would be able to run to such an extent that there would be adequate services and it would no longer be necessary for people to buy cars. However, it is my experience that the bus companies say that if the whole of the tax were removed, it would make no difference to fares.

Mr. Hooson

Not at all. I am not making that argument. I am saying that there are certain bus services in the rural areas which are marginally uneconomic. A concession on the fuel tax would enable them to be economic. As I see it, there are certain people in rural areas, as in urban areas, who will never be able to afford cars, but nevertheless must be transported. The sole test here is whether it is in the public interest generally that the concession proposed by this new Clause should be granted.

I have referred so far only to the rural areas, but I should like to turn to the other side of the coin—the Buchanan Report—which emphasises the catastrophic effects which would result if more and more people poured into cities in cars, especially if carrying only one person, and the Report calls for a means to halt congestion and improve public transport services. I would remind the Economic Secretary of paragraph 457 of the Buchanan Report, which states: But, given a different financial policy travel by public transport could be made relatively cheap, and this may prove to be the key to the problem in the long run. That was the point made by the hon. Member for Bristol, South-East (Mr. Benn).

Last week, there came the Phelps Brown Report on the pay of drivers and conductors of London Transport, which was concluded in February, 1964, and this puts the case even more strongly and draws specific attention to the fuel tax. Paragraph 58 states: … when the maintenance of bus services in towns has been accepted as an essential part of public policy to meet a growing threat of congestion, a tax that adds so much to the cost of just those services becomes increasingly anomalous. It was pointed out that the fuel tax cost London Transport £4.7 million per annum, or more than its total target of operating surplus. The cost of removing the tax on buses throughout the country would be approximately £31 million per annum.

Now I want to deal very shortly with the kind of traditional objection put up by the Government to the type of proposal encompassed in this Clause. It is argued sometimes that removing the fuel tax would be anomalous if petrol tax on the buses did not go, too, but the operators are not calling for this, nor is the Clause. It is pointed out that 90 per cent. of the buses already use diesel fuel, and that even if all the rest went over to diesel as a result of taking away the tax, only another £3 million would be lost to the Revenue. From an administrative point of view, it is much easier to take off the heavy fuel tax than to have a differential in the petrol tax between cars and buses.

Another argument which has been heard before is that it might be awkward to have a differential fuel tax between commercial vehicles and buses. But in Ireland they do precisely this, and the fuel tax there is 1s. per gallon less on buses than on ordinary commercial vehicles.

The Jack Report did not come out in favour of removing the fuel tax but favoured direct subsidies to the uneconomic rural bus services, but one of the difficulties cited was the belief that it would be difficult to separate a fuel tax cut for rural services alone from city services. But now that we have had the Buchanan Report on top of the Jack Report there is a different type of thinking which has shown that the essential need is to improve city as well as rural public transport, giving public transport a much stronger economic position. There is, therefore, an overwhelming case for taking off the fuel tax right across the board. It seems obvious that before giving subsidies we should stop taking money away from operators by way of tax.

The third argument is that it is sometimes said that this would be unfair competitive discrimination in favour of buses against other transport. I would remind the Economic Secretary that railways pay only 2d. a gallon on diesel fuel, and that the whole idea is to make public transport more economic as opposed to private cars.

Eventually, it all comes down to the question of money. Last year, the Chancellor, in justifying the continuation of this tax, said that it was not the cost but the need to protect coal which forced him to maintain the general fuel tax, that is, to maintain the balance, as it were, in favour of home coal production against imported fuel. I would remind the Economic Secretary that no coal is used in buses and therefore in reply to this Clause it is impossible for him to resort to the argument used by the Chancellor last year. I think that an overwhelming case has been made out for this Clause.

Mr. Archie Manuel (Central Ayrshire)

I am glad to support this new Clause, so ably moved by my hon. Friend the Member for Bradford, East (Mr. McLeavy). Many points have been covered in speeches from both sides of the Committee. I want to say a word about rural bus services. I think that today we must all have been struck, especially hon. Members opposite, by the fact that we had the Minister of Transport presenting a picture to us of the chaos now existing in large towns and city centres, and that he is now setting up another double-barrelled working party, as if the problem was not illustrated enough and that we do not use our eyes to see what is happening.

The remit, in part, is to consider the design and shape of cars for the future that would be allowed into our larger cities. This is merely staving off the evil day. I think that most of us who have thought about this problem are convinced that, sooner or later, due to the number of cars coming on to the home market and the strenuous efforts being made by manufacturers to keep up sales, and whether we like it or not, not even new design and smaller cars will solve the problem but that we shall need to make arrangements on the perimeters of our larger cities and seaside resorts during the summer holiday months for car parking facilities. Public service transport will have to be used by nearly everyone to get into cities and allow the freedom of movement that is becoming almost impossible in many areas.

This being so, one would have thought that the Government would now be turning their attention to the iniquity of this penal tax on heavy fuel oil. The position is that, willy-nilly, freedom of choice is being removed from the people in the rural areas because in many cases railway transport is being removed completely, or passenger trains are being withdrawn and stations closed thus making it impossible for many people to use the railways, and the much vaunted freedom of choice about which we hear so much from the other side of the Committee is disappearing.

6.0 p.m.

For many years local authorities in my constituency have made representa- tions to me about this tax. Each year they hopefully pass resolutions which they then send to hon. Members and ask them to use what influence they have to try to get this tax removed. The position has been aggravated in my constituency by the railway closures which have taken place. I am thinking particularly of the closure of the railway services between Beith and Glasgow, and between Kilmarnock and my constituency, and the closure of Kilbirnie Station next month will mean that people in the area will have to use the local bus services to get to the other station at Glengarnock.

It may be that Dr. Beeching and those who advise him, and also the Minister of Transport, think that no particular hardship is involved in using bus services in rural areas, but I know that if train services are withdrawn great hardship is suffered by elderly people, by old-age pensioners and by mothers with families when they go out to do their shopping.