HC Deb 15 July 1976 vol 915 cc1060-82
Mr. Robert Sheldon

I beg to move Amendment No. 89, in page 127, line 24 leave out from beginning of line to end of line 30 on page 128 and insert—

Age of car at end of relevant year of assessment
Cylinder capacity of car in cubic centimetres Under4 years 4 years or more
£ £
1,300 or less 175 120
More than 1,300 but not more than 1,800 225 150
More than 1,800 350 235
Age of car at end of relevant year of assessment
Original market value of car Under 4 years 4 years or more
£ £
Less than £2,000 175 120
£2,000 or more but less than £3,000 225 150
£3,000 or more but not more than £6,000 350 235
Age of car at end of relevant year of assessment
Original market value of car Under 4 years 4 years or more
£ £
More than £6,000 but not more than £10,000 500 335
More than £10,000 800 535

This is the main amendment putting forward the new scale that has been arrived at following consultations with the motor industry. It sets out the new scale break-points at 1300 cc and 1800 cc. There is a reduction in the number of break-points generally as set out in the Amendment Paper. The changes result from the anxieties that were represented to us by the industry, and which we naturally took into account.

There were a number of statements about the degree of danger to the industry, some of which were somewhat exaggerated. It was said that there would be a certain amount of down-trading to smaller cars. In fact, we do not happen to be producing the numbers of small cars that would be required as a result of that down-trading, but such matters had to be taken into account.

We had to tae into account the representations that were us about damage to the industry even though they may have been submitted in an exaggerated form.

As for total revenue from these benefit provisions, we shall now get from the altered provisions about two-thirds of the revenue that was expected to be received—namely, about £80 million instead of the £125 million that was expected when the Bill was introduced. As part of the new arrangements we are dispensing with the interim half level of the scales for 1977–78. The purpose of the half scale was to prevent the too sharp rise that could have resulted in considerable disadvantage to people paying substantially increased tax on their benefits. As a result of these changes, that sharp rise will not occur.

Probably the most important point to be made at this stage is that the new scales should not take more in tax in total than does the existing scheme from those taxpayers who are now paying the correct amount of tax by reference to their private mileage. The increase will arise in respect of those who have not been paying the correct amount of tax in relation to their private benefit.

Mr. Viggers

How do you know?

Mr. Sheldon

It is necessary only to look at the statistics and to make an estimate. One can make an estimate of the amount of revenue that should be received by the Exchequer and one finds that, owing to the inexact system of checking the benefits declared by companies, there has been a shortfall. Those people who have been paying properly by reference to their private use will not pay any increased tax as a result of the changes.

Mr. Lawson

What will be the total increase in revenue in a full year as a result of the Bill going through with this amendment, and what would have been the total increase in revenue in a full year had the Bill gone through as originally drafted?

Mr. Sheldon

I thought that I had given that figure. It was £125 million as originally drafted and £80 million as it now is. The industry has welcomed these changes. It accepts the fact that we attach importance to stability in the industry, and therefore we hope that the amendment will be agreed.

Mr. David Howell

It cannot be said that these amended figures flow directly from pressure by the Opposition in Committee because, even before we arrived in Committee upstairs, the idiocy of the original Schedule 7 had dawned on the Government Ministers, and indeed on the motor industry. In Committee we were merely able to point to the further difficulties in which the Government would find themselves if they proceeded with the original proposals. We were told at every point that talks were proceeding in Whitehall and in the companies and that from those discussions in due course would arise a new formula. This is the new formula that has emerged.

My hon. Friend the Member for Blaby (Mr. Lawson) said that Amendment No. 88 was not in English. Certainly Amendment No. 89 seems to have slipped into a foreign tongue because a close examination of Table A makes a nonsense of it. No doubt the Financial Secretary will be moving the necessary amendment to cover that matter. I understand that Table B is for cars with rotary or Wankel engines or engines of similar design. Perhaps the Financial Secretary will say why we need to have that table changed.

These are the new figures to be negotiated. We shall later be pressing a number of amendments on this point.

12 midnight

Mr. Fairbairn

I do not pretend to be a mathematician, and therefore this amendment means extremely little to me. I understand English, so the remarks made by my hon. Friend the Member for Blaby (Mr. Lawson) have more validity. I appreciate the difficulty of anybody understanding the amendment as written, because in relation to claims in respect of a car with an original market value of up to £6,000 with a cylinder capacity of 1300 c.c., or less one gets four years for that. I do not know whether that is a penalty. If the exercise involves more than 1300 c.c., one gets even more than tour years. I take it that four years is a minimum sentence.

Are we to have, as we had with the cherished numbers system, the prospect of lots of inspectors making sure that no one cheats? When someone declares his engine to be 1300 c.c. will there be a lot of little men opening it up to check its cubic capacity? As I understand it, the manufacturer's version of the cubic capacity is not necessarily in accordance with that provided by the Department at Swansea. Will there be a new inspectorate to make sure that this terrible cheating which we are told is liable to happen with number plates and the blondes who drive the cars bearing those plates will not happen here? Will another branch of the bureaucracy check up to make sure that none of us gets more than four years when we should get £150?

Mr. Newton

The Financial Secretary cannot be allowed to get away with saying that the problems have been exaggerated and that he has done something to help. He has come to the conclusion that the levels imposed were 50 per cent. too high. He said that the figure which would be raised under the original proposals was 50 per cent. higher than he is now suggesting. That represents a major error.

The hon. Gentleman has conceded that his original proposals were damaging to the motor industry. The maximum addition to earnings under the original proposals was to have been £3,400 a year for the most expensive car. Under the amendment it will be only £800 a year. It was reduced because Rolls-Royce halted its entire investment programme. That prompts two questions. First, how did the Minister come to make the original proposal? Second. has Rolls-Royce restarted its investment programme?

Mr. Geoffrey Robinson (Coventry, North-West)

In Committee we made certain representations to the Government. I believe that the amended proposals have been widely and favourably accepted throughout the motor industry. This is not the time to carry on with these churlish party political points but to state that the new proposals are accepted by the industry and that in three aspects they show an extension with industry of the same spirit of co-operation as the Government have established with the trade unions. The co-operation with industry is as vital to the successful management of our industrial policy as is the co-operation we have established with the trade unions.

The break points have been established with special reference to the interests of the British-owned sector of the motor industry. I make no apology for saying that that is a wholly good sign. It may be discriminatory against and slightly less favourable to the foreign-owned motor interests in this country.

The rates are now extremely generous and are probably a reflection of the fact that the industry may have exaggerated the potential impact of the original proposals on our exports, on domestic sales and on employment, which is probably more important than anything else.

It is easy for an industry to exaggerate when it is responsible for the investment of tens of millions of pounds in new Rover, Jaguar and Rolls-Royce products. In that sense I declare an interest. Those investment decisions also involve thousands of jobs. Despite the concessions that have been made, and despite the pressures from those with economic and constituency interests, the Government have held out on the structure of the tax. The structure will enable us to see in due course whether the industry exaggerated or whether the Government under-estimated. In the light of that experience, the Government can move the tax upwards if required and get back the revenue which we can justifiably bring into the Exchequer without inflicting the severe damage on the industry which might otherwise have been incurred.

For those reasons, with that future development in mind, my hon. Friends and I, without making churlish party political points and totally irrelevant criticisms, welcome the new proposal.

Mr. Lawson

The speech we have just heard from the hon. Member for Coventry, North-West (Mr. Robinson) will have been welcomed by all who believe in the corporate State. It will have been detested by anyone who believes in the principle of justice, equity and fairness to the individual. Hon. Members on the Government Benches may laugh, but I shall demonstrate to their satisfaction, if they are fair-minded, why that is so.

The hon. Gentleman said that at last accord had been reached with the motor industry comparable to that which had been reached with the TUC; the figures were satisfactory to the motor industry —I take his word for that—and therefore they were right. But that has nothing to do with it. The Government have said—and a good case can be made for it—that benefits in kind are a form of income and should be taxed as income. The only fair way to look at this is to ask what is the true value to the individual of the use of a motor car and to tax him on that value. That is the way of fairness and equity.

The hon. Member for Coventry, North-West could not care less what is the value of the use of a motor car to the individual taxpayer. That does not matter. He can pay any amount of tax, perhaps too little, perhaps too much, but as long as the motor industry is satisfied, it is all right. That is the corporate State, and I hope that we shall have nothing to do with it.

Mr. Parkinson

I support my hon. Friend the Member for Blaby (Mr. Lawson). When we discussed the clauses to which the schedule is attached, we pointed out to the Government that the changes here being made were for the purpose of removing complication, producing a simpler system for assessing benefits and achieving fairness. We also pointed out that the proposals would be extremely damaging to industry. The Government said that the system would be simpler and fairer, and we analysed those two claims.

The present system is extremely simple. Anyone who drives a business car has to report the expenses of the car and to agree the proportion of time for which he personally uses that car for private purposes. Every taxpayer who has a business car has to submit an assessment to the Revenue and to agree the private usage.

We must have here tonight as gullible a couple of Treasury Ministers as have ever held office in the Treasury because the Revenue has only to tell them something for them to believe that it is incontrovertible. They have been told by the Revenue "This system militates against us and the taxpayers are getting away with it. Therefore we should change the whole system".

We have had no proof. The Financial Secretary gave us vague generalisation about data being available, but it is the individual taxpayer who is submitting his claim to the Revenue. The Revenue has wide powers, and private benefit has to be agreed. In future we shall have three categories, and the Revenue will still be dependent on the taxpayer for information as to whether he keeps the car near his home. So the Revenue is still in the hands of the taxpayer. The only reason for the elaboration is that the Revenue has convinced the Financial Secretary that the present system puts it at a disadvantage. We do not think that it is at a disadvantage. The new system will be infinitely more complicated than the old.

We ask whether it is much fairer. That is the last consideration which has entered the Government's mind. It does not matter to them whether it is fair.

I shall be better off under this proposal, because the private benefit assessable on me will be smaller, but the private benefit itself will not have changed. Tomorrow it will be the same as it was last week, but, thanks to the Government, I shall be told that it is less. It is not. It is just the same.

The Government have introduced a totally arbitrary range of so-called benefits, to which the hon. Member for Coventry North-West (Mr. Robinson) referred. It has nothing to do with justice. The Government have fixed a range of scales and have been told by the motor industry that those scales would damage the motor industry, and the Treasury have said, "All right, we shall change the scales. We must look after the motor industry."

There is no question of what is right or wrong for the taxpayer. They must fix something which will allow the British motor industry to stay in business. British Leyland will be able to put up the price of the Daimler to £10,000 and people will not claim increased benefit as a result.

This is supposed to be less complicated but is undoubtedly more complicated. It has been said that these arrangements are more just and fair to make sure that the taxpayers pay a proper figure for a benefit. That idea has now been totally abandoned by the Government. They are interested only in arriving at a range of scales which will suit the motor industry.

Mr. Robinson

During Committee stage, all the Opposition MPs with one undistinguished exception argued forcibly that the scales and rates would or could badly damage the motor industry. Is the hon. Member now saying that he would prefer the original scales and break points? Would he say whether he accepts and welcomes these revised proposals?

Mr. Parkinson

I made the argument in committee about how damaging these proposals would be to the motor industry, but what we are discussing is not what is good or bad for the motor industry but the private benefit to the individual of the use of a company car. I thought the Government proposals were damaging and I am glad they have changed them—

Mr. Robinson

Let us hear that.

Mr. Parkinson

If the hon. Member will allow me to continue. They will be less damaging to the motor industry, but we are discussing not that but the question of arriving at an arbitrary level for fixing benefit, and the Government are trying to claim credit for solving a problem which did not exist.

12.15 a.m.

Under the old system the British motor industry was not threatened. Taxpayers' assessments were agreed between the taxpayer and the inspector. There was no problem for the motor industry. The Government come along with a set of half-baked proposals which are obviously not propertly thought out, which have nothing to do with justice or fairness. Suddenly they wake up to that fact and invite us to step back and be filled with admiration for the fact that they have noticed that their proposals will damage the industry.

I hope that Labour Members, instead of sniggering, will realise that they owe me an apology. My point was a perfectly valid one. These proposals will be less damaging for the motor industry. But the original arrangements, which these proposals supplement, were not damaging at all. I hope that the Government will not regard themselves as having produced some major achievement. These proposals are not fair. They are extremely complicated, far more so than those which previously existed. I do not believe that the Government have any cause to congratulate themselves in that, because they threatened to damage an industry which was not in danger, they are now lessening that threat.

Mr. John Wakeham (Maldon)

I did not have the advantage of being a member of the Committee but I am bound to say that these amendments are better than the proposals originally put forward. They will do less damage. People will pay less tax. They are, however, still unsatisfactory and illustrate the disadvantages of trying to deal with the matter in this way.

There are three major defects. First, there is the point that this is a grave departure from a simple principle of taxation, namely that we should tax people on the cost of a benefit to the employer rather than deal with matters, unless there is no other way, on the basis of the so-called benefit to the employee. If we stick to this principle we shall end up, more or less, with a better system.

The second objection is that, basically, those who work out their motoring expenses as between private and business use accurately cannot obtain a correct assessment for tax based on the true facts. If there is to be an arbitrary system such as this, it ought to be applicable only to those not able properly to present the position and tax paid accordingly. There are those who keep meticulous records and are prepared to substantiate exactly the amount of mileage claimed for private and business use. In those cases there is no ground for arguing that they should be taxed on any other than the correct basis. They may be the minority, but if they can present the information they should be properly treated.

The third thing that ought to be said, particularly to Labour Members, is that we have left those taxed under Schedule D with basically the same system as before while those taxed under Schedule E will have this arbitrary system of benefits, using a method other than the cost to the employer. Whatever the merits or demerits of the proposed system —and the Government feel that it has merits—it will not apply to all.

Once more this brings into focus the fact that one set of income earners are taxed on the basis of Schedule D while another set is taxed on the basis of Schedule E. This is not a satisfactory system. There are many cases in which it is considered unfair. I agree that we cannot unify the rules immediately but a move such as this makes the difference still wider and it not one which I welcome.

Mr. David Howell

This sort of debate has been useful, demonstrating a number of valid points. The first is that this is just change for change's sake, and no great advantage accrues. On the contrary, great complications are caused. We started from square one, with no threat or damage to the motor industry. We then advanced to square two, with maximum threat and damage. At square three we are little way back towards square one, with some of the damage slightly reduced.

I do not know whether the hon. Member for Coventry, North-West (Mr. Robinson), who speaks on these matters with great expertise, felt that he was coming here to achieve that kind of thing. He has joined in helping to reduce slightly the damage that otherwise would have been imposed on the industry of which he was such a prominent member.

Mr. Robinson

When I came to Parliament I was honoured to join a party which has done a great deal for the motor industry, in the teeth of the defiance of the Conservative Party, which did its best, in the case of British Leyland and then Chrysler, to destroy that industry.

Mr. Howell

The hon. Gentleman at this late hour is letting his romanticism about the motor manufacturing industry get a little out of control. As a result of a great many efforts, the Government to whom he gives support are now doing a little less damage to the motor industry than they were a few weeks back. That is all that has been achieved by the new Schedule 7.

As my hon. Friend the Member for Blaby (Mr. Lawson) says, it has nothing to do with income tax any more. At least previously the system was based on a persons' income and the income tax system. It has now turned into a car tax. It is a tax related to the manufacture of a certain size of car. It has been foisted on to the income-earning public and also on to the motor industry. It carries us no further forward and a good way backward in regard to fairness and equity in taxation, and in regard to the motor industry and simplicity of administration.

I suspect that the Government are now secretly regretting very much indeed that they set out on this crazy course and wish they had not embarked on this kind of schedule. The old arrangements were better. This arrangement achieves noth- ing. We have no admiration for it on this side at all, nor any praise for the Government's great triumph in slightly reducing the damage produced by their original proposals.

Amendment agreed to.

Amendment made: No. 90, in page 128, line 34, leave out '£5,000' and insert '£6,000'.—[Mr. Robert Sheldon.]

Mr. Robert Sheldon

I beg to move Amendment No. 91, in page 129, line 14, at end insert—

'Car used preponderantly for business purposes

2A.—(1) The cash equivalent derived from Table A, B or C is to be reduced (or, where paragraph 2 applies, further reduced) by half if it is shown to the inspector's satisfaction that the employee was required by the nature of his employment to make, and made, use of the car preponderantly for business travel, which means that such travel must have amounted to at least 25,000 miles in the relevant year.

(2) In relation to a car which for part of the year was unavailable in the sense of paragraph 2 above, the figure of 25,000 miles above mentioned is proportionately reduced'.

Mr. Speaker

With this we may take the following amendments to the proposed amendment:

(a) in subsection (1) leave out '25,000' and insert '15,000'.

(d), in subsection (1) leave out '25,000' and insert '20,000'.

(f), in subsection (1) after 'miles', insert 'or 50 per cent. of his total mileage in the car (whichever is the less)'. (g) in subsection (1), after 'miles', insert 'or 66⅔ per cent. of his total mileage in the car (whichever is the less)'. (h) in subsection (1), after 'imles' insert 'or 75 per cent. of his total mileage in the car (whichever is the less)'. (b), in subsection (2), leave out '25,000' and insert '15,000'.

(i), in subsection (2), leave out '25,000' and insert '20,000'.

(c), in subsection (2), leave out '25,000 miles' and insert '12,000 miles as four fifths of the total actual mileage'.

Mr. Sheldon

The amendment deals with the relieving provision that we are proposing concerning cars doing a business mileage in excess of 25,000 miles a year. We are proposing that such cases be assessed on the level of half-scale benefits. This follows a number of representations made to us concerning heavy heavy business use of cars. I mentioned that in dealing with an earlier amendment.

If there are any questions on the amendment I shall be glad to answer them.

Mr. MacGregor

I wish to speak to amendments (a) and (b) to the proposed amendment. As the Financial Secretary said, the main amendment has been brought forward to deal with a point made very forcibly in Standing Committee and also by outside interests, namely, that under the original proposals the people who were most to suffer were those who most used the car as a tool of the trade. It was not just the car salesman. It was applied to many others for whom the car was not only an essential item of use in business but by whom it was mainly used for business purposes.

As my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth) said earlier, there are many people who will benefit under the Government's proposals—generally those who have over 50 per cent. private use, I imagine, but insufficient business use to come under the other clauses in the Bill. We have a situation in which quite a number of people who were less justified in getting reductions were getting them, whereas the people who were really to be hit were those for whom the car was fundamentally and almost totally provided for business purposes. They included many people who did not want to use their cars at the week-end after having driven them all week and people who used their cars so frequently that they had to buy a second car for their wives.

The Government have attempted to deal with this situation by relating their amendment to a number of miles rather than a proportion of private use to total use because they believe that this will make it easier for companies—and the Government themselves—to check business mileage. But the Government are again out of tune with reality. Their amendment has been framed without consultation with the interests affected and they are again proposing the wrong figure.

I am extremely critical of the way in which this figure of 25,000 miles has been arrived at. It is simply an arbitrary figure. It does not deal properly with the point made in Committee and conceded by the Government in the production of their own amendment.

I have checked with some of our biggest companies with large forces of sales representatives. One firm with a household name conducted a survey of 1,000 sales representatives after the Government amendment was tabled and concluded that only 35 per cent. of them would qualify. Yet all these men are doing the same job. Our amendment would come much nearer to covering them all.

In another company, the Government amendment would cover 25 per cent. of sales representatives and in a third major firm, which employs many representatives, none of them would be covered by a 25,000 mile limit. Since all these representatives are using their cars to do the same job, more of them should be included in the concession granted by the Government.

The 25,000-mile figure does not take account of geographical differences in many parts of the country. In areas with substantial lengths of motorway—and there cannot be many—a number of sales representatives will come into the category proposed by the Government. But in rural areas such as my own, where it can take a day for a sales representative to do two jobs, and there are not long stretches of motorway, they will not clock up 25,000 miles—yet they are doing the same job and using their cars all the time for business purposes.

From our brief survey, the accuracy of which is confirmed by the CBI, we have concluded that 15,000 miles would be a much more accurate figure. The Government have gone some way to meeting our objections, but have failed to get the figure right. I hope that even at this late stage they will take this opportunity of getting it right.

12.30 a.m.

Mr. Fairbairn

I am concerned about the definition which the Government are seeking to force upon us in this matter. They say that a car should be used "preponderantly" for business purposes.

This is an important phrase and presumably it is intended to mean something. I do not know who selected the word "preponderantly" and why it should mean that this travel must have amounted to 25,000 miles in the relevant year. In fact, its meanings include a situation in which one exceeds another in weight. That presumably relates to whether a car is heavier when it is being used for business purposes.

Secondly, it means a superiority or excess in moral weight, power, influence or importance. I should not have thought that there was anything morally superior in using it for business purposes. The illustration refers to the Ministry having had the great preponderance of popular opinion at its back. That could not be said of this Ministry. Perhaps that definition is insufficient.

The third way in which the word is defined is that in becoming established it became noxious—preponderantly noxious. I should have thought that that applied in this case.

When the Treasury uses arbitrary figures and words wrongly it is in grave peril of doing a major injustice. It is no good saying that a line must be drawn somewhere. The line is drawn at a point which makes some people eligible, or preponderantly eligible, and others preponderantly ineligible. I think that the line which has been drawn is preponderantly improper. It does a preponderantly manifest injustice to those people who do the same job but who travel different distances.

Mr. Newton

My amendment seeks to substitute a different absolute figure and to introduce the only concept capable of dealing with the point about preponderant use. It seeks to apply a proportionate approach by comparing the business mileage with the total mileage done by the car. I suggest that the proportions may either be one-half, two-thirds or three-quarters. I do not know what is the right figure. I am prepared to listen to what the Financial Secretary says. Apart from the use of the word "preponderantly", the only fair procedure would be to compare the business mileage with private mileage.

I should like to back up what was said about the effect of this proposal in different areas. The representations made by the Confederation of Employee Organisations to the Financial Secretary contained the result of a survey of a large and well-known firm with 400 sales representatives spread throughout the country. An assessment was made of the different mileages covered by those representatives in different parts of the country. The figures will interest Government supporters as it is not only the people living in the Conservative rural areas who will suffer from these proposals.

The figures applied to representatives doing the same job in different parts of the country, getting through roughly similar workloads. The representatives in Mid-Wales covered 30,500 miles a year. Their tax problem is halved. Those in North Scotland covered 24,300 miles. They do not qualify. Those in Cambridge and North Suffolk covered 24,900 miles. If they cover a further 100 miles a year their tax burden will be halved. Those in West Wales covered 33,800 miles.

We now come to the low figures. The representatives in South-East London covered 10,100 miles. They have no chance of escaping from the Chancellor's extra taxation. Those on Teesside covered 11,000 miles. The Leeds representatives covered 11,100 miles.

What fairness, justice, principle or equity is there in a tax system which has the following result in respect of people doing the same jobs and using the same 1½litre car: those in mid-Wales would be taxed on £125 a year benefit, while those living elsewhere would be taxed on £225 a year? That cannot be right. There is no possible justification for that. It cannot be right for one man to pay twice as much tax as another when both do the same job and use the same car. I do not see how that can be defended. I look forward to hearing what the Financial Secretary has to say about that.

Mr. Wakeham

I should declare an interest. My company employs 50 salesmen who drive motor cars and average 25,000 miles a year—some lower and some higher. Those who do more than 25,000 miles a year will have less of a tax burden, and therefore a better take- home pay, than those who do not drive 25,000 miles a year.

My company is by no means certain that those who drive over 25,000 miles a year are better salesmen than those who drive less than that mileage and whose take-home pay will be varied by these new proposals in an unreasonable way. That will present my company with problems.

The figure of 25,000 miles is much too high. I calculate that it means 500 miles a week or 100 miles every working day. That represents three and a half hours of driving each day. People outside this House work a seven or eight-hour day. Therefore, a man may spend half of every working day driving. If he has to spend any days in the office dealing with paper work, he will probably spend more time driving on the other days.

My company's objective is to sell its products. Therefore, its aim is to reduce the mileage covered by its salesmen in order to increase the time that they can spend selling the company's products to customers. This proposal goes counter to everything that the management of the company is trying to achieve. It will mean that salesmen who spend more of their time selling rather than driving round the countryside will be put at a disadvantage compared with those who spend more of their time driving.

There is no doubt that towards the end of the financial year salesmen and others will be watching their mileage to make sure that they do not fall just below the 25,000 miles level and that next year there will be proposals in the Finance Bill to give marginal relief and a lot of other ridiculous nonsense which could be avoided.

Mr. Robert Sheldon

The hon. Member for Maldon (Mr. Wakeham) did not serve on the Finance Bill Committee for reasons which we well understand. Had he served on that Committee, he would have heard his hon. Friends pressing the need for a provision for people who achieve a high mileage. The argument, strongly put forward in Committee, was that certain categories of people used cars so extensively for business purposes that a special concession should be given for that purpose. The result of that argument was that we decided to deal with these exceptional cases.

We are not concerned with the average case. If we were to make special provision for the average case, the whole of the benefits in kind legislation would need to be changed. This is an exception for a small number of people who have an exceptionally high level of business use. An exception is made not for most people, but for an unusual and limited number of people. We may argue about the definition of this limited number of exceptional users of motor cars for business use, but clearly it can be nowhere near the average level.

The hon. Member for Braintree (Mr. Newton) rightly pointed out that the average level of use is 14,000 or 15,000 miles. That fits in closely with the information that I have available to me from the National Travel Survey of 197273, which showed that average business use was 14,000 or 15,000 miles in that year. That, I think, would correspond broadly with the sort of indications which most of us have available.

What we are providing is a means of assesing those users who have a wholly exceptional amount of business travel. It was argued strongly in Committee that those people who had an exceptionally high level of business use were not in a position to drive their cars as much at weekends, or would not even wish to use their cars for pleasure or recreation, unlike those who had less business mileage.

Mr. MacGregor

The Financial Secretary said that we argued purely for those with exceptional high mileage, whereas we argued for those with exceptionally high business use. Some of them may have had exceptionally high mileage but it is exceptionally high business use which is the point which matters. There are many people who use their car a lot but who have to have it outside an office and there are those who will never get near 25,000 miles.

Mr. Sheldon

I can understand the hon. Gentleman's point of view that it is exceptional business use rather than exceptional mileage but he must accept that we are talking about exceptional people, people who make either exceptional use of their car or have exceptional mileage. We are not talking about the ordinary person who makes use of his car for 14,000 or 15,000 miles and is not exceptional either in the amount of business use or the amount of his business mileage.

Sir G. Howe

Will the Financial Secretary not understand the quite astonishing propositions to which this kind of legislation is committing him? He said that we are trying to make provision for those who make exceptional business use or drive exceptional business mileage. Immediately he has got two distinct categories and he is trying to encapsulate them in one group. There is no reason, surely, why a clergyman who spends his life going from parishioner to parishioner in an urban parish should have a lesser tax advantage than the clergyman in a rural parish who travels larger distances? The Financial Secretary's latest cockshy is trying to resolve the insoluble by putting people into compartments when they should be treated separately. He will be driven, by each argument he puts, to some new absurdity. This is one of the difficulties we have in trying to consider this legislation within two or three days of its publication. The more we look at this the more lunatic it is seen to be. Any alternative to putting people into compartments is bound to be equally absurd.

Mr. Sheldon

I can think of few things more absurd than attempting to assess use on the basis of hours spent in a car. We well know that the only way in which use is generally computed is by means of mileage. That is a point which has been put to us, and I am sure that it has been put in representations to the right hon. and learned Gentleman and others. It is the only way in which one can make an assessment of this kind.

That is what we have done in response to representations made in Committee, more importantly in response to representations by those people who have direct experience of this matter and, most importantly of all, in response to the Motor Agents Association which asked for this precise concession. It asked for 25,000 miles and a reduced scale. We looked at this and we thought that the association had a good point. I heard the arguments in Committee. We received representations elsewhere for the exceptional cases and we felt that a concession of this kind was justified, and we produced an amendment for the consideration of the House.

Mr. David Howell

Having listened to the Financial Secretary I do not know which situation to fear most, either that where he rejects our representations or that when he claims to have understood them and rushes to produce an amendment which turns out to be utterly wrong and unrelated to the case. The one thing we could agree on was that we were seeking a way in which those with an exceptionally high level of business use could be protected against the full rigours of the new provisions. But how or why the Financial Secretary leaps from that to these mileage calculations he has not explained.

12.45 a.m.

The Financial Secretary has left us in an extraordinary position. Insead of being based on a proportion of use—the word "preponderantly" which we debated earlier would seem to imply that—the assessment is to be based purely on mileage. Obviously, the amount of mileage is in an almost random or purely chance way connected with the intensity of use. In areas of high population there will be less mileage, whether the person concerned is a clergyman, as in the example given by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), or a retail salesman. In areas of low population the mileage will be far higher.

For reasons which the hon. Gentleman has not shared with the House, there is now is to be a bizarre discrimination between the retail salesman slogging round Mid-Wales and the retail salesman slogging round, for example, my own constituency of Guildford. These two people will work equally hard. They will sweat away during the week. They will hardly use their cars at the weekend because they will be exhausted. Each will have visited as many customers as the other. Yet for some reason totally unexplained a substantial income tax benefit is to accrue to the salesman in the less populated areas.

As my right hon. and learned Friend said, this is the road to a higher lunacy. We have not been told why it should be so. The Financial Secretary says that the matter was discussed with the motor industry, but the motor industry has supplied a brief to all hon. Members, as far as I know, saying that it thinks that this is entirely wrong and is not the basis on which help for those with exceptionally high level of business use should be given. The industry's representatives say—and I think they are right—that it should be something very much in line with our amendment, and that if one is to make a step in this direction at all, for heaven's sake choose a level of mileage rather fairer to all people in different parts of the country, the areas of high population and those of low population—MidWales and West Wales as well as Leeds, Teesside and South-East London. That is what they say, and they add that the sort of figure they have in mind is 15,000 miles, which is what we propose.

We believe that the Financial Secretary probably misheard what was said in Committee. He seems to have misheard what was said by the motor trade. He has rushed off and produced an amendment which has created an even more bizarre and anomalous state of affairs than the one which existed before. As my right hon. and learned Friend said, he has now trapped himself in a situation from which, whichever way he turns, it is impossible to get it right.

It would be better to take all these proposals back. Plainly, both the Financial Secretary and the Chancellor are wishing that they had never embarked on this chaotic venture which will lead to so much unfairness, injustice, arbitrary calculation, administrative complexity and difficulties and inequity of the kind with which we have become so familiar in Socialist legislation from this Government. We can find nothing to say in support of it, and I feel that it would be right if my hon. Friends pressed the amendment to a Division to demonstrate the absurdity of the Government's proposal.

Amendment proposed to the proposed amendment: (a), in subsection (1), leave out '25,000' and insert '15,000'. —[Mr. MacGregor.]

Question put, That the amendment to the proposed amendment be made:—

Question accordingly negatived.

Amendments made: No. 91, in page 129, line 14, at end insert—

'Car used preponderantly for business purposes

2A.—(1) The cash equivalent derived from Table A, B or C is to be reduced (or, where paragraph 2 applies, further reduced) by half if it is shown to the inspector's satisfaction that the employee was required by the nature of his employment to make, and made, use of the car preponderantly for business travel, which means that such travel must have amounted to at least 25,000 miles in the relevant year.

(2) In relation to a car which for part of the year was unavailable in the sense of paragraph 2 above, the figure of 25,000 miles above mentioned is proportionately reduced'.

The House divided: Ayes 23, Noes 124.

Division No. 256.] AYES [12.49 p.m.
Beith, A. J. Howell, David (Guildford) Percival, Ian
Buck, Antony James David Ross, Stephen (Isle of Wight)
Cooke, Robert (Bristol W) Lamont, Norman Wakeham, John
Cope, John Lawson, Nigel Weatherill, Bernard
Fairbairn, Nicholas MacGregor, John Winterton, Nicholas
Farr, John Newton, Tony
Glyn, Dr Alan Page, Rt Hon R. Graham (Crosby) TELLERS FOR THE AYES:
Gow, Ian (Eastbourne) Parkinson, Cecil Mr. Spencer le Marchant and
Howe, Bt Hon Sir Geoffrey Penhallgon, David Mr. Carol Mather.
Abse, Leo George, Bruce Perry, Ernest
Archer, Peter Golding, John Richardson, Miss Jo
Atkinson, Norman Grant, John (Islington C) Robinson, Geoffrey
Barnett, Guy (Greenwich) Hardy, Peter Rodgers, George (Chorley)
Bates, Alf Harper, Joseph Hooker, J. W.
Benn, Rt Hon Anthony Wedgwood Harrison, Walter (Wakefield) Roper, John
Bennett, Andrew (Stockport N) Hooley, Frank Sandelson, Neville
Bidwell, Sydney Huckfield, Les Sedgemore, Brian
Boothroyd, Miss Betty Hughes, Robert (Aberdeen N) Selby, Harry
Brown, Robert C. (Newcastle W) Irving, Rt Hon S. (Dartford) Shaw, Arnold (Ilford South)
Brown, Ronald (Hackney S) Jackson, Colin (Brighouse) Sheldon, Robert (Ashton-u-Lyne)
Butler, Mrs Joyce (Wood Green) Janner, Greville Short, Rt Hon E. (Newcastle C)
Callaghan, Jim (Middleton & P) Jeger, Mrs Lena Silkin, Rt Hon John (Deptford)
Carter, Ray Johnson, Walter (Derby S) Silkin, Rt Hon S. C. (Dulwich)
Carter-Jones, Lewis Kerr, Russell Silverman, Julius
Cartwright, John Kinnock, Neil Skinner, Dennis
Castle, Rt Hon Barbara Lamborn, Harry Smith, John (N Lanarkshire)
Clemitson, Ivor Lamond, James Snape, Peter
Cocks, Michael (Bristol S) Latham, Arthur (Paddington) Spearing, Nigel
Coleman, Donald Lestor, Miss Joan (Eton & Slough) Stallard, A. W.
Corbett, Robin Lipton, Marcus Stewart, Rt Hon M. (Fulham)
Cox, Thomas (Tooting) Loyden, Eddie Stoddart, David
Crawshaw, Richard Luard, Evan Tinn, James
Cronin, John Lyons, Edward (Bradford W) Tomlinson, John
Crowther, Stan (Rotherham) MacFarquhar, Roderick Torney, Tom
Cryer, Bob Madden, Max Walker, Harold (Doncaster)
Cunningham, G. (Islington S) Mallalleu, J. P. W. Ward, Michael
Davidson, Arthur Marks, Kenneth Watkins, David
Davies, Bryan (Enfield N) Marquand, David Weetch, Ken
Davies, Denzil (Llanelli) Marshall, Jim (Leicester S) Weitzman, David
Davis, Clinton (Hackney C) Maynard, Miss Joan White, Frank R. (Bury)
Deakins, Eric Meacher, Michael Whitehead, Phillip
Dell, Rt Hon Edmund Mendelson, John Whitlock, William
Dormand, J. D. Mikardo, Ian Williams, Alan (Swansea W)
Douglas-Mann, Bruce Morris, Rt Hon J. (Aberavon) Williams, Alan Lee (Hornch'ch)
Ellis, John (Brigg & Scun) Moyle, Roland Williams, Rt Hon Shirley (Hertford)
Evans, Ioan (Aberdare) Mulley, Rt Hon Frederick Wise, Mrs Audrey
Foot, Rt Hon Michael Newens, Stanley Woodall, Alec
Forrester, John Orme, Rt Hon Stanley
Fowler, Gerald (The Wrekin) Ovenden, John TELLERS FOR THE NOES:
Fraser, John (Lambeth, N'w'd) Owen, Dr David Mr. Ted Graham and
Garrett, John (Norwich S) Palmer, Arthur Mr. Tom Pendry.
Garrett, W. E. (Wallsend) Pavitt, Laurie

No. 244, in page 129, line 20, leave out 'paragraph 2 above' and insert 'the foregoing paragraphs".—[Mr. Robert Sheldon.]

Forward to