§ Hydrocarbon Oil Duties
§ I dealt earlier with the excise duties on tobacco and drink. The oil duties, however, raise wider issues. I have already mentioned the general case for measures that will help us to meet the growing and undoubted need to conserve oil. At a time when there is a worldwide shortage of crude oil, it is essential that we should play our full part in achieving the 5 per cent. reduction in consumption to which the previous Government rightly committed us.
254§ I therefore propose to increase all the main oil duties this year. In the particular case of petrol, the VAT increase from 12½ per cent. to 15 per cent. will be smaller than for many other items. With that in mind I propose to increase the petrol duty by 7p a gallon, which will result in a total price change of about 10p a gallon. I also propose to increase the duty on derv by the same sum, 7p a gallon, and the duty on heavy oil other than derv by ½p. I am not, however, increasing the duty for burning oil and for domestic paraffin, which is the oil used most commonly in the home, particularly by pensioners. The yield from these excise duty changes is estimated at an additional £525 million in a full year and £400 million in 1979–80. The immediate increase in the RPI will be about a quarter of 1 per cent.
§ Vehicle Excise Duty
§ In view of the increase that I am proposing in the road fuel duties, I have decided to make no change in the rate of vehicle excise duty. Our predecessors announced their intention of abolishing the duty on petrol driven vehicles. As my right hon. Friend the Minister of Transport has already said, we are reviewing the future of this duly and we shall announce our conclusions in due course. For heavier goods vehicles, my right hon. Friend will be announcing plans for restructuring the form of this tax.
§ Car Leasing
§ Before I leave the subject of motor cars, there is a particular issue that I need to deal with. There is a weakness in the present legislation on capital allowances which enables leased cars to avoid the special rules restricting allowances for business cars. This has resulted in a loss of tax which is currently running at about £175 million a year, and which could well rise to £200 million next year if I take no action. I propose to put this right with effect from today.
§ Petroleum Revenue Tax
§ I turn next to petroleum revenue tax. The previous Government announced last August that they proposed to increase this tax from 1 January this year. These proposals were discussed very fully by the last Government with the industry and we ourselves have had representations about 255 them, which we have carefully considered.
§ I have judged them now against the background of recent rises in the price of oil. On that basis, the original package of PRT proposals for giving the Government more revenue from the North Sea is now fully justified. Accordingly, there will be provisions in the Finance Bill to implement it. I also propose, however, to introduce some changes in the PRT expenditure rules for which the industry has been pressing for some time. The British National Oil Corporation will no longer be exempted from PRT.
§ These proposals will increase the Government's revenue from the North Sea—at 1978 prices—by about £110 million this year and by about £1,800 million over the period to 1985.