VEHICLES EXCISE DUTY: GREAT BRITAIN

HC Deb 15 May 1975 vol 892 cc662-716

3.51 p.m.

Mr. Peter Fry (Wellingborough)

I beg to move Amendment No. 4, in page 6, line 3, leave out '5'and insert '4'.

First, I apologise to you and the Committee, Mr. Thomas, and especially to the Minister, for the fact that after speaking to the amendment I shall have to leave the Chamber, as I am a member of a Select Committee sitting upstairs. But I hope that my hon. Friends will push the amendment to a Division.

The amendment would have the effect of leaving the excise duty on motor cars at the previous level of £25 instead of increasing it to £40 as proposed in the Budget.

I am not trying to be irresponsible. I fully realise that public expenditure must be cut and that taxation as a whole must probably be increased. But that object could have been attained in other ways. For example, the cut in VAT from 10 per cent. to 8 per cent., and the introduction of food subsidies, both designed to help produce a certain result in the General Election, cost about £1,000 million. The increase in the car excise duty is estimated by the Chancellor of the Exchequer to raise about £209 million.

The criticism that many of us make of this tax increase is that it is yet another blow at the motorist. Far from being equitable, it is extremely unfair in its incidence. Between October 1973 and March this year the cost of petrol doubled from 37p to 74p for four-star petrol. No less than half of the increase is accounted for by tax—22½p in excise duty and 25 per cent. VAT. The majority of motorists have come to feel that the increase in the tax on fuel alone is more than enough. The new imposition on the road fund licence is a further severe blow.

I understand the argument that the increase of 60 per cent. is less than the average rise in prices generally since the last increase, but the burden of taxation on the motoring public must be considered in total and not on one element alone. The colossal increase in motoring expenses has substantially raised the cost of living for all sections of the community, and it will undoubtedly encourage more demands for higher wages.

The increased cost of motoring especially hurts those sections of the motoring public who can least afford it. For many people, owning a motor car is not a luxury but an essential. I am not talking about the owners of Rolls-Royces or those who use company-financed cars. Car ownership is far from being restricted to the better-off. It is estimated that 64 per cent. of families in the socio-economic groups D and E are car owners. It is not surprising when one considers that unless people in rural and semi-rural areas are to live lives of almost complete seclusion, they need some form of transport. In most such areas public transport is progressively being cut. In my own county, for example, the National Bus Company is already proposing reductions in services later this year.

Although the system of transport grants and passenger subsidies under Section 34 of the Transport Act 1968 was supposed to deal with the problem, it has so far failed. The transport grants are insufficient. They must cover road building and maintenance of all but trunk roads as well as public transport subsidies. Most local authorities, because of the pressure on local government finance, have shied away from making sufficient grants to halt on any significant scale the long and sorry decline in public transport in many rural areas.

Many of my constituents find that unless they are prepared to travel considerable distances, local job opportunities are not available. That means that the state of public transport has made a car essential.

In rural areas the car is also the only way to lead a reasonable family life. Mobile shops are being priced out of existence, and many post offices and small shops are being closed or are closing. To have any choice in shopping and entertainment a degree of mobility is necessary. Often a young wife with small children will find herself almost totally isolated once her husband has taken the family car to work.

The Government should start to take a good look at what is happening in many of the villages and hamlets. Many of my constituents would be pleased to earn the £55 a week that one striking worker recently considered derisory. Many young people in the lower income groups find it impossible to continue to live in small, isolated places because of the cost of getting to work. Therefore, they tend to leave for nearby towns, with consequent pressure on housing accommodation there. That kind of movement is bad for village life. It increasingly means that the village becomes a less balanced community.

The people who are left are often the elderly, the pensioners, who are made even more immobile by the increasing isolation of their village. For many of them a small car is the only means of contact with the doctor's surgery, the chemist's shop, the market town, even the post office now, and certainly the local office of the Department of Health and Social Security, which can be many miles away.

These are the two sections of the population who are most hit by the Government's proposals. The owner of an average small car, averaging some 30 miles per gallon, who drives that car for the average distance of 9,000 miles per annum, is, in effect, by paying the extra £15 in duty, paying an extra 5p per gallon on his petrol. One who uses his car for a smaller distance, such as a pensioner, pays an extra lop per gallon as a result of the increase, if he, for example, does 4,500 miles per annum. That is converting it into terms of petrol consumption.

4.0 p.m.

I suggest that those increases are considerable. It is rather interesting to note that the recent Labour Party study into Transport Policy, produced in the April edition of Socialist Commentary said: No case can be made on transport policy grounds for increasing the level of revenue to be raised from road users.

Mr. Douglas Crawford (Perth and East Perthshire)

Does not the hon. Gentleman agree also that the situation is very much aggravated by the fact that bus services in the rural areas have been decimated? In my constituency no bus services exist at all.

Mr. Fry

I quite agree with the hon. Gentleman. Therefore, this increase can in no way be dictated on transport grounds. The intention of the Chancellor of the Exchequer was obviously to use this tax increase merely as a way of putting up his own revenue. This is exactly where the proposal has been so unjust. One of the side effects of the heavy cost of motoring is not that many motorists will give up owning their cars. Indeed, the very core of my case is that they are usually unable to do this. They will be forced to economise in others ways. They might try to avoid paying the road fund licence fee at all. The hon. Member for Newham, North-West (Mr. Lewis) had much to say on this subject on Budget Day. They may delay the regular servicing of their cars. They may do the servicing themselves, without noting the dangerous faults that often lead to serious accidents, with the consequent effect on road safety.

Others—perhaps this is the majority—may find themselves faced with a shortage of cash and defer buying a replacement vehicle. The British motor industry is so depressed at the moment that it can well do without any further disincentive to car sales in the home market. It is a very odd set of priorities which leads the Government to increase the excise duty—an increase which will help to depress the motor industry—and yet at the same time to propose investing £14 million of public money in British Leyland. They have also hinted at an intention to help the Chrysler Corporation.

At a time when public expenditure should be cut, surely the Government should control their actions to lessen the need to pour millions of pounds into the motor industry. The Government should reflect that even when this capital injection has been made, the cars when manufactured will have to be sold, otherwise the investment is wasted.

This amendment is not just an attempt to champion a popular cause against the Government of the day because we on this side of the Committee are in opposition. I have no wish to emulate the many hon. Members opposite who, when they were in opposition, declared that high wage increases did not cause inflation. This amendment is a genuine attempt to show the Chancellor of the Exchequer that he has acted wrongly in increasing this particular burden on the motorist. He has acted without a sense of justice and discrimination. The amendment is a plea on behalf of the private motorist whose car is essential for work and contact with the rest of society.

Bearing in mind that well over 50 per cent. of the private cars in this country are either company owned or have some mileage allowance paid on them, it is clear that much of the cost of the increase in the excise duty will be passed on in the way of higher prices. My plea, therefore, is for the truly private motorist—the kind of person for whom one would have expected a Labour Government to have some consideration. The refusal to recognise the plight of many of these people in areas outside towns is a sign of the lack of foresight and understanding by the Government in operating their financial system. I suggest that by introducing this increase, the Chancellor is following a policy which is unrealistic, unthinking and unfair. I very much hope that my hon. Friends will press this amendment to a Division.

Mr. Tony Newton (Braintree)

I support my hon. Friend the Member for Wellingborough (Mr. Fry) with some enthusiasm. My name, too, is on this Amendment. I wish to support his case as strongly as I can under a number of heads.

First, it seems to me that what the Government have done is socially unjust. This is the kind of argument that I would hope would appeal to hon. Members on the Government benches, were there anybody on them who appeared to be taking any interest in this matter at all.

The Leader of the Liberal Party argued in the Budget debate that it was manifestly unfair that there should be the same tax on a Mini as on a Rolls-Royce. He put forward some tentative figures as to what the tax should be on a Mini and on a Rolls-Royce. I do not go along with him in his conclusion that there ought to be different taxes for different sizes of cars, because I think that would cause considerable difficulty and anomalies for the motor industry. I thought it was quite fair for the Financial Secretary to say, in that same debate, that this differential taxing of cars according to their size was removed at the request of the motor industry soon after the war.

But, whatever conclusions one draws there can be no doubt that the right hon. Gentleman was right in saying that it is manifestly ridiculous that there should be the same flate-rate charge on a Mini as there is on a Rolls-Royce. This is partly because, leaving all else aside, a flat-rate charge of this kind hits at the owners of small cars by comparison with the owners of large ones. The owners of small cars tend to be the less well-off. It hits at the less well-off people, who tend to use their cars rather less, by raising their overhead costs. It hits at those who can only just afford to use their cars and may be on the verge of being forced to give them up altogether.

I cannot believe that that is the kind of policy the Government or hon. Members opposite would support. It is a regressive kind of policy which I would not be prepared to support.

Secondly, it clearly does nothing whatsoever—my hon. Friend the Member for Wellingborough has touched on this—to alleviate the present problems of the United Kingdom car industry, with which we are all more than familiar. In the Budget debate, both the Financial Secretary and the Chancellor of the Exchequer put forward the very pessimistic argument that the British car industry was so sick at the moment that encouraging the demand for small cars would worsen the whole position of this country in the market. I doubt whether that is true. I leave aside the point that one who has been described by the Prime Minister as an "Old Testament prophet" is apparently to rescue the car industry from these difficulties in any event.

Whatever one thinks about the immediate prospects, there can be very little doubt that the structure of our motoring taxation may be one of the reasons why the British motor industry is not doing better in the small car market than it is at present. I do not believe that the situation can be used as an argument for saying that nothing is to be done about this and no adjustment made to the weight of our motoring taxation so that it is further in favour of the small cars. It seems to me to make sense to move further and further in that direction in order to encourage the British motor car industry to improve its performance and its stake in that part of the market.

I noted in particular that the Chancellor said in winding up the Budget debate that loading the whole of the weight of this tax on to petrol, rather than on vehicle excise duty, was the kind of move that might make sense in a year or two. I am open to argument about whether it is sensible to do it now or in a year or two. But it cannot be argued, if it might make sense to move in that direction in a year or two, that it makes any sense at all to be moving in the opposite direction now, which is what the Budget has done.

Whatever else may be said about this aspect of the Government's proposal, it cannot help our motor car industry at a very difficult time in its affairs to add still further to motoring costs. It can only tend to reduce the market for its vehicles when it needs the biggest market that we can provide for it as the basis for reorganising its affairs, expanding its investment and improving its efficiency, which are objectives that we commend on both sides of this House.

My third point relates to energy and import savings. I do not pretend that this tax increase is likely to have a dramatic effect one way or the other in this connection. But it runs directly counter to any sensible policy for saving energy and for decreasing oil imports. It shifts slightly the weight of taxation in favour of high fuel consumption large cars. In economic terms, it increases the fixed cost of running a car in comparison with the marginal cost—that is, mainly the cost of petrol. That cannot be justified in circumstances in which one of our paramount objectives is to reduce the consumption of energy and the amount of oil that we import.

The fourth and most important argument in favour of the amendment is that to which my hon. Friend the Member for Wellingborough devoted the greater part of his speech. It is the effect on the motoring public in general, especially on those who live in our more rural areas.

Increasingly, as we have watched the performance of the present administration, we become aware that one of their shortcomings is that they put monotoring into the category that they describe as luxuries to be attacked by fiscal policies. It is significant that they have tidied up the VAT situation in this Bill by including petrol in the Schedule to this Bill of those items on the 25 per cent. VAT rate. In other words, they have lumped petrol with furs, jewellery, washing machines, hi-fi equipment and other items which in their minds are to be discouraged as needless luxuries that should be taxed heavily. I do not believe in discriminatory tax of that kind. I was in favour of the flat-rate VAT because it was not discriminatory. However, that is another argument which we shall be having later.

Whatever may be argued about washing machines, hi-fi equipment, furs, jewellery and the other items contained in the schedule, the key factor about motoring is that, though it is perhaps a luxury to some people, to many others it is an absolute necessity which puts it into quite a different category and makes the Government's somewhat crude attack on motoring costs a matter which should be reconsidered.

Even in the area in which motoring can be regarded as a luxury, when families trip out into the countryside at weekends or visit mothers-in-law, there is a very important point which should not be overlooked. The growth in mass motoring since the war has been one of the great liberating forces in British society. It has been one of the biggest single elements in raising people's standards of living. Car ownership has made possible the enjoyment of all kinds of activities which as recently as 10 years ago were available only to those in the higher income groups.

4.15 p.m.

I am not prepared to use the word "luxury" about this kind of motoring because it has led to improvements in the living standards of people such as I want to see and which I shall try to assist in any way that I can through my political activities. I am sure that the same goes for most right hon. and hon. Members.

The problems created by what the Government are doing to increase motoring costs by this increased vehicle excise duty have severe effects in the more rural areas such as the one which I represent. In this connection, we are discussing people who have to use their cars. Some of them are older people who will not be able to visit anyone or to do anything unless they have access to their cars. As my hon. Friend the Member for Wellingborough pointed out, and as the hon. Member for Perth and East Perthshire (Mr. Crawford) confirmed, in many parts of the country bus services no longer exist. Often where they still exist, a person can travel to the nearest town on one day of the week but he cannot get back until two days later. Cars are essential to many people living in areas of this kind.

People who live in rural areas but who work in our bigger industrial conurbations have a similar problem. In my constituency, many people live in and around Chelmsford and Braintree and commute to Liverpool Street each day. They have to travel by car to their nearest railway stations. These problems cannot be avoided. They must either cease work, use their cars, or move their homes—which I am sure that the Government would not wish to advocate. These people have to use their cars in order to maintain their existing pattern of life.

Increasingly, it is becoming necessary for families to own two cars. I have gone to live in my constituency, and one of my first actions was to decide that my wife must have a car of her own. We are now a two-car family. It is essential for me to use a car, and I came to the conclusion rapidly that my wife's life would be impossible without a car of her own. It may be that the life of a Member of Parliament is unique because of the odd hours that we work, and so on, but the same is true of many ordinary families where the husband takes the car in the morning and does not return until some time in the evening. Even on housing estates around the larger towns, let alone in the villages, there are fewer shops and amenities. Without a second car, a housewife, especially if she has young children, can be completely stranded because of the absence of public transport.

My hon. Friend the Member for Wellingborough spoke about the problems of shopping. Another important factor is the growing concentration of public services. It is the policy of this administration, as it was to some extent of the previous administration, to concentrate our hospital services. In my constituency, the smaller local hospitals are being closed and are having their facilities reduced, with the result that many people live eight or 10 miles from the nearest hospital. I am strongly opposed to this, but simply state it as a fact. Visiting anyone in hospital becomes an enormous problem without a car. Local government services are concentrated. There are fewer and fewer local offices, and people have to travel from their villages to the towns if they have any queries about rents or rates.

Doctors are concentrating their surgeries. At the same time, they are encouraging their patients to visit them rather than maintaining the old-fashioned practice of the doctor going on his rounds and visiting his patients. Here again, a car is essential for the ordinary day-to-day things of life like seeing one's doctor. The same is true of postal and other public services. There is a steady trend towards concentration. When this is combined with the growing inadequacy of public transport services, the effects are quite severe.

I have referred already to the problems of commuters. But they face a double blow. The Government, regrettably but rightly—it is a policy forced upon them which I could not honestly oppose in terms of national need—are withdrawing subsidies. This is having drastic effects on the fares of those public transport services which still exist. In my constituency, many bus fares have doubled in recent months. There have been huge increases in commuter rail fares, and there are to be further increases later in the year.

Commuters are facing these problems. In addition there is to be this further increase in the motoring costs which are part of their travel-to-work expenses, and this is causing increasing problems and hardship.

I do not pretend that the increase from £25 to £40 in the annual rate of vehicle excise duty is a disastrous addition which turns it from a problem into a catastrophe. What it is—and this should not be allowed to go without being opposed and without comment being made—is one more burden on top of what is already a mounting heap of burdens on the people and the areas we are talking about. Over the past few years they have had a huge, disproportionate increase in their rates arising from the revaluation and the damage that did in rural areas, and a disproportionate increase in house prices, which means that people are facing much larger mortgages than they otherwise would. All the costs of living in the kind of area I am talking about have risen, and this is one further burden.

Equally, I do not pretend that if we were to change this particular proposal it would solve these problems, because I do not think there is any neat answer to these problems in terms of a single, simple fiscal device. I think it was the Financial Secretary who argued during the Budget debate that there was a break-even point. If one assumed that the alternative to this increase was an increase in petrol duty, that increase would be 6p a gallon, and using one's car for 7,500 miles a year at 30 miles a gallon one would be worse off with that increase in petrol than with the present increase in vehicle excise duty. That is a fair point, and I would not dispute the hon. Gentleman's figures. In some sense, I accept the implication, but I do not accept that it is the necessary alternative to putting up vehicle excise duty at the present time. There is no automatic necessity for this to go on motoring costs. There are a number of alternatives which should and could have been considered.

I accept that it would not necessarily help the rural areas to load petrol prices. It would depend entirely on how much individuals used their cars. I have no doubt that in the long term the only sensible course in this field is to do exactly that load petrol duty instead of vehicle excise duty. I would move towards scrapping vehicle excise duty and putting the whole load on petrol over a period of time. But with that, positive and definite measures are needed to deal directly with the kinds of problem I have been talking about. I would not like to see that happen without some of the other things which I intend now to touch upon briefly.

Mr. Nicholas Winterton (Macclesfield)

Is my hon. Friend suggesting to the Committee that the road fund licence should be scrapped for all vehicles, private and commercial, or purely for domestic vehicles?

Mr. Newton

The amendment relates only to ordinary private cars, and that is certainly the point to which I am addressing my remarks. I am not referring to commercial or agricultural vehicles, and so on, but to private cars.

That is what I should like to move to in the long term, because that makes sense in terms of energy saving, import saving, the development of the car industry, and so on. But with it, as I said during the debates in Committee on the last Finance Bill, there would have to be a new look at the problem of tax relief on travel-to-work expenses. This should be taken much more seriously. It has been dismissed time and again over the years but these have now reached a scale at which this ought to be looked at again. Second, we ought to look at the question of concessionary road fund licences for retired people. In the same way as there has been talk about concessionary TV licences, and we already have concessionary vehicle excise duty for the disabled, we ought now to consider the same kind of approach for retired people.

If we were prepared to have a sensible policy with regard to vehicle excise duty and petrol duty, combined with an attempt to tackle the actual problems of the people as individuals who are suffering especially acute hardship as a result of the increase in motoring costs, I believe that over a period we could begin to make some sense in this field. But, for the moment, by not adopting the proposal which the Government have put forward in this Bill, by accepting the amendment to which I am speaking, we could at least avoid making the problem worse than it is at present.

This has been a fairly lengthy speech because I feel that it is an important problem. I will sum up briefly, if only for the benefit of the Minister who is to reply, the four basic points I have been making.

First of all, I do not think that this proposal is socially just, because it shifts the weight of motoring costs against the smaller car and the less well off. Secondly, it makes no industrial sense and will only make life more difficult for a car industry which is already in trouble. Thirdly, it makes no sense in terms of energy saving or import saving. Fourthly, and above all, it gives no sign or sense or impression at all of any kind of co-ordinated transport policy, least of all any policy to deal with the problems of hardship caused by rising transport costs and inadequate public transport services in the rural areas.

I do not say that it would necessarily have been right to raise the price of petrol at this time. What I do say is that it is wrong to move in this direction and that it makes no sense at all of any longer-term policies which the Government may have—and that they would do better to reconsider this proposal.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

I, too, support this amendment. I hope the Committee will forgive me if I have to leave the Chamber shortly, because I have to go to the Committee stage of the Industry Bill where we shall be considering vast sums of money for the British car industry, among others, I think the Government ought to come to terms with the fact that they cannot spend half their time down here hampering the ownership of private cars and the other half upstairs improving the ability of the factories to produce private cars, because the two things do not add up.

I object to the increase in vehicle excise duty on simpler grounds than those put forward by my hon. Friend the Member for Braintree (Mr. Newton). It is simply that I think the discrimination against the private motorist has gone too far. It is no longer logical to regard him as a person of superior means who indulges in a luxurious pursuit. As my hon. Friends have already said, hundreds of thousands of people, millions indeed, depend upon the car for their livelihood and for social and other purposes. Particularly in a constituency such as mine, which is very rural, it is absolutely essential. It shows the stupidity of discriminatory taxation that there is discriminaion always against the private car. That is why I think it is quite wrong continually to increase the tax on motor cars, whether through petrol or through VED.

I am grateful that the Government have accepted what I have said on previous occasions, that they should not put up the petrol tax, but I am disappointed that they have found a way round it by putting up vehicle excise duty. I should have preferred a much higher rate of VAT across the board. I should be quite prepared to see it go well over the 10 per cent. which it was before the Government foolishiy reduced it, in order to pay for a greater equalisation of the burden of taxes. It is quite unlikely to discourage imports of fuel, and I do not think it is the right way to go about solving our balance of trade problems to seek to discourage imports of fuel. All it does is increase the burdens on one particular section of the community, particularly those living in rural areas. Therefore, I do not believe that this is the right way to look at the whole question of private motoring.

It is extraordinary that the forms of public transport which we have are all tending to lose more and more money. The loss on the railways, the Underground in London, and public transport of all sorts, gets greater every year, yet the Government continue to believe that somehow or other the perfect Socialist era will dawn and everybody can be made to go by public transport, and the car will wither away. Restrictions are placed on parking, there are fines on those who use their cars in big cities, there are very heavy taxes on petrol, there are ever-increasing licence duties. But all these enormous imposts on the private car do not result in diminishing private motoring and the population's taking to the buses and trams and Tubes and trains. The reverse happens. Public transport is used less and less and private transport more and more. As a nation we have to come to terms with the fact that people are determined to have motor cars because they represent the most convenient way of going about their business.

4.30 p.m.

It is wrong to continue to discriminate against the private motorist as if he were a selfish and anti-social person. I would like to see a big reduction in motoring taxation accompanied by taxation spread across the board. If I support the amendment it is not because I want to reduce taxation revenue but because I think that the revenue is being unfairly raised by this means. I know of many constituents who are placed in a serious position because of the petrol tax and the vehicle excise duty increase. These are mostly people of slender means who have already been hit in other ways by the Government's actions. This is not only a blow against those who motor for pleasure; it is a blow against country dwellers who are not quite so well off as many town dwellers.

It is a pity that the Government introduced this clause. I do not agree that there should be no vehicle excise duty. If the whole of the taxation was placed on petrol it would encourage people to keep a large number of cars which might be used only two or three times a year. That would mean that such people would not be paying their fair share towards the cost of the road system. I do not believe in the abolition of excise duty but I do believe that the burden on the private motorist has become excessive. The time has come to spread the burden among all sorts of groups of people by ceasing to discriminate against the private motorist. For that reason I will support the amendment if my hon. Friends press it to a Division.

Mr. Winterton

I support the amendment. I will direct my comments to one sector of the community which has been harshly hit by the dramatic rise in excise duty. I refer to the elderly, the retired, those living on the State retirement pension in rural areas that are not well served by public transport. We have heard from one or two of my hon. Friends that many such areas are totally bereft of any public transport and that where there is such transport it turns up perhaps once or twice a week. Elderly people need to get out to buy food, to visit their friends and to carry on some sort of existence.

I am sure that the Minister of State does not want people living in such areas to hibernate because they cannot afford to lead a normal existence. As we have heard in the excellent speech of my hon. Friend the Member for Braintree (Mr. Newton), these people have been harshly hit by inflation. Their interest on any private investment has been restricted by successive Governments—if they are fortunate enough to have some private investment. In recent years they have been hit severely by increased rates.

I remind the Minister that it is the country areas which have been most harshly hit by the dramatic rate rises that have been highlighted in the media and have resulted in militant protests by a section of the community which hitherto has never resorted to this type of public demonstration. Such people have also been affected by the increase in telephone and postal charges. Their whole existence is now in jeopardy. I have had a number of letters from constituents who have said "We shall have to sell our car or lay it up because we can no longer afford to run it." This increase in excise duty is the straw that breaks the camel's back.

The Minister may say that there are few areas where there is no public transport. Perhaps in some of my villages such as Marton, Siddington, Withington, Kettleshulme, Rainow, Wildboarclough and Wincle which have a main road some form of public transport passes through once or twice a week. But I am sure that the hon. Gentleman will be prepared to admit that people often live many miles from main roads. Particularly in the winter, an elderly person does not want to walk four or five miles to a main road, wait for a bus that may or may not arrive and then have to repeat the process at night.

The situation is serious. I regret that my amendment was not called for discussion. The Government have to get more money into the coffers. They have a responsibility to balance the country's accounts although Ministers in the Industry Bill Committee are doing things to upset that in a dramatic fashion. I know that the Minister has some remote villages and homesteads in his constituency. I hope that he will give due attention to the serious problems facing retired and elderly people living on pensions and fixed incomes in remote rural areas who cannot afford to meet extra charges.

I could go on about the problems facing such people in communicating with the outside world. There is the vastly increased cost of renting a television as a result of the Bill. The situation is serious. It is all right for Mr. Scargill to be given a car by his union—and a foreign one at that. No doubt the insurance and the licence are paid for by the union. People living in remote rural areas have to meet their own costs out of a pension which is not keeping pace with inflation.

There are grave problems. Why do the Government not bring in a special road fund licence for retired people? My hon. Friend the Member for Braintree talked about a special rebated television licence for elderly, retired people. Why not have a similar road fund licence for retired persons living in remote rural areas which are inadequately served by public transport? This would help them to lead a normal existence without the anxiety and suffering which they are now experiencing.

The Government claim to represent people and to be concerned about people. How right my hon. Friend was to say that we are talking about people and their everyday problems. Do the Government want this proposal to be the last straw that breaks the camel's back? Does the Minister want to see thousands of people who can no longer afford to live adequately under this Government gathered in the Central Lobby to express their displeasure?

I earnestly ask the Minister of State to give serious consideration to the plight of these people whom it is my privilege to serve. They have served their country for many years. Now that they are retired they cannot demand higher wages. I hope that the Minister will listen well.

Mr. David Mudd (Falmouth and Camborne)

My hon. Friend the Member for Macclesfield (Dr. Winterton) has been relentless in his search for the last tearjerker of an argument. Let me suggest that he has overlooked one argument of logic. If the older members of the community are to lie imprisoned in their cottages in the country, unable to stray forth upon the highways and byways, then similarly the younger members of the community will be so imprisoned. To what will they deploy their energies? The answer is: in one of the few pursuits currently free of excise duty—with the result that the Government will be facing an increased bill for family allowances rather than the cautious, insulting additional £15 a year revenue which they seek to draw from the motoring population.

In a more serious vein, one of the important threads throughout the contributions to this debate so far has been the suggestion that in rural areas it is quite reasonable and acceptable for workers to wait by the roadside for the rural bus to pick them up. However, what about the man who drives the bus or what about the man who drives the early morning train? By definition, he must be alert and awake to provide that form of transport long before it is available for other members of the public. What will happen to the bus driver who lives in a remote rural area? Is he to sleep at his depôt, or is he, in some way, to be assisted to get to work to provide public transport? Indeed, what will happen to the diesel locomotive driver? Is he to subsidise a public service out of his own pocket, because that would seem to be implied by this proposal in the Bill?

I want to refer specifically to the problems of my own constituency, which are shared by the constituents of my hon. Friend the Member for St. Ives (Mr. Nott). The tin miners, the shipyard workers and the fishermen without exception have lived within the terms of the social contract and have in no way attempted to extort, exploit or extend it to suit their particular needs, yet the economy of Cornwall depends on the tin miners, the shipyard workers and the fishermen. These are the industries that depend upon the most unsocial hours of working—hours that cannot be laid down by the clock and hours that are dependent upon the call of nature.

My hon. Friend the Member for St. Ives will recall that in happier days, when he occupied office, I drew his attention to the case of a gentleman who was a casual harbour-worker in the port of Hayle. Not benefiting from the much-maligned tied cottage, he had to live ten miles from his place of work but he could go to work only when the tide happened to be right. Despite his grandiose schemes, the Secretary of State for Industry may control many things but he will not control the flow of the tides in our ports and he cannot, therefore, seek to control the time at which port employees must go to work.

At that time I suggested that some form of tax allowance must be made available to those people who had no form of public transport and yet who had to get to work at times totally outside those when public transport was running. The point was fairly made that it was improper for the Treasury to seek to discriminate in favour of this group of people. Yet now, under a Labour administration, we have the situation in which the Treasury is seeking to discriminate against this class of worker. This will certainly not be overlooked or forgotten in Cornwall, where people face these problems.

My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) made a very interesting case for the reduction of taxation. Clearly, in these troubled, expensive and inflationary times, a reduction in expenditure or taxation cannot be a reality. Therefore, may I conclude by suggesting to the Minister that if, indeed, this is merely a measure to increase revenue and not a discretionary measure against rural dwellers, he can increase his revenue by the simple expedient of introducing a tax rate of 95 per cent. on all those who gain settlements outside the terms of the social contract.

4.45 p.m.

Mr. Hector Monro (Dumfries)

I should like to support the vehement protest made by my hon. Friend the Member for Braintree (Mr. Newton) and other of my hon. Friends about this huge increase in vehicle taxation.

Drivers are already hit hard by petrol taxation, and insurance costs are rising, too, due to the inflation that is affecting the repair industry as well as everything else. Now we have the steep rise in the car tax. My hon. Friend has explained how this additional tax could be raised in other ways, for example by a 10 per cent. VAT across the board or, indeed, by adjusting the Government's priorities in their vast expenditure in other spheres.

I want to speak, briefly, of the impact that this increase will have on rural communities. I support what my hon. Friends the Members for Macclesfield (Mr. Winterton) and for St. Ives (Mr. Nott) have said. I want to bring home to the Minister just what it means to those who live five, ten, 15 miles and more away from shopping centres—the great expense involved in going to shop for normal household articles, for recreation and, perhaps, even more important, in getting to and from work.

I do not know whether the Minister appreciates just what it costs to travel by car ten or 15 miles twice a day, to and from work. This has a dramatic impact when it comes to wage negotiations. I support my hon. Friends in their condemnation of this increase in taxation in relation to those on fixed incomes, pensioners and young people. Young people are entitled to get away from home and the countryside to meet their friends at dances and so on. They are feeling the impact of this high taxation imposed through the motor car licence. This also applies to those families who take their children to and from school each day.

We have all made it clear that frequently there is no alternative. Bus services are sparse and timings singularly inconvenient. Post Office buses are welcome but they are not the answer to the problem. The Scottish bus group has just weighed in with another whopping loss which gives every indication that there will be a further reduction in bus services, making the use of cars all the more important. Yet the Government are bringing in increased taxation. We already know that local authorities are subsidising bus services to the hilt. Rates are increasing more and more and local authorities are becoming reluctant to go any further.

We welcome the indications that there will be concessionary bus fares to pensioners for nearly every area. However, this increase in support by local authorities is bound to become harder and harder, forcing people back to using motor transport which, if it were at a reasonable price, they would much prefer to do. The point that so many hon. Members are making is that the rural dweller must count on private transport to get about. Why is it that the Chancellor is putting this unfair burden on the countryside as opposed to the urban and city dwellers, who have so many facilities at their finger tips? With these few words, I hope that the Minister will accept that he is being most unfair to the countryside. The burden he is placing on it is absolutely penal and in no way helps to raise the standard of life of this country to the level which we are all striving to attain.

Mr. Peter Rees (Dover and Deal)

I should like to refer to the points made with such eloquence by my hon. Friends the Members for Dumfries (Mr. Monro) and for Macclesfield (Mr. Winterton).

I appreciate the Government's need to raise additional revenue to cover their mounting expenditure. We shall have to return to that subject not only in Committee but also, I suspect, in other ways in a matter of months if not weeks. I appreciate the Government's anxiety about and intention to cut the oil deficit and therefore to concentrate, as far as they can, the burden of taxation on motoring. I also appreciate that it must have been a difficult decision whether to raise, once again, the duty on petrol or whether to raise, as they now propose, the duty on the road fund licence. However, wonder—and I shall be listening with keen interest to what the Minister says in reply—whether the Minister appreciates the effect that this will have on country districts.

It would be crude to the point of distortion to say that Conservative Members represent country districts and Labour Members represent urban districts. I know that a small portion of the Minister's constituency is a rural area and, therefore, he may have seen at first hand the change that has come over country life during the past decade or two. I instance, as have my hon. Friends, the diminution to almost vanishing point of the country bus services. Many villages in East Kent are no longer served by a regular bus service. Coupled with that, the village shop in some small villages is almost a thing of the past. Many of my constituents are worried about the difficulties that they are encountering and will encounter, for instance, in obtaining prescriptions. It is no answer to say that the doctor can dispense them. This does not meet the case universally.

Therefore, there are three categories of country resident, if I may so describe them, who will be particularly hard hit. There are those who live in the country and work in towns. Their case has been put very eloquently and movingly by some of my hon. Friends. However, I should like to concentrate on two other categories, the retired and those who work on the land.

Probably both of these categories need to use their cars daily. Some may but many do not. Many may live by their place of work. They leave their wives at home. Possibly their wives do not even have a driving licence. It happens, therefore, that on Saturdays they will have to drive into the local market town—perhaps Canterbury, Sandwich, Deal or Dover—to take in their wife and do the week's shopping.

Here I would anticipate what we may have to tell the Minister in subsequent debates. Such people do their shopping once a week and want to take it home and put it in a refrigerator or a deep freeze, which are no longer luxuries in country districts but necessities, and these, too, the Minister will hit with his proposals. It follows from that, perhaps, that they may take out their car only on two days a week. Therefore, by these proposals they are being asked to bear, as I conceive it, a quite disproportionate burden—a burden which is hardly felt to the same degree by urban dwellers.

I know that the Minister would not want the country to feel that he and his administration were insensitive to the needs of these people. Therefore, I hope that when he replies to the debate he will show a little imagination and a little flexibility and see whether, even at this late stage, he cannot recast this new tax proposal.

Mr. John Pardoe (Cornwall, North)

It looks as though the Committee will be unduly privileged in this debate by having three Cornish Members taking part. That is entirely proper, because petrol taxes and vehicles taxes affect Cornwall more than any other county. Cornwall has the highest incidence of car ownership of any county. That is not an indication of our wealth and luxurious living but merely that there "ain't no other way" of going about the county.

Our rural transport is more or less nonexistent. It is certainly substantially worse than it was in grandmother's time, and very much worse than it was in great grandmother's time. It is also appropriate that three Cornish Members should take part in the debate, because no doubt Cornwall will have a direct interest in oil and energy shortly when it is discovered in enormous quantities in the Western Approaches—when no doubt we shall come together with Brittany and set up an energy department of our own. Perhaps the hon. Member for St. Ives (Mr. Nott) will be its president.

This is not a proposal to increase the borrowing requirement. I am sure that we shall hear that old chestnut—stewed or roasted. The Government are quite right to want to increase the revenue to meet necessary expenditure. It would be even more right to want to cut expenditure as well. They will, therefore, have to find revenue from some other source. I do not dissent from that proposition at all, and I would support the Government in looking for other sources.

My hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) interestingly ended his speech by making an appeal to the Government to bring in a very severe tax—I think he suggested 95 per cent.—on those who break the social contract. I am delighted to hear that he has been converted to what I and my right hon. and hon. Friends have been advocating for some time. But there is a certain difficulty here. In the debate on the Budget Resolutions and Economic Situation, the hon. Member for St. Ives, who is in the constituency next door, took apart the Liberal proposal to tax increased wages. His remarks are reported at column 1103 of the Official Report for 21st April. I would refer the hon. Member for Falmouth and Camborne—as I do not intend to put forward the reasons why our proposal is impractical; I still think that it is, whatever the hon. Member for St. Ives said—to what was said by his hon. Friend about this matter. He will then know the arguments against our proposal.

There is a serious problem in the rural areas. This problem has been occasioned as a result of the increase in the cost of energy and motoring generally. We have heard in this debate from many hon. Members about the very considerable hardship which people in rural areas are suffering. I do not dissent from that description. I fully support the descriptions that have been put forward. We have very little public transport. What we have will be reduced as a result of the quite correct squeeze on local councils' expenditure. One of the first things that will go will be subsidies to rural transport.

In Cornwall and many other rural areas the car is not a luxury. It is not even a luxury leaving aside its use for getting to work. In large parts of my constituency, and probably in those of other Cornish Members and other rural areas, the car is the only means of getting to work. We must take account of the very severe disincentive effect which higher and higher motoring costs impose in such areas. It is on this argument that I base my plea to the Government. I am continually confronted with a situation in which if one takes into account the motoring costs of getting to work, one finds that for many constituents it would clearly be more advantageous economically to stay at home. That is not simply because Cornwall is a very low-wage area. It is partly because of that but also partly because people have to drive very considerable distances to get to work. Work is scarce. Jobs are few and far between. Everyone has to have a car to reach their work because no public transport is available.

Having said that, and having urged the Government to consider the point about the incentive as the most important point in the argument—although, I accept all that has been said about hardship—I come to a further matter. Such is the way in which we run our welfare services and our unemployment benefits—although I do not necessarily argue against that—that in 1974 we reached a situation in which a married man with two children with an income of less than £55.50 a week—leaving aside the costs of motoring now, and anywhere in the country—was better off staying at home than he was going to work. But £55.50 was very much above average earnings in 1974. Therefore, we are not talking merely about people in Cornwall or those right at the bottom of the pay scale. We are talking about a vast area of the population. If one adds to that the marginal costs of getting to work, one can appreciate that the disincentive effect is very great indeed.

Nevertheless, I accept that the Government are having a careful look at this matter. I have had a letter from the Financial Secretary to the Treasury, dated 10th March, in which he said, We are urgently exploring a number of ways in which help might be given and I hope these investigations will result in specific proposals to meet the very real difficulties. That was in answer to a letter of mine about the problems of transport in rural areas. I hope that we shall hear something from the Minister of State today along those lines, or at least, I hope that he will be able to indicate when we shall be hearing the results of the Government's thought processes.

My second point, on which I am entirely in agreement with the Government, concerns the question of energy conservation. I accept that almost inevitably this must be achieved by price, because the only other way of doing it would probably involve us in a great deal of bureaucracy or rationing, and it is very difficult to think of any better way of doing it. I have no love of bureaucracy or rationing. I accept, too, that although petrol is a small part of the total, nevertheless it is worth having a go at it. I again quote from the Financial Secretary's letter of 10th March. He said, Our imports of petrol and of crude oil for refining into petrol cost us about £500 million a year, and it is believed that about 60 per cent. of petrol is purchased by the private motorist. I accept the energy conservation point. However, in the debate on the Budget Resolutions my right hon. Friend the Leader of the Liberal Party challenged the Chancellor on our tentative proposal—it was only tentative—that there should be at least a two-tier VED and that there should be one rate for a Mini and another for a Rolls-Royce. On that occasion, the Chancellor said that the output figures were there for all to see. He said: It might make sense to make a change along the lines suggested in a year or two, but not at a time when we know the British car industry is incapable of meeting the demand for small cars which would result"—[Official Report, 21st April 1975; Vol. 890, c. 1114.] I wrote to the Chancellor immediately after that debate, challenging him to produce the output figures on which he based that assertion. I am grateful for the reply that he sent me, although he did not give me the figures I requested. Instead, he gave me a wider generalised view of the situation. I accept, to a certain extent, that the British car industry is in such a sorry state and is so under-invested in production of the cars which we seem to need in this situation that it is in no shape to compete.

5.0 p.m.

The right hon. Gentleman said in his letter to me of 15th May: even in the range from one litre to, say, 1300 c.c. there are some attractive new models recently introduced by, for example, Volkewagen and Peugeot, which would compete very strongly with the Viva and the Escort. I accept, therefore, that the Government have a point on the question of car production in Britain at the moment, but I think we should delve behind the Chancellor's figures and consider why this situation has arisen and whether the structure of our taxation has not encouraged that situation.

I do not say that there is a definite answer one way or the other, but the available evidence seems to indicate that the differential car tax in France has had one very salutary effect on the French motor industry, namely that it has encouraged the manufacturers there to maximise the efficiency of their engines up to the limit. It may well be for that reason that the most recent survey by the AA, published in "Drive" magazine shows that, of all motor cars, Renaults are by far the most economical more economical than our cars in every range and more economical than other European cars. For instance, Renaults in general cost about 3.5p per mile to run whereas the Mini costs about 3.81p per mile. I will not go into detail on those figures because any hon. Member who is interested can study them in "Drive".

It seems therefore that there may well be an argument, even at this stage, when the British motor industry cannot entirely cope and compete, for introducing a two-tier tax. It might well encourage our motor manufacturers to do what the French have done, to maximise the efficiency of their engines.

Mr. A. J. Beith (Berwick-upon-Tweed)

Does my hon. Friend not agree that unless the Chancellor indicates some intention of moving in this direction, even if he does not do so this year, none of the developments that my hon. Friend is seeking is likely to take place, and the British motor industry is likely to continue along the lines he has criticised?

Mr. Pardoe

I am grateful to my hon. Friend for summarising so well the point I was endeavouring to make. He has outlined the reason for the Government reconsidering their attitude to the two-tier structure, even though they may be right to resist the idea on the basis of current production figures.

If they intended to think again, they should take account of rather more than simple engine capacity. That is, perhaps, too simple a basis. They should take account of the weight of a car, because basically lighter cars require less energy to produce and use less energy in running. They should certainly take account of vehicles which consume more petrol and which have higher servicing costs. Any type of car which reduces the total use of energy should be favourably considered. I understand that a hybrid car is coming on to the market, based on the Imp, which does about 130 miles per gallon.

There is a strong case for a standard Government test to show the energy consumed in constructing a car, the energy required to run it and the energy required to service it. It may be proved that the Mini is not a very good bet, but we should have to accept that fact and the new nationalised BLMC would have to do something about it.

There are other solutions which the Government should consider. There is the suggestion of a special road fund licence for the retired. I know the splendid headlines that my support for that suggestion would secure in my local newspapers, but I dissent from that suggestion because once started there would be no end to the process. It would be far better to provide old-age pensioners and elderly people with the money necessary to maintain a certain standard of living, leaving them to choose how they spent it. That would be preferable to subsidising cinema seats, car seats, walking sticks or whatever.

Mr. Newton

What does the hon. Member think of the existing concessionary fares schemes? Does he carry the logic of his argument so far as to want to scrap them?

Mr. Pardoe

For a very long time concessionary fares schemes were operated only in those places where the local authorities owned the bus service. After the Transport Act 1968 it was open to local authorities to make an arrangement with the bus companies to give concessionary fares. I undertook a detailed exercise with the local bus company and my local authority and worked out a scheme, but the authority would not pay for it. I think that the hon. Member for Braintree will find that these schemes involve great unfairness. Those authorities which are poor and which are up against heavy rates resistance are unable to subsidise such a scheme, whereas, perhaps, other authorities, which can afford to do so, but in whose area a scheme is less necessary, will operate concessionary fares. If there is to be such a scheme, it should be operated nationally. Even with concessionary fares, it is far better to increase the pension and let the pensioners choose how they want to spend the money.

Another possibility is to have a special licence for rural areas. The idea is possible, but the Government may think it too bureaucratic, and it would be for them to say how they could cope with it. It is possible to have a special price for petrol in rural areas. I moved an amendment in Committee on the last Finance Bill to that effect. I am not now particularly endeared to the idea. The hon. Member for Cirencester and Tewkeslnry (Mr. Ridley) pointed out the error of my ways, and I am grateful to him for that. On the whole, he persuaded me more than I persuaded myself. Hon. Members cannot say I am not honest.

A further possibility is some kind of get-to-work grant. That would be less bureaucratic than the other suggestions I have made, and it might be done within the context of the regional employment premium so that a tax-free allowance could be given to people who travelled more than 15 miles, or whatever, to work.

Of course, one might ask why subsidise rural areas at all. I do not like subsidising, but London is heavily subsidised. I believe that £53 million is being paid to London Transport and that substantially more goes to British Rail to subsidise the commuter rail service. London needs such subsidies a lot less than Cornwall.

Finally, the Government could consider an across-the-board tax concession to help pay for getting to work, as is done in Germany. The Inland Revenue will say that this is impossible to do, but it is done in West Germany, and it seems to me the best answer to the problem.

[SIR MYER GALPERN in the Chair.]

Mr. Ian Lloyd (Havant and Waterloo)

The hon. Member for Cornwall, North (Mr. Pardoe) is for me so often the living embodiment of the curate's egg. I find myself agreeing in parts with what he has to say, and sometimes agreeing to a great extent. I do so on this occasion, and principally with his comments about the possibility of discriminatory allocations of the burden as between pensioners and the rest of the community.

Mr. Ridley

My hon. Friend is being less than fair to the hon. Member for Cornwall, North (Mr. Pardoe). At least the hon. Gentleman is able to persuade part of his own party to listen to him.

Mr. Lloyd

I do not accept that qualification as regards myself.

I have two or three important points to make which arise from the debate. The essence of the problem has been intelligently discussed between those who advocate, in a sense, support for the Government's measure of increasing the vehicle excise tax and those who suggest that a similar amount of taxation might have been raised more sensibly, and with a greater respect for the various methods of taxation, by increasing the tax on petrol.

Within the discussion that has taken place I have detected a certain lack of attention for something which I believe more fundamental and more important. There is an important relationship of growing significance between the standard of living and the cost of energy. I do not think that it is now possible for great countries or for large communities, and certainly large communities within modern industrialised countries which are heavily energy dependent on petroleum fuels, to refuse to make basic adjustments in their economic relationships when there is a basic adjustment in the relationship between the cost of energy and the standard of living. There is no magic wand which a Conservative Government, a Labour Government or a Liberal Government can take out of their knapsack and wave to exempt the community as a whole from the unfortunate consequences.

Adjustments must be made and they must be accepted. The United Kingdom as a whole, if it is facing an increase in the real cost of petroleum fuels, must in some way distribute the increase in that real cost over the whole of the community. If there are no alternative resources, that must mean that the real standard of living of the community must fall. There is no escape from that conclusion.

If some significant sectors of the community are exempted by fiscal or other processes—I do not dispute that exemption is possible, and it may be desirable—to what extent must the remaining sectors of society accept a greatly increased burden? This is the point that we do not want to make. This is the point which we are inclined to ignore and to shuffle under the benches on either side of the Committee. We must ask the questions "Which sections, how much and what are the consequences?" Those are very much more difficult questions to answer.

The load that can be carried by the productive sections of the community is not unlimited. There is the assumption underlying so many desirable shifts in the burden, such as pensioners having subsidised petrol or subsidised television and other sections of the community living in rural areas having subsidised petrol, that subsidies can be given without any significant or serious economic consequences for the rest of the community. That I dispute absolutely and profoundly. If we allow ourselves to make that assumption we are likely to find that there are serious consequences.

5.15 p.m.

We live in a mass consumption society. All this talk about large motor cars shows what a long way we have gone. We can no longer finance the fiscal burdens of the British community by taxing the man who owns a Rolls-Royce. That situation disappeared about 50 years ago, but it is a concept which still tends to underly much of our present fiscal thinking. If the nation has to face mass adjustment and significant adjustment in its economic relationships as a result of such things as the massive increase in the price of petrol communities as large as the pensioners—I remind the House that the pensioners number 9 million and that the motoring population represents 19 million vehicles—cannot by any process of the imagination, or by fiscal sleight of hand, be exempted from the necessity of accepting and making the necessary adjustments in their relationships which fundamental cost changes require.

Mr. John Nott (St. Ives)

I think that the Committee will agree that this has not been a particularly exciting debate. Nevertheless, it has covered a subject of great importance to many people, and especially to those living in rural areas. I believe that my hon. Friends the Members for Wellingborough (Mr. Fry) and Braintree (Mr. Newton) made a most powerful case. It seems worth recording, at the outset that it is only two months ago that we were debating the last major increase imposed on the private motorist by this Government—namely, the massive increase in the VAT rate on petrol which took it up to 25 per cent. Today we are debating the 60 per cent. increase on vehicle excise duty from £25 to £40 a year.

As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has said, we feel that the discrimination against the private motorist—many private motorists are essential users of their motor cars—has gone too far. Of course, we associate all Labour Governments with high taxation coupled with profligate expenditure by themselves. However, the combination of the higher cost of imported oil, which is certainly not the fault of the Government, plus the greatly increased taxation has undoubtedly caused an increasing degree of concern, bordering on desperation, in many parts of the country.

My hon. Friend the Member for Macclesfield (Mr. Winterton) listed many of the villages in his constituency. Some of them have admirable names. All Members who represent rural constituencies could compete with my hon. Friend's list by giving most of the polling stations in their constituencies. My hon. Friend made the important and serious point that it is particularly the elderly in the villages who are suffering from the increase in petrol costs and who will now suffer even more by the increase in the vehicle excise duty. That point was also made by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees).

My hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) told us something about the youth in his constituency. He referred to the only youthful pursuit which he said is still untaxed in West Cornwall. It is untaxed everywhere. I am glad to say that it is untaxed even in London. I can bear witness, if not personal witness, to my hon. Friend's testimony about West Cornwall. As my hon. Friend knows, the ancient borough of Helston, which is a very ancient borough indeed, borders our constituencies, although the actual town is in my constituency. For several years it had the highest birth rate in the United Kingdom, it still comes very near the top of the list. That is not wholly to do with the expense of evening travelling in West Cornwall; it is also something to do with the presence of the Royal Navy air station at Culdrose just outside the boundaries of the borough. It may also be the Cornish cream which keeps us all going. Treasury Ministers should remember that if young people cannot travel to local events such as darts matches and dances in the evenings there will be a heavy future impact on family allowances.

My hon. Friend the Member for Falmouth and Camborne made the serious point that the people working in this area of high unemployment have been keeping to the social contract and have settled for reasonable amounts in their negotiations with their employers. Those are the very people in the rural areas who will be particularly hard hit by this increase.

The hon. Member for Cornwall, North (Mr. Pardoe) said that Cornwall has one of the highest car-owning populations in the country, which is true. The statistics on incomes are extremely poor and hardly exist, but the figures produced by the Inland Revenue show that Cornwall also has possibly the lowest income per head of any county in the United Kingdom. So Cornwall has a high car-owning population and is an extremely low income area.

As the hon. Member for Cornwall, North said, this shows that a car is an absolute essential for people to get to work because there are virtually no bus services and no train services. Most of my constituents living in the Land's End area and the Lizard and people living in North Cornwall have to have a car—they have no choice. My hon. Friend the Member for Falmouth and Camborne also made the valid point that in this low income area the increased burden upon people for whom a motor car is essential is such that there is a diminishing incentive for them to go to work. That is a worrying and serious development.

Mr. Crawford

The hon. Gentleman said that Cornwall was the lowest income area in the United Kingdom. Would he care to rephrase his remark? It is perhaps the lowest income area in England.

Mr. Nott

I am slightly tempted to be diverted. I took the Inland Revenue statistics which break down the employment incomes in England and Scotland into counties. There are one or two Highland counties in Scotland which have a lower employment income than does Cornwall. To be strictly accurate, I will accept the hon. Gentleman's correction.

Mr. Pardoe

Perhaps the best figures are those published for manual workers aged 21 and over giving average weekly earnings. Of the 63 sub-divisions according to the Department of Employment the western area of Cornwall, in which lie his constituency and the southern part of mine, shows the lowest figures apart from Roxburgh, Selkirk and Peebles.

Mr. Nott

I am grateful for the hon. Gentleman's support, particularly when it gives me assistance against the Scottish National Party.

My hon. Friend the Member for Cirencester and Tewkesbury spared a few moments from his labours upstairs on the Industry Bill to point out to the Committee that the Government are busy taxing the motor car downstairs and pouring money into the motor industry and other industries upstairs. He did not think that this was very logical, and I agree.

My hon. Friend the Member for Braintree made some general remarks about the motor car industry, and it is worth referring briefly to the history of purchase tax and VAT. In 1962 purchase tax on motor vehicles was 25 per cent. By the time the previous Labour Government left office it had risen to 36⅔ per cent. During the Conservative Government's period of office it was brought down to 20 per cent.

I wish now to make clear the attitude of the official Opposition on the general principle. We are appalled at the escalation of public spending. Almost every day the Government come forward with new measures which make the Chancellor's forecast last month of a £9 billion borrowing requirement seem like a piece of ancient history. Because the Government are unable to control their own spending, with the serious effect that has upon inflation, we do not accept that Treasury Ministers are entitled to expect our support for more and more taxation upon some of the most vulnerable sections of the community.

The answer to the Government's dilemma does not lie in heavier and heavier taxation but in less profligate spending by themselves. We reject the argument that each and every positive proposal that the Opposition put forward to help and protect the most vulnerable sections of the community is unacceptable to the Government because it increases their borrowing requirement. If that argument were accepted by the House generally there would be virtually no sanction upon the degree to which the Government felt themselves to be entitled to impose ever-increasing taxation upon the British people.

When inflation is running at a very high level, we accept in principle that the Chancellor will need to raise excise duties at certain times to maintain his revenue. The excise duty on vehicles has not been raised since 1968, but I suggest that no Chancellor should raise excise duties without studying carefully all the associated increases in costs which affect the particular sector of the economy on which he is attempting to levy additional tax. The increased taxes on essential motoring within the past 12 months have been exceptional.

In case there is doubt about the official Opposition's attitude, I make clear that we would have preferred the rate of VAT to be held at 10 per cent. rather than reduced to 8 per cent. with a higher rate of 25 per cent. By our calculations, had the Chancellor retained the 10 per cent. rate of VAT it would have provided more than sufficient revenue to keep the vehicle excise duty at £25 a year.

Since the Government came to office the total tax on petrol has risen from 22½p per gallon to 37p per gallon—an increase of 65 per cent. It now represents more than half the retail price of petrol. By this clause the vehicle excise duty is raised at one jump by 60 per cent. Each of those increases is more than double the rate of inflation during the same period. According to the calculations of the Automobile Association it now costs £19 a week to keep a car on the road against £11 a week in 1973. That is an increase of 72 per cent. during the past two or three years. I found that figure difficult to believe. It seemed so high that I tried to check it for myself. The only way I could do so was with the aid of the Family Expenditure Survey but that is out of date because it refers only to 1973 incomes. The 1973 figures show that the average expenditure of someone earning roughly the national average weekly wage was about £4.30 per week. That figure, worked through to actual car owners as opposed to the average, is not so different from the £11 a week produced by the Automobile Association.

When the Chancellor has information put in front of him before a Budget on the effect of measures of this sort he has to have regard to the fact that the public Expenditure Survey is an extremely blunt instrument. It gives an average figure and takes no account of the devastating effects which measures of this sort have upon those who actually own cars.

I ask the Government to understand what this means in rural areas. Many of my hon. Friends have given examples. I could give hundreds of examples from my constituency file but I will mention just two. One letter, which is dated 15th January says: I am employed by the Western National Omnibus Company at their depot in Penzance. That is the nationalised bus undertaking in the West country. When on early or late shift I have to use my car to and from work as there are no public transport vehicles so early or so late. With my basic pay of £23 per week less tax, insurance and so on, and a further average of £4 for petrol per week, I find that I would be just as well off by being on the dole. That point was made by the hon. Member for Cornwall, North.

The letter was from a typical member of my constituency taking home £23 per week. According to the AA figures, in which vehicle depreciation is taken into account, it costs approaching £20 a week to keep a car on the road.

5.30 p.m.

I take another example. This note concerns seven scattered families living one side of a little village near Lands End called New Mill. I refer to the case of a Miss S. and her neighbour. The note reads: There is only one small bus which runs from Zeunor to Penzance once a week on Thursday. It is therefore usually very overcrowded.… As there are virtually no shops in the area I have to come in and do my shopping taking this once a week bus service. A Mr. Z. a grocer, does come out with groceries, if I telephone him, but he can come out only once a week. The vicar used to help bring in the papers from St. Ives but he has been ill for some time and is not likely to be able to help with them again. So, no papers. She continues, The butcher used to call twice a week but he has just informed the residents that he will not be calling after the end of this month. So, no butcher either.

I do not want to elaborate on this. All hon. Members representing rural constituencies can give such examples. This is a worrying aspect of life in rural areas. I shall not fatigue the Committee with more examples, but they are numerous.

I shall pass over the point made by my hon. Friend the Member for Braintree and others about energy saving. We debated that matter on 3rd March. The Paymaster-General said that the results from energy saving with the additional increases in taxation are very slight. The Government accepted that point. We recognise that the Government must raise their revenue but in our view it should have been raised in other ways. Since the energy saving is very slight we feel that the Government should reconsider this increase once again.

I now summarise the arguments which have been advanced. In this I echo the words of my hon. Friend the Member for Braintree and my hon. Friend the Member for Wellingborough by saying that the Opposition oppose the increase, first because of its size. This is a sudden jump of 60 per cent. coming after a roughly similar jump in the tax on petrol within the past year. Secondly, we object to it because of its discriminatory nature and the way in which it bears extremely hardly on people in rural communities, who normally have low incomes, and who, since they are working people, are essential users. Thirdly, we object because of the hardship which it will cause to the elderly.

Last, we object because of its marginal effect on energy saving. I have raised this matter over many months with the Government. In my file I have a host of letters from Ministers in the Department of Energy indicating that something is being done and that the matter is under consideration, and that the Government will be coming forward with proposals. But nothing has happened. Between the time we were assured that the Government were conscious of the problems, which were described in the debate, and the making of an announcement as to how the Government intended to tackle this problem, the Chancellor came along with yet another impost. I refer to the 60 per cent. increase in vehicle excise duty. We must be led to believe that the Government do not understand the problems which we are discussing in spite of the letters I have received from Ministers in the Department of the Environment and the Department of Energy.

On the assumption that the Government are unable to accept the principle underlying this amendment, I therefore ask my right hon. and hon. Friends to support the amendment in the Division Lobby when the Minister of State has concluded his remarks.

The Minister of State, Treasury (Mr. Robert Sheldon)

This has been an amiable interlude in our debates because to me one of the main interests has been that of Cornishmen swapping their tales, and hearing about their splendid villages, which I know very well from holidays, and which I shall know again within the next week or so. I could not help anticipating with pleasure the little time that I shall take off from the House.

The hon. Member for St. Ives (Mr. Nott) made a number of points with which I hope to deal in my remarks.

First, I should like to comment on the Amendment No. 4, which was moved by the hon. Member for Wellingborough (Mr. Fry). The purpose of this is to leave the rates of vehicle excise duty on cars at their pre-Budget level. If we were to accept the amendment, the cost to the revenue would be £209 million in a full year. Bearing in mind that the excise duty on cars comes to about three-quarters of the total yield, the cost this year would be £190 million.

Considerable interest was shown as to the effect of this increase on rural areas. The hon. Member for Macclesfield (Mr. Winterton) started off with a long and moderate speech on these matters. He was followed by the hon. Member for Braintree (Mr. Newton). Although the impact on rural areas is bound to be considerable, some hon. Members made the case for the rural areas on the grounds that those people had a great deal of mileage to cover overall or that their cars were used for extensive journeys, while others held that cars were of great necessity in rural areas.

As regards the extensive car users and the increase in the vehicle excise duty, a car giving 30 miles per gallon—which is not an unreasonable estimate—would have to do less than 7,500 miles a year to compensate for the increased petrol duty, which was the other alternative offered by many hon. Members. The petrol price has risen considerably. If we were further to add to that considerable increase the total would be too high. The hon. Member for St. Ives said that the tax now represents over half the price of petrol. He was right to say that. But before September 1973 it amounted to more than 60 per cent. of the price. I accept that the price of petrol has increased and that the tax has increasd, but, expressed as a proportion, the tax has not increased as much as is generally believed. It is important that there should be a balance between the amount that will be raised from those who use their cars moderately and from those who do a considerable mileage.

In the years up to 1948 there was always a differential vehicle excise duty. That was changed from 1948 to the single rate of vehicle excise duty to which we have become accustomed. Therefore, from 1st January 1910 right up to the end of 1947 there was this differential duty which bore heavily on the constraints of design which were a particular feature of the pre-war British motor car industry, despite the arguments adduced by the hon. Member for Cornwall, North (Mr. Pardoe), I do not think that anyone would wish to see those constraints again. They distorted the motor industry and prevented its considerable expansion—perhaps world-wide expansion—to become the greatest industry in the world. It might have been possible in pre-war years but a design radically different from that re- quired for export had to be produced for the home market. The lesson was learned, and the situation was corrected, but, in my view, it was corrected too late.

The main pressure on economy of use in motor car design will come from those individuals running cars who look for low levels of petrol consumption. Anything that hon. Members here or people outside can say that will bring to light the comparative use of petrol in various cars will help in this direction.

Dr. Alan Glyn (Windsor and Maidenhead)

I have been following the hon. Gentleman's argument with great care. I think that his analysis is correct on the question of how many miles a person does in a year and whether the tax on petrol or the revenue tax hits him more. Does the hon. Gentleman agree that under the present arrangements the persons who are badly hit are those who do small mileages, the sick and the old, and those who live in rural areas and are obliged to have cars, because their overheads are very heavy?

Mr. Sheldon

I agree with the hon. Gentleman. I doubt whether that is peculiar to rural areas, but the problem can be exacerbated. Indeed, in my constituency some people have great difficulty in going half a mile to shopping areas. That presents problems to them. I shall be dealing with some of these matters in greater detail.

I am concerned about the point made by the hon. Member for Macclesfield and others regarding the necessity of distinguishing and differentiating between classes of users. I am sure that the hon. Member for Windsor and Maidenhead (Dr. Glyn) also had that point in mind. The difficulty arises on both differentiation and definition.

I will deal first with the definition problems. If we were to consider the areas not served by public transport, we would have an immense task, because public transport is absent not only from rural areas, but from many other parts of the country. The deficiencies of public transport are known by many hon. Members who press the various authorities concerned about the problem.

Some people need cars for reasons of health and family circumstances, apart from distances to shops. Their purposes are no less valid than others which have been mentioned today. If we were to try to cover the problems of definition and differentiation, we would be faced with an administrative problem incapable of being solved.

The difficulty of operation of any form of differentiation is that the vehicle excise duty is provided for the keeper, not the owner, of the vehicle. That is the important aspect. Being provided for the keeper, not the owner, there would be the easy and ready possibility of the transfer of vehicles. It would be difficult to prevent abuse of that kind taking place.

I accept that in practice it is impossible to legislate for the wide variety of circumstances defining how far from public transport one would have to be. It would end with the natural and, in these circumstances, justifiable grievance that those requiring to shop in towns, perhaps living not in a rural area, but in an area where there were no shops on their doorsteps, would find themselves disadvantaged by not being able to benefit from this concession.

5.45 p.m.

Up to the year 1968 the vehicle excise duty was an integral part of the revenue derived from the motor car industry. At that time the vehicle excise duty stood at £25. Since then prices have risen by 80 per cent. By comparison the vehicle excise duty has increased by 60 per cent. We estimate that this rise of £15 a year will increase the costs of motoring by 2 or 3 per cent. only.

When we consider the present economic situation and the need, quite justifiably, to reduce the public sector borrowing requirement—I take on board the point made by the hon. Member for St. Ives—it is only right that the motor car should play its part in the raising of these sums of money.

The hon. Member for St. Ives gave us his principle in attacking Government taxation policy. He said that were the Labour Government to attack the most vulnerable sections of the community, he would have no hesitation in pronouncing against them for trying to raise taxes rather than cutting public expenditure. He based this theory on the basis that we were attacking the most vulnerable sections of the community. But surely he must realise that if we were to cut public expenditure in the unspecified ways that he did not mention, we would be forced into attacking the most vulnerable sections of the community because so much spending is directed in that way. I have heard many of his hon. Friends attack subsidies and various kinds of transfer payments which they maintain are the easiest forms of public expenditure to cut. But these concern the most vulnerable sections of the community.

Mr. Nott

There does not seem to be much principle involved since the Government are to phase out the milk subsidy next year. The Minister of State admitted in a debate a few weeks ago that the milk subsidy could go now. Since there is no principle in keeping the milk subsidy, the Government are taking it away. Could that not go now?

Mr. Sheldon

I am surprised to hear that the hon. Gentleman objects to the milk subsidy going in the way that the Chancellor suggested.

Mr. Nott

I am in favour of that.

Mr. Sheldon

Then there is agreement on both sides and it is a point hardly worth raising. I should have thought that the milk subsidy being phased out would delight the hon. Gentleman. But if he wants to go beyond that, obviously there would be an attack on certain vulnerable sections of the community. What we are doing about the vehicle excise duty needs to be considered alongside that point.

The point made by the hon. Member for Braintree related to the examination that he conducted on a variable tax for the vehicle excise duty. The hon. Gentleman considered the abolition of the vehicle excise duty and its replacement by a rise in the price of petrol. I should point out that if this were to happen, the price of petrol would rise by 16p.

To increase the price of petrol through taxation instead of the vehicle excise duty would not be suitable in the present economic situation. It would be too great a reliance on one particular tax. At a time of economic stringency there is a need to obtain revenue from as wide a number of sources as possible in order to share the burden of taxation as fairly as we can.

There is the question of the taxation of car ownership as opposed to the taxation of car use. There are many people who believe that there is an important rôle for both of these taxes—to tax not only use, through the petrol duties, but also car ownership.

Mr. Keith Speed (Ashford)

Will the Minister confirm that abolition of vehicle excise duty would save 6,000 to 7,000 civil servants and £15 million to £16 million a year in administrative costs?

Mr. Sheldon

The hon. Gentleman has overlooked an important factor. If we were to remove the vehicle excise duty we would still require some facility for the registration of cars, which would involve considerable administration. If we took that action we would not greatly diminish the number of civil servants required for the operation of vehicle excise duty, because a considerable number would still be required for the registration of cars. [Interruption.] If we have a debate on the Question, "That the Clause stand part of the Bill", I shall be happy to go into this whole issue.

Mr. Mudd

Have the Government studied the system in Denmark whereby when a new car is registered for the first time there is a registration fee once and for all of 110 per cent. on the price of the vehicle? This would obviate the cost of annual relicensing, and the administration requirements.

Mr. Sheldon

I am not sure whether figures of that size are designed to bring comfort to the Opposition. They do not bring much comfort to me. Irrespective of what the hon. Gentleman has said, he has underestimated the number of people who would be involved in a registration facility of the type that he has outlined.

Given the big increase in the tax on petrol that would be needed to produce the same revenue, those who live in rural areas would find themselves faced with substantial increases in charges.

Perhaps the clinching argument concerns the British motor car industry. Although the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) made great play with the fact that the problem of the motor car industry was being looked at upstairs and the problem of taxation downstairs, there is a point where they meet. If we had introduced a variable vehicle excise duty to favour the small car it would have taken years to provide the means to produce the new cars, with the tooling and so on. Any change of this kind, made purely for taxation considerations, would be absurd in the context of the changes that would be required in the motor car industry.

It is also the case that the British motor car industry is not especially strong at present in the production of small cars, particularly cars of less than 1,000 cc.

Mr. Winterton

Does the hon. Gentleman agree that one of the few car companies making a profit is Rolls-Royce, and that a two-level tax which would discriminate against the larger car might well upset market forces which allow this company—a very trouble-free company—to make a handsome profit for this country?

Mr. Sheldon

I understand the point made by the hon. Gentleman, but the most important factor is that fundamental changes in taxation with repercussions on manufacturing and production need to be introduced with great care and co-ordination.

In the present circumstances, arguments about the economy are sufficient to add to the arguments that I have used so far. If the vehicle excise duty were replaced by a tax on petrol there would be a certain overlap, because the vehicle excise duty is payable in advance, whereas the excise duties on petrol are payable as petrol is purchased. That would result in a net loss to the Revenue of about £200 million which, for this year, with the particular difficulties that we face, rules out this solution.

As my right hon. Friend the Chancellor said, when we are considering the problems of industry, and how taxation affects industry, we are always open to consultations, and consultations will take place.

The important aspect of this debate is that the present defects of the vehicle excise duty have been exaggerated. I believe that the increased duty has a contribution to make to the Revenue, and I ask the Committee to reject the amendment.

Question put, That The amendment be made:—

The Committee divided: Ayes 152, Noes 186.

Division No. 208.]	AYES	[5.57 p.m.
Adley, Robert	Hannam, John	Pardoe, John
Arnold, Tom	Harrison, Col. Sir Harwood (Eye)	Parkinson, Cecil
Atkins, Rt. Hon. H. (Spelthorne)	Harvie Anderson, Rt. Hon. Miss	Penhaligon, David
Awdry, Daniel	Hastings, Stephen	Percival, Ian
Bain, Mrs. Margaret	Havers, Sir Michael	Raison, Timothy
Baker, Kenneth	Hayhoe, Barney	Rathbone, Tim
Banks, Robert	Henderson, Douglas	Rees-Davies, W. R.
Beith, A. J.	Heseltine, Michael	Renton, Rt. Hon. Sir D. (Hunts)
Berry, Hon. Anthony	Hicks, Robert	Renton, Tim (Mid-Sussex)
Biffen, John	Higgins, Terence L.	Ridley, Hon. Nicholas
Biggs-Davison, John	Hordern, Peter	Roberts, Wyn (Conway)
Blaker, Peter	Howe, Rt. Hon. Sir Geoffrey	Rossi, Hugh (Hornsey)
Boscawen, Hon. Robert	Howell, David (Guildford)	Sainsbury, Tim
Bowden, A. (Brighton, Kemptown)	Hunt, John	Shaw, Giles (Pudsey)
Boyson, Dr. Rhodes (Brent)	Irvine, Bryant Godman (Rye)	Shaw, Michael (Scarborough)
Brittan, Leon	James, David	Shelton, William (Streatham)
Brotherton, Michael	Jenkin, Rt. Hon. P. (Wanst'd & W'df'd)	Shepherd, Colin
Brown, Sir Edward (Bath)	Jessel, Toby	Silvester, Fred
Bryan, Sir Paul	Kilfedder, James	Sims, Roger
Buck, Antony	King, Tom (Bridgwater)	Sinclair, Sir George
Budgen, Nick	Knox, David	Smith, Dudley (Warwick)
Butler, Adam (Bosworth)	Latham, Michael (Melton)	Speed, Keith
Carlisle, Mark	Lawrence, Ivan	Spicer, Jim (W Dorset)
Chalker, Mrs. Lynda	Lawson, Nigel	Stanbrook, Ivor
Churchill, W. S.	Lloyd, Ian	Stanley, John
Clark, William (Croydon S.)	MacCormick, Iain	Stewart, Donald (Western Isles)
Clarke, Kenneth (Rushcliffe)	Macfarlane, Neil	Stewart, Ian (Hitchin)
Clegg, Walter	MacGregor, John	Stradling Thomas, J.
Cockcroft, John	Marshall, Michael (Arundel)	Tebbit, Norman
Cope, John	Marten, Neil	Temple-Morris, Peter
Costain, A. P.	Mather, Carol	Thomas, Rt. Hon. P. (Hendon S.)
Crawford, Douglas	Maude, Angus	Thompson, George
Crowder, F. P.	Maudling, Rt. Hon. Reginald	Thorpe, Rt. Hon. Jeremy (N Devon)
Dean, Paul (N Somerset)	Maxwell-Hyslop, Robin	Townsend, Cyril D.
Drayson, Burnaby	Mayhew, Patrick	Tugendhat, Christopher
Eden, Rt. Hon. Sir John	Miller, Hal (Bromsgrove)	Vaughan, Dr. Gerard
Evans, Gwynfor (Carmarthen)	Mitchell, David (Basingstoke)	Wainwright, Richard (Colne V.)
Fisher, Sir Nigel	Moate, Roger	Wakeham, John
Fookes, Miss Janet	Monro, Hector	Walker-Smith, Rt. Hon. Sir Derek
Fowler, Norman (Sutton C'f'd)	Moore, John (Croydon C.)	Wall, Patrick
Fox, Marcus	Morgan, Geraint	Warren, Kenneth
Freud, Clement	Morrison, Charles (Devizes)	Watt, Hamish
Fry, Peter	Morrison, Hon. Peter (Chester)	Weatherill, Bernard
Glyn, Dr. Alan	Mudd, David	Wells, John
Goodhew, Victor	Neave, Alrey	Welsh, Andrew
Goodlad, Alastair	Nelson, Anthony	Wigley, Dafydd
Gorst, John	Neubert, Michael	Wilson, Gordon (Dundee E.)
Gow, Ian (Eastbourne)	Newton, Tony	Winterton, Nicholas
Grimond, Rt. Hon. J.	Nott, John
Hall, Sir John	Onslow, Cranley	TELLERS FOR THE AYES:
Hall-Davis, A. G. F.	Osborn, John	Mr. Spencer Le Marchant and
Hamilton, Michael (Salisbury)	Page, Rt. Hon. R. Graham (Crosby)	Mr. W. Benyon.
NOES
Anderson, Donald	Coleman, Donald	Ellis, John (Brigg & Scun)
Archer, Peter	Concannon, J. D.	Ellis, Tom (Wrexham)
Armstrong, Ernest	Cook, Robin F. (Edin C.)	English, Michael
Ashton, Joe	Cox, Thomas (Tooting)	Ennals, David
Atkinson, Norman	Craigen, J. M. (Maryhill)	Evans, Ioan (Aberdare)
Barnett, Rt. Hon. Joel (Heywood)	Crosland, Rt. Hon. Anthony	Evans, John (Newton)
Bates, Alf	Cryer, Bob	Faulds, Andrew
Benn, Rt. Hon. Anthony Wedgwood	Cunningham, G. (Islington S.)	Flannery, Martin
Bidwell, Sydney	Dalyell, Tam	Fletcher, Raymond (Ilkeston)
Bishop, E. S.	Davidson, Arthur	Foot, Rt. Hon. Michael
Blenkinsop, Arthur	Davies, Bryan (Enfield N.)	Ford, Ben
Booth, Albert	Davies, Denzil (Llaneill)	Forrester, John
Boothroyd, Miss Betty	Davies, Ifor (Gower)	Fowler, Gerald (The Wrekin)
Bottomley, Rt. Hon. Arthur	Deakins, Eric	Fraser, John (Lambeth, N'w'd)
Bray, Dr. Jeremy	de Freltas, Rt. Hon. Sir Geoffrey	Garrett, John (Norwich S.)
Brown, Ronald (Hackney S.)	Dormand, J. D.	George, Bruce
Butler, Mrs. Joyce (Wood Green)	Douglas-Mann, Bruce	Gilbert, Dr. John
Canavan, Dennis	Duffy, A. E. P.	Gould, Bryan
Carter, Ray	Dunn, James A.	Grant, John (Islington C.)
Cartwright, John	Dunnett, Jack	Hamilton, W. W. (Central Fife)
Castle, Rt. Hon. Barbara	Dunwoody, Mrs. Gwyneth	Hardy, Peter
Clemitson, Ivor	Edelman, Maurice	Harper, Joseph
Cocks, Michael (Bristol S.)	Edge, Geoff	Harrison, Walter (Wakefield)
Hart, Rt. Hon. Judith	Marks, Kenneth	Silkin, Rt. Hon. John (Deptford)
Hatton, Frank	Marshall, Dr. Edmund (Goole)	Silkin, Rt. Hon. S. C. (Dulwich)
Hayman, Mrs. Helene	Marshall, Jim (Leicester S.)	Sillars, James
Heffer, Eric S.	Maynard, Miss Joan	Silverman, Julius
Horam, John	Mellish, Rt. Hon. Robert	Skinner, Dennis
Howell, Denis (B'ham, Sm H.)	Mendelson, John	Small, William
Hoyle, Doug (Nelson)	Mikardo, Ian	Snape, Peter
Huckfield, Les	Millan, Bruce	Spearing, Nigel
Hughes, Mark (Durham)	Molloy, William	Spriggs, Leslie
Hughes, Robert (Aberdeen N.)	Moonman, Eric	Stallard, A. W.
Irvine, Rt. Hon. Sir A. (Edge Hill)	Morris, Alfred (Wythenshawe)	Stoddart, David
Irving, Rt. Hon. S. (Dartford)	Mulley, Rt. Hon. Frederick	Strauss, Rt. Hon. G. R.
Janner, Greville	Murray, Rt. Hon. Ronald King	Thomas, Jeffrey (Abertillery)
Jay, Rt. Hon. Douglas	Newens, Stanley	Thomas, Ron (Bristol NW)
Jeger, Mrs. Lena	Noble, Mike	Tierney, Sydney
Jenkins, Hugh (Putney)	Ogden, Eric	Torney, Tom
John, Brynmor	O'Halloran, Michael	Urwin, T. W.
Jones, Alec (Rhondda)	Orme, Rt. Hon. Stanley	Varley, Rt. Hon. Eric G.
Jones, Dan (Burnley)	Ovenden, John	Wainwright, Edwin (Dearne V.)
Judd, Frank	Palmer, Arthur	Walden, Brian (B'ham, L'dyw'd)
Kaufman, Gerald	Park, George	Walker, Harold (Doncaster)
Kelley, Richard	Parker, John	Walker, Terry (Kingswood)
Kerr, Russell	Parry, Robert	Watkinson, John
Kilroy-Silk, Robert	Perrt, Rt. Hon. Fred	Weetch, Ken
Kinnock, Neil	Pendry, Tom	Weitzman, David
Lemborn, Harry	Perry, Ernest	Wellbeloved, James
Lamond, James	Phipps, Dr. Colin	White, Frank R. (Bury)
Leadbitter, Ted	Powell, Rt. Hon. J. Enoch	Willey, Rt. Hon. Frederick
Lee, John	Prescott, John	Williams, Alan (Swansea W.)
Lestor, Miss Joan (Eton & Slough)	Radice, Giles	Williams, Alan Lee (Hornch'ch)
Lipton, Marcus	Richardson, Miss Jo	Williams, W. T. (Warrington)
Litterick, Tom	Roberts, Gwilym (Cannock)	Wilson, William (Coventry SE)
Loyden, Eddie	Rodgers, George (Chorley)	Wise, Mrs. Audrey
McElhone, Frank	Rooker, J. W.	Woodall, Alec
MacFarquhar, Roderick	Roper, John	Woof, Robert
Mackenzie, Gregor	Ross, Rt. Hon. W. (Kilmarnock)	Young, David (Bolton E.)
Mackintosh, John P.	Sandelson, Neville
Maclennan, Robert	Shaw, Arnold (Ilford South)	TELLERS FOR THE NOES:
McMillan, Tom (Glasgow C.)	Sheldon, Robert (Ashton-u-Lyne)	Mr. James Hamilton and
Madden, Max	Shore, Rt. Hon. Peter	Mr. Laurie Pavitt.
Magee, Bryan

Question accordingly negatived.

6.0 p.m.

Mr. Newton

I beg Amendment No. 5, in page 6, line 5, at end add— '(2A) In subsection (4)(b) of section 2 (commencement and duration of licences, and rates of duty) for the words "eleven thirtieths" there shall be substituted the words "one third".'

The Deputy Chairman

With this amendment we may take Amendment No, 7, in page 6, line 23, at end add— '(7) Any person taking out a vehicle excise licence under Part II of Schedule 5 to the Vehicles (Excise) Act 1971 may, by giving notice in writing to the licensing authority at the time when the licence is first applied for, or not less than 14 days before the licence is due for renewal, elect to pay by twelve equal monthly instalments payable on the first day of each month'.

Mr. Newton

The meaning of Amendment No. 5 may not be immediately apparent to anyone who has not looked at the original Vehicles (Excise) Act 1971, although the Minister will be well aware of it. The amendment would remove the extra payments levied on those who choose to buy their vehicle excise licence in three four-monthly instalments rather than buy one annual licence. The amendment goes with Amendment No. 7, which is clearer to anyone who just glances at it. That amendment would give people the clear statutory right to pay the annual vehicle excise duty, on certain conditions, by monthly instalments.

I think that the purpose of the amendments is clear, and that their justification is also clear. It arises partly from the matter which we discussed in the previous debate, the level at which the vehicle excise duty will stand after implementation of what the Government propose in the Bill. Before the increase, when the vehicle excise duty was £25 for a year, one could take out four-monthly licences, each costing £9.15. The total cost was then £27.45 over the year. By choosing to pay in three instalments instead of one lump, one was penalised to the extent of £2.45, or nearly £2 10s. in proper money.

After the increase proposed in the Bill, when the vehicle excise duty will be £40 for a year, the four-monthly licence will cost £14.65, which makes a total annual cost of £43.95. In other words, one must now pay nearly £4 extra to enjoy the privilege of paying for one's licence in instalments. This is wrong. There should be no penalty at all for buying a licence in instalments.

In Amendment No. 7, I suggest that we should go further and give people the right to pay by monthly instalments. Some of my arguments would be very much those to which I referred in my speech in the previous debate and arise from my concern about the socially regressive nature of this tax. It tends to hit hardest at the owners of the smallest cars—people who use their cars least and can least afford to run cars at all. The vehicle excise duty is socially regressive and tends to put the biggest burden on those who can least afford to pay it. The least that the Government can do is to ease that problem, as they do many others by allowing people to pay in instalments over a period of time rather than forcing them to pay in one lump.

I feel very strongly about the problems of retired people. It is all very well for the spokesman for the Liberal Party to say that, instead of concessionary bus fares, help with motoring costs or with television licences, we should make sure that the pension is high enough to cover the cost. That is not the situation at present, nor, judging by the Government's policies, is it remotely likely to be the situation. In the real world which I inhabit, and in which I am in touch with my retired constituents, many of them have the most acute problems in meeting these lump-sum payments which arise at intervals during the year, and which must be met if they are to maintain, in rural areas like my own, basic essentials such as the running of a motor car. I should like to see this problem eased, first, by removing the discrimination against those who already buy four-monthly licences, and, secondly, by introducing a proposal enabling people to pay monthly.

I have in mind in introducing this amendment the clear-cut analogy with what is already done concerning rates. It may well be that, when the Minister replies, he will say that my amendment is not technically correct and requires a lot of alteration. I am not interested in that sort of argument. The Government can take it away and draft pages and pages of legal jargon if the principle is once accepted. I am simply arguing the principle at this stage.

Before putting down this amendment, I looked up the Rating Act 1966, which introduced the principle of a statutory right to pay rates by instalments. In the Rating Act 1966 there are many pages of legislation dealing with the facility to enable people to pay their rates by monthly instalments. No doubt it would be necessary to devise some similar legal provisions in order to put my amendment into effect. The analogy with rates seems to me to go a long way towards supporting my argument. I hope the Minister will direct his answer to that point.

The vehicle excise duty is now, according to the Government's proposal, £40 per year. In answer to Questions last week one of the Ministers from the Department of the Environment said that the average rate payment in the district of Booth Ferry was £51. If that is so, it follows with almost mathematical certainty that a lot of people must be paying no more than £40, and they have a statutory right to pay by monthly instalments, to ease the problem created for the less well-off and the retired by these lump-sum payments.

In these circumstances, we ought now to be moving towards the same kind of proposal on the vehicle excise duty, and in due course, I hope, in regard to television licences and a number of other lump-sum payments.

Although this may appear to be a small point, it is nevertheless an important one in relation to which the less well-off could be helped significantly to budget by being able to make regular payments. It would ease their problems in meeting these great chunks of financial demand in a highly inflationary age.

I hope that the Minister will give a sympathetic reply, especially on the first of my amendments. It would be very easy to implement. I hope for a favourable reply to my proposal that there should be monthly instalments for the payment of vehicle excise duty.

6.15 p.m.

Mr. Beith

I support the two proposals outlined by the hon. Member and ask the Minister to bear in mind again the kind of person referred to already in debate—the elderly person in the rural area who is struggling to meet the overheads on a car, the person who is not a heavy consumer of petrol or a heavy user of the car, but who at one time in the year faces a particularly heavy combined burden of vehicle excise tax and the renewal of car insurance. The Minister should bear in mind that many of them take out only third party insurance in view of the burden of overheads being too heavy for them. He must recognise the case for spreading this payment, even if he does not reduce it in the ways already suggested to him.

The system of monthly instalments for the payment of rates is already available and is greatly attractive to most of us. Even if the Minister were not to go as far as that, can he honestly defend the principle of taking additional amounts from these very hard-pressed people in the form of a penalty for paying by the existing instalment scheme? Surely the least he can do is to remove the degree of penalty which attaches to paying on the instalment scheme which already exists for the vehicle excise duty.

Mr. Sheldon

The hon. Member for Braintree (Mr. Newton) moved his amendment with obvious clarity. He asked me in dealing with it to consider the principle of the amendment rather than to niggle at the way in which it was drafted. I have always made it quite clear that in dealing with any amendment I deal with the principle. It is a very easy trick for Ministers, whether from the Treasury or any other Department, to make fun of amendments drafted with insufficient expertise, but I believe it to be the task of all Ministers to look at the point in principle and see whether it can be applied, to direct their argument in that way and to stress some of the drafting difficulties only if they are relevant.

The purpose of this amendment is to abolish the surcharge which at present exists when people take out licences in four-monthly bites rather than for the whole of the year. There is also the other amendment which would allow payment on a monthly basis. The £40 licence should come to £43.95, as the hon. Member says, if the surcharge were to stand as proposed at present, for those four-monthly licences.

The first question is why it is necessary to charge this extra amount for the two additional licences taken out during the year by a person who intends to license his vehicle over the whole year. I took the point that a number of people will not license throughout the whole year.

My point is that vehicle excise duty is an annual tax. This is how it was conceived and constructed. The four-monthly licence was introduced to help those people who might find the sum on the whole rather difficult to raise.

In the year 1974–75, 23 million vehicle excise duty licences were issued. Two-thirds of them were four-monthly licences. If there were no disincentive, as obviously provided by the charge, this could rise to 40 million if everybody took out his licence in this way. There would also be the increased cost of administration.

We estimate the direct cost of the abolition of the surcharge at £30 million. That would be the direct cost, but then there would be the increased use of four-monthly licences, which we estimate would cost another £20 million, and there would be the increase in the public sector borrowing requirement as the money would come through to the Revenue later. The increased public sector borrowing requirement would amount to about £140 million in the first year, resulting in interest charges of around £15 million.

The result of all these is that, if one wanted to retain the amount of revenue at the same level as that for which we had budgeted, there would need to be an increase in the vehicle excise duty for private cars of a further £3'50 at an annual rate.

Mr. Newton

Will the hon. Gentleman clarify those figures? He referred to 23 million vehicle licences. I should have thought that the number was smaller than that. Then he referred to a proportion of two-thirds. Did he mean two-thirds of all vehicle licences or two-thirds of the total number of private licences?

Mr. Sheldon

I was referring to the total number of vehicle licences, 23 million of which were issued in 1974–75. We reckon that two-thirds of the 23 million are four-monthly licences. That is the breakdown which I have. It means that the additional amount for each licence works out at a figure of £1.32. That is the additional cost of each licence over the cost that it would be otherwise. Incidentally, I have just been informed that the figure of 23 million vehicle excise licences refers to cars. The total figure is 27 million.

From the additional £1.32 for a four-monthly licence, the cost of issuing each licence has to be deducted. It amounts to 85p. That is the administrative cost of issuing each licence, taking account of overheads and so on. That means that the Government receive a net sum of 47p to cover the interest forgone on the outstanding amount of the annual duty. That is the cost that the taxpayer pays. When he buys his licence on a four-monthly basis, the Government receive only 47p which has to go towards the interest which has been forgone.

I ought also to say that if we were to have all four-monthly licences—this is a serious possibility since under the amendment there would be no incentive to go for an annual licence—the increase in the cost of administration would be £20 million. If all licences were four-monthly, this could mean 50 million licences, and we would have to organise a new facility for dealing with this kind of administrative burden.

I want to deal now with the possibility of 12 monthly payments, because that magnifies the problem which I have just outlined in connection with four-monthly licences. Additional to all the problems of the cost of administration and of the public sector borrowing requirement, we have the problem of enforcement. It would be almost impossible to deal with that.

The hon. Member for Braintree compared his suggestion with the present position with local rates, and he described the administrative changes which have resulted in our being able to deal with rates on a regular payment basis. However, what is possible when dealing with immovable property in this way is not so easily done in the case of cars. Rates are related to immovable property on the basis of a continuing liability. The same cannot be said about the frequent transfer of vehicles between individuals or about the fact that vehicle excise duty is not required to be paid when a car is not kept on the road.

The liability is very easy to prove in the case of rates. It is not so easy to deal with it in the case of a motor car. With rates, it is a simple matter to trace the ratepayer and to take recovery action where necessary. These advantages do not obtain in the case of vehicle excise duty. There would be an enormous temptation for a car owner to pay one or two monthly payments and then to default. The difficulty of enforcement would be insuperable unless we withdraw the 14 days' concession which applies at present for those taking out vehicle excise licences. Even if that were withdrawn, there would still be the problem of not knowing when a car owner was due to make a payment.

Then there would be the cost of frequent checking, the cost of maintaining some sort of record and the cost of maintaining an administrative structure which would check these matters. Having answered many Questions from my hon. Friend the Member for Newham, North-West (Mr. Lewis) about vehicle licences, I am confident that there would be the additional cost of answering his innumerable Parliamentary Questions on the subject.

The hon. Gentleman's proposal, therefore, presents us with difficulties which it would be extremely difficult to overcome. As a result, I hope that he will see fit to withdraw his amendment. If he does not, I must ask my hon. Friends to reject it.

Mr. Newton

Perhaps I might comment briefly on what the Minister said.

First, I assure the hon. Gentleman that I shall not be too popular with my right hon. and hon. Friends if I decide to press the matter to a Division. However, before I withdraw the amendment or let it fall, I wish to make one or two observations.

I am staggered by the figure for the number of licences already taken out on this basis. It may be that I should have known it. In any event, it backs up my case to the hilt. Clearly we are already in a situation in which the vast majority of people find it so difficult to pay licence fees on an annual basis that they choose to accept the penalty of the additional sum required for the four-monthly licence. In one sense, that supports my argument about the burden that this represents to people. In another sense, however, it would be more honest, next time that the Government touch the vehicle excise duty, if they do, for them to think about putting it round the other way, making the licence a four-monthly one and offering people a discount for applying for an annual licence.

I am completely unconvinced by the Minister's administrative arguments. On the last occasion that I tried to renew my own licence, I had changed my address. As a result, my application had to be sent away, and it took a considerable time to come back. I understood that part of the problem was that everything was being moved to Swansea and that computers were being put on to the operation at vast expense to the taxpayer. I understood that one of the advantages in shifting all this work to Swansea instead of leaving it in the hands of county councils was that it would be more efficient and easy to organise. Although I have a deep suspicion of computers, having seen what they have done to my gas bills in recent years, I feel that it cannot be beyond the power of the ordinary computer to keep track of whether monthly instalments are coming in regularly. If it is beyond the capacity of the Ministry's computer, the Government should look again at their proposal to centralise the work on vehicle excise licences.

I cannot believe that my proposal would be beyond the capacity of a computer. Nor can I accept what the hon. Gentleman said about enforcement problems. There are already acute enforcement problems about vehicle excise duty. I often meet people who claim to have driven round for months without a current licence and nothing has been done about it.

I accept that there are enforcement problems, but I am sceptical about the Minister's argument, which seemed hardly to convince him, that the problem would become even more difficult on the basis that I suggest. I suspect that it would be less difficult, because the vast majority of people would find the most convenient course would be to sign a banker's standing order, a Giro payment order, or some other payment on a regular basis, and that it would be easier for the Ministry to collect the money in that way than having people go to post offices on an irregular basis and fill in additional forms.

I have two final points. I understand the Minister's financial worries. The amendment would cost the Government a good bit of money this year. That may be an argument of pure expediency for not accepting it, but it has little to do with my argument on grounds of social equity and fairness. One could look at what the Minister said the other way round, because this is a payment in advance. Why should I lend the Government this money until next March or April? Why not look at it the other way round? The Minister says that if he lets people pay later there will be a loss to the Government. I could say as a consumer that if I pay a year in advance I am giving the Government the use of my money. There is no more merit in one argument than in the other; one simply takes one's choice.

I am entirely unconvinced by what Eh;, Minister says about the difference as compared with the payment of rates by instalments. In fact, local councils have bigger administrative problems because with rates one pays in 10 instalments and not 12, so that it is a considerably more complicated organisational and administrative problem to get the money.

I have no doubt that everything the Minister has said this evening in objection to what I have put forward could have been, and probably was, said in objection to the proposal in 1966 for payment of rates by instalments. The real difference is that the central Government were prepared to impose these problems on local authorities for reasons such as those I have put forward but are not prepared to accept them for the contra'. Government.

If I felt that it would be appropriate and would be welcomed by my hon. Friends, I should push this matter to a Division. As it is, I shall not invite my hon. Friends to divide, but neither shall I withdraw the amendment.

Amendment negatived.

Clause 5 ordered to stand part of the Bill.