§ Nevertheless, I have concluded that I cannot, in our present difficult circumstances, avoid asking for some further contribution from road users.
§ I have chosen the duties on road vehicles. The vehicle excise duties have remained at their present rates since April 1968, since which time the general price level has increased by about 80 per cent. Thus, even if I were to double the duties, would be doing little more than restoring the relative burden of them to the level set in the spring of 1968.
§ In practice, however, I doubted whether would be justified in going so far. Accordingly, I am proposing an increase in the rate of duty on private cars from £25 a year to £40 a year. The same 60 per cent. increase will apply to the short-period licences, and to motor cycles, three-wheelers and pedestrian-controlled vehicles. These increases will bring in a further £209 million in a full year.
§ Somewhat different considerations apply to commercial vehicles. The bulk of the burden of the duty on private cars falls directly on private consumers and does not lead directly to any increases in prices of other goods and services bought by people who do not run cars. The duties on commercial vehicles, like other business costs, are likely to have some impact on prices in general. including export prices.
§ I therefore propose that the increase in duty rates for commercial vehicles should be restricted to such amounts as are necessary to keep a reasonable balance in the schedule of duty rates as a whole, including those for private cars. This points to a minimum rate for commercial vehicles of £40 a year, which would cover all vehicles with an unladen weight of less than 16 cwt. The lowest rate of duty, now charged on vehicles under 12 310 cwt., will be amalgamated with that for vehicles in the 12-to-16 cwt. category. All other commercial vehicles, including farmers' goods vehicles and showmen's vehicles, will be subject to duty increases of one-third in present rates. The duty on hackney carriages will be increased from £12 to £20 a year, but in order to avoid any substantial increases in the costs of public transport, the additional charge for every seat above 20 in a passenger-carrying vehicle will remain at 50p a year. These increases in commercial vehicle duties will yield £61 million a year, making total increases in the full year yield of the Vehicle Excise Duties of £270 million.
§ Together with the increases in Customs and Excise duties and the extension of the 25 per cent. rate of VAT, these increases in vehicle excise duties will bring the total increase in the RPI generated by the Budget to about 2¾ per cent. in the next three months or so. I greatly regret the need to raise the level of the price index in this way when inflation is already high. But the House must understand that in nearly all cases these increases in indirect taxation are in practice the effect rather than the cause of inflation. If taxes fixed years ago in money terms are not regularly raised to take account of the rate of inflation, the only alternative is a further increase either in the level of direct taxation—which in the present situation means personal income tax—or in forms of indirect taxation levied as a percentage of price, like VAT, which are already rising automatically as inflation takes its course.
§ Since increases in the income tax and in the standard rate of VAT would affect rich and poor alike, I thought it better to concentrate the tax increases in those areas of indirect taxation which affect less necessary expenditure or which have fallen heavily in real terms because of inflation in recent years. None of these increases touches essential goods, but they are all necessary because as a nation we are at present living beyond our means. For this reason attempts to offset them, or any other tax measures, through pay increases would be wrong, damaging, and in the end self-defeating.
§ I am arranging for the effect of the duty increases on the index to be monitored specially in the coming months. The results will be published monthly.