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Second Resolution Read A Second Time

Volume 415: debated on Wednesday 31 October 1945

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Motion made, and Question proposed, "That this House doth agree with the Committee in the said Resolution."

We shall have an opportunity of discussing this matter on which, as I know, opinion is not unanimous, and in which great interest is taken, when we reach the Finance Bill, and it occurs to me that it would be inconvenient, perhaps, to have a double discussion upon it. My own attitude towards the matter, as I sought to explain when making my Budget speech, is that granted the adoption of the cubic capacity tax, which is, I think, preferred by all to the previous cylinder horse-power tax, we have put down a Resolution in terms of narrow steps, following the advice we have received—which was not unanimous but it was the advice of the majority—from the motor car industry. I went on to say in my Budget statement that the mind of the Government was not closed on the matter, that we apprehended that there were powerful arguments both for the narrow steps and for the wide steps, and that so far as I was concerned I was prepared to listen with attention to the run of the Debate on this subject and, in the light of the balance of arguments adduced, to make a submission to the Committee at the end of the discussion on whether to retain the proposal in the form in which we have made it or to modify it in the direction of wider steps. I shall not be able to go further than that today, nor will my hon. Friend, and if there is debate on the subject today we shall have to ask the House to adhere to the form in which the Resolution is put down now, namely, in favour of the narrow steps and it will be open in Committee for an Amendment to be made in favour of wider steps if it should seem to the Government that that is desirable after the subject has been fully debated on the Finance Bill. That being so, and since we have a number of ether Resolutions, I wondered whether it would not be better to leave the discussion of this matter until we reach the Committee stage of the Finance Bill, because otherwise we should be discussing the same thing twice over.

I think it would be very useful to have a preliminary discussion now. We certainly should not divide against the Resolution because it was drawn in this particular form, but we should like an assurance that it is drawn in such a manner that its amendment would be possible on the Finance Bill. I am a little uncertain whether that is so, and whether we should be able to put down an Amendment.

An Amendment would be in Order, I am advised, which would knock out a number of steps, that is to say produce wider steps by knocking out some of the steps in the existing scale. I repeat that my mind is open, or at any rate partly open, on the subject. I am not committing myself to putting down such an Amendment, but as a matter of Order that would be the way to proceed.

In view of the fact that the right hon. Gentleman's mind is open I am sure he would not object to some of my hon. Friends trying to fill it for a short time.

I am afraid that I cannot agree to the Chancellor's suggestion to defer any consideration of this matter, partly because I do not agree with the whole business, and also because I want to ask him a specific question. I notice that in his Budget speech he said:

"I have received a good deal of conflicting advice."—[OFFICIAL REPORT, 23rd October, 1945; Vol. 414, c. 1888.]
I have no doubt a Chancellor of the Exchequer always gets a lot of conflicting advice, but what I want to ask him is from what quarters he has received it, because I make no secret of the fact that personally I deplore the decision in this matter from beginning to end. I am convinced that if we adhere to the horsepower tax in any shape or form, even although disguised as a cubic capacity tax, we shall be condemning the British motor car industry to a permanent status of inferiority in comparison with the American, and shall prevent British motor cars from playing that part in our export trade to which the Chancellor, I know, looks forward.

I do not know whether many hon. Members had the same doleful experience that I have had of seeing British motor cars trying to compete with American motor cars in various parts of the world, even in the comparatively sheltered markets of the British Empire. Up to now the whole position has been perfectly ludicrous. At this time last year, when I was in Trinidad, I made inquiries about the postwar possibilities for British motor cars. One of the dealers to whom I spoke said, "Come down to my garage and let me show you something." He showed me a 12 horsepower British car and a 30 horsepower American car, both at the same price, and remarked, "Do you ever imagine that the British car is going to compete in those conditions?"

What we are continuing to do is to subordinate sound engineering to a purely arbitrary factor like taxation, and to place the British motor car industry under a handicap from which it has hitherto never recovered. This has led to a multiplicity of models. One never sees American motor car manufacturers turning out eight or ten or a dozen models, as our manufacturers do. It means that we are throwing away in advance most of the advantages of mass production. We are designing a car which is not based upon sound engineering principles but designed merely to dodge the Chancellor of the Exchequer. The other handicap from which our industry suffers is that we have to produce a special model for export. I hope the right hon. Gentleman realises that if we produce a special model for export only, and cannot rely upon the great home market, we can never compete with the United States. He is going to find that out when it comes to the question of Purchase Tax—and the effect of which will be that he will not get the volume of production which will enable us to compete economically in the markets of the world. Our industry has always suffered from those two handicaps, and under the existing system of taxation apparently it is to go on suffering indefinitely.

3.45 p.m.

But the question I wish to ask, and to which I hope either the Chancellor or his hon. Friend will reply, is: From whom was the advice received? He has certainly not received it from the users of cars, as represented by the A.A., R.A.C., and the Scottish R.A.C., who are unanimously opposed to the continuation of the horse-power tax and are in favour of the Chancellor adopting a system of a fixed licensing fee, plus a tax on petrol. He has certainly not received that advice from the Motor Agents' Association, who have to sell the cars, and who again are entirely opposed to this idea. He has certainly not received it from at least two of the largest manufacturers, and he has certainly not received it, I imagine, from the trade unions.

I do not know whether the Chancellor of the Exchequer was in the House less than six months ago, when his right hon. Friend the Foreign Secretary made an illuminating speech on this subject. It was on 4th June, 1945, and this is what he said:
"I carefully estimated that, if this thing were revised and put on a proper basis, as I have submitted to the Chancellor over and over again, nearly another 500,000 people would be permanently employed in the motor car industry of this country."—[OFFICIAL REPORT, 4th June, 1945; Vol. 411, c. 579.]
We have never learned to associate the Foreign Secretary with wild or irresponsible statements, and I assume that, when he made that statement, he was not merely voicing his own ideas but putting forward the view of the great trade union movement of the country and especially of the Transport and General Workers' Union. Is the right hon. Gentleman going to entirely ignore a recommendation of this sort, which shows that another 500,000 people could be employed in the motor car industry if this tax were adopted in that form?

From whom, then, has the Chancellor taken advice? Is he referring to the Passenger Carrying Vehicles Association, or bodies of that sort, because I want to tell him—and he is probably not aware of it—that in the last few days or weeks, these bodies have at last got together. I would be one of the first to admit that the motor car industry has suffered in the past from the fact that these people did not get together and present a united front. I have reason to believe—I will not put it any higher than that—that if the Chancellor is still prepared to keep an open mind on the whole basis of taxation, he may, in the course of the next few weeks, receive representations from all branches of the industry which will show him that they are in favour of the abolition of the horse-power tax, in any shape or form, and the substitution of a licensing fee, plus such additional tax on petrol as is necessary to make up the same revenue.

I want to ask the Chancellor two questions. First, would he tell the House what advice he has listened to, and if he is to ignore the voice of the trade union movement in this matter; and, secondly, whether his mind is still open to representations on the alteration of the whole basis of taxation?

One part of the speech of the hon. and gallant Member for Hornsey (Capt. Gammans) cannot be allowed to go unchallenged. The hon. and gallant Member said, I believe, that we were not producing, in our motor cars, a sound engineering job. I feel that that ought not to go out of the House unchallenged, because I am satisfied, and I know a little about the industry, that we do produce, from the point of view of design, a really sound engineering job and a really well-constructed job.

Possibly, I did not make it clear. I certainty did not want to give the impression that the British motor car industry was incapable of producing a sound engineering job. I said that they were in the unfortunate position of having to subordinate sound engineering principles to taxation.

When the hon. and gallant Member spoke of subordinating sound engineering principles, the implication is that we have not produced a sound engineering job. I say that the British car is a sound engineering job, in spite of the limitations of the horsepower tax, and I am satisfied that we do produce a good job. What is rather interesting to me is that the hon. and gallant Member was unable to convince his side of the House, when they had overwhelming power, of the urgent necessity of this change. Presumably, the manufacturers would have supported him—and that side of the House. Now, he expects this Government and the Chancellor to make that alteration at a time when it is obvious, from the taxation point of view, that it is most undesirable to do so. There is, at the present time, a restriction on the use of petrol. What sort of tax would there have to be on petrol to produce the amount of revenue which the Chancellor would lose? Surely, that is a satisfactory answer to the hon. and gallant Gentleman at this stage. It seems to me that the Chancellor has gone as far as we could reasonably expect him to do at this particular juncture, and, on another occasion, when an opportunity presents itself, when the level of taxation that may be raised from motor cars may be of such a volume as will justify the alteration being made, I hope we shall find that the Chancellor's mind will be just as open as the hon. and gallant Member expects it to be at this time.

I should have been quite willing to have followed the Chancellor's advice and left this question for further discussion when the Finance Bill comes before us, but the hon. and gallant Member for Hornsey (Captain Gammans) has raised one or two points which I think must be dealt with now, for fear of creating some misapprehensions. The hon. and gallant Member asks where the Chancellor got his information, and he stated that private car users are in favour of a tax on petrol. That is correct; they have been for the last 20 years, to my knowledge. The hon. and gallant Member also mentioned that manufacturing interests, or rather two manufacturers, were also in support of it. He did not tell the House that they are in a minority of two, and that the rest of the motor car manu facturers support the method which has been suggested by the Chancellor.

The motor manufacturers put their views to the late Chancellor and I have no doubt that they have put them to the present Chancellor, and suggested that the R.A.C. rating, which takes notice only of the bore and ignores the stroke, should be dropped in favour of a rating based on cubic capacity. But they did agree that, if the Chancellor was willing to accept any other method of taxation, they would not press their objections, but that that was their view as to the best method. The Chancellor has accepted this method of taxation, and the motor manufacturers, therefore, naturally feel satisfied, with the exception of two dissentients, that it is the best method under the circumstances. As I stated during the Debate on the Budget, this will make no real difference. So long as we are going to tax motor cars to the extent that we do, so long are we going to have small motor cars. There is no mystery about it. Even under the taxation before the war, which was lower than it is today, 90 per cent. of the cars produced were 12 horse power and under, and something like 80 per cent. between eight and ten horse power. I am speaking without having the exact figures in front of me.

Would my hon. Friend agree that, if 90 per cent. of the cars produced were under 12 horse power, this type of British car is quite unsuitable for export, and, therefore, so long as the Chancellor is hoping to increase our export of motor cars, that system, whatever we may call it, is not suited to the policy he has outlined?

I was only trying to make the point that, under any system of taxation, where you are going to make motoring expensive, you are going to have the public asking for small cars. Other countries produce larger cars, but petrol is much cheaper, and registration fees are not as high. They do not regard transport as a means of raising revenue, but rather as a means of life. We have always regarded motor transport as being a rich man's hobby and, therefore, to be taxed. As I have said before, and shall continue to say, we shall never get our share of the world's motor car market until we tax the motor car as a transport vehicle and not, like whisky or beer, as a means of raising revenue. If we could free motors from high taxation, we should be making motor cars cheaper and should get bigger cars. For that reason, if the Chancellor accepts, as the motor car industry will accept, this basis, they will then say to him, "Neither a tax on cubic capacity nor any other change will produce larger motor cars for export. The only way to produce larger cars is by reducing the amount of taxation, and that the Government is not prepared to do at the present time."

We say, therefore, that, if you are going to have this method of taxation, let us have it in the smallest steps possible. The hon. and gallant Member for Hornsey talked about eight and ten different models, but the hon. and gallant Member is thinking about body styles. The British manufacturer, and the foreign manufacturer, do not manufacture a large number of different engines, but they have had a habit in the past of making their engines 11·9, 13·9 and 15·9 horse power—always getting the highest possible level they can under the taxation. Under this restricted method, you would get the same thing over and over again. If a manufacturer is to have four steps, you will get four in that way, but, if he is told that he can have 10 steps, he will not make 10 different cars, but will reckon up the weight of the chassis, how much it will cost in taxation, and, if necessary, add another 100 cubic centimetres, and so he will produce a better car. The short steps will give him more scope in which to design.

I would have reserved these remarks for a later stage but for the remarks put forward by my hon. and gallant Friend, and I do not want the House to be under any misapprehension as to where British motor car manufacturers stand and why they stand there. We shall not get bigger cars under our present system of taxation. I can assure hon. Members that they will find some countries where you can sell small as well as large cars; there are other countries besides this where economic motoring is essential, as it is in this country, and those are the countries where we shall have to sell our cars.

The principal argument seems to me to be that mentioned by the hon. Member who has just sat down. It is becoming clear that the taxation, in any form, of motor cars leads to reduction in output. I would like to obtain from the Chancellor some definite statement on why the Government want the same amount of money out of the taxation of motor cars as they have had in the past. I remember when the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) said he would consider a suggestion put to him, but mentioned the necessity of having the same amount of revenue out of cars. It is becoming clear that, if we keep motor car taxation high, people will not buy cars. They cannot afford them. If, according to the views of the hon. and gallant Member for Hornsey (Captain Gammans), we transfer the tax to petrol, there again the people who have large cars will have to pay high annual chargesin taxation in buying their petrol. Both aspects of the tax militate against the production of large cars and their export overseas. It is quite true, as the hon. and gallant Member for Hornsey said, that people abroad will not look at the small-powered English car as compared with the high-powered American car, and there is no hope of selling it. The distances are great, the roads are dusty and often bad, and a high-powered car is needed in order to overcome the difficulties and strain of long distances. Can we have from the Chancellor some definite statement about why it is necessary to keep on this taxation, and does he admit that, while he keeps it on, there is no prospect whatever of securing a very large output for British cars overseas?

4.0 p.m.

I do not pretend to be an authority on the engineering side, but I have listened with interest to the economic arguments put before the House this afternoon. I have always regarded the taxation of cars as not the cause of all the ills of the industry but as the effect. Taxation on cars in this country has been levied in a certain way because fundamentally the problem is to maintain our home market. That is, as I see it, one of the tremendous difficulties facing an industry like the motor car industry—the narrowness of the home market. The British home market relative to the home market in America is indeed a very small one. I remember very well being on a committee dealing with the subject of films, and masses of technicalities were brought up in the course of the discussions, but we were up against the same problem as we are up against here, the relative largeness of the American market compared with the British market. Therefore the Chancellor has a very difficult job to synchronise the industry to the needs of the home market and the export market. We are so placed in Britain that the demands of the home market generally do not synchronise with the demands of the export market, and to keep the home trade we have been compelled to have relatively low-powered cars. That, as I see it, is one of the great problems facing the Chancellor.

I would like to ask the hon. and gallant Member for Hornsey (Captain Gammans) and other hon. Members this question:They want a certain form of taxation in this country—they want to take away the horse-power tax and put a tax on petrol, thereby giving a chance to the industry to capture the export market. Do my hon. Friends include also the lowering of the tariff on cars imported into this country in order to cheapen the running of cars? Will they open the floodgates? Will they expose us to the competition of American industry? Let us have cheap motoring, let us have big cars—I have no doubt that big cars are better than smaller ones and are more conducive to safety. We shall have safer roads if we have bigger cars, but are my hon. Friends prepared to go so far as not only to deal with the motor taxation itself but to remove the tariffs? They cannot argue for cheap cars and cheap motoring unless they are prepared to remove the tariffs. Fundamentally, we are up against the big unit of production that exists in America, we are up against the gigantic power of American production and no tinkering, as I see it, with the horse-power tax, and so on, will meet the gigantic problem that lies before this country.

I intervene for one moment to impress upon the Chancellor of the Exchequer the point that he will impose this tax in small steps. I understand that the motor industry are quite unanimous in urging that small steps are desirable in the interests of the industry in imposing this tax. I understand also that they feel it would give greater elasticity for development of design, greater opportunity for using high octane petrols, as and when they become available, and I also understand that it will not mean multiplicity of design as has been suggested. Small steps will really help the motor trade, not only for the home market but for export, and I hope that the Chancellor will give most earnest consideration to the representations he has received, or will receive, from the motor trade when he decides upon the way in which he will impose this tax.

I merely wish to stress thatthis is a very important issue which is before the Chancellor today. After all, he has a very great opportunity, and if we make a mistake in this House now or during the course of the Finance Bill, we may do very great injury to a most important industry which we want to see developed still further. It comes back, I think, to something really fundamental and to a point which the right hon. Gentleman made in his Budget statement, of which I will give this sentence:

"…it is claimed by some that the total weight of taxation on motor vehicles, however assessed, should be reduced. I cannot agree to this at present."—[OFFICIAL REPORT, 23rd October, 1945; Vol. 414, c. 1888.]
So the Chancellor lays it down that whatever happens there can be no reduction in the amount of money coming into his coffers from motor cars. Is he absolutely right to take that line today? I have not had an opportunity of asking my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) but even if he said that six or 12 months ago, that was in a time of war when there was no question of making any motor cars at all, whether for home or for export, because we were not exporting in the latter war years. So it is really irrelevant, in my submission, to cast back to what any previous Chancellor may have said. This is the opening of a new era, possibly, in motor car manufacture in this country. The right hon. Gentleman the Chancellor of the Exchequer has told us several times that it is the opening of a new era in other directions—let him not overlook the opportunities that lie in front of him in this connection. I could see more strength in the argument that we must under no circumstances lose any revenue out of motor taxation if the old system still existed of linking up motor taxation with the expenditure on the roads, which is really where it all started—the introduction of the Road Fund, and so on, which has long since been swept away, was, I think, part of the reason why the taxation of motor cars in those days was so high, but of course there has been a complete change in the world since then and the motor car is, as the hon. Member for Aberavon (Mr. Cove) pointed out, no longer a luxury—

:The hon. Gentleman may say that, but I will quote what the present Foreign Secretary said recently when this was being discussed. He said:

"…why should we perpetuate the misery of any artisan or member of the lower-paid middle class having to ride in a car with his knees in his mouth."—[OFFICIAL REPORT, 4th June, 1945; Vol. 411, c. 579.]
I agree that is a most undesirable attitude to adopt, and evidently the Foreign Secretary envisaged the possibility of lots of people having motor cars and the more the better. I should certainly subscribe to that myself. It is a form of enjoyment which we hope may become as extensive here in due course as it is in the United States of America. I do not know how our roads will stand up to it, but that is another question.

How does that apply to those who are redundant and are only to get 24s. a week?

I understand that will not last any longer in the new world which is just beginning. I merely put it to the right hon. Gentleman that this original link, partly a luxury link and partly a Road Fund link, has now entirely disappeared. He has this great opportunity of so moulding the taxation on motor cars as to bring about not only a great increase in this country but—again in the words of my hon. and gallant Friend the Member for Hornsey quoting from the Foreign Secretary—of seeing a great development of the industry here. In our search for vital exports it may very well be that by right design—and so far as that is due to taxation, by right taxation—the motor car industry has a very great future. I am not competent to go into the details of the steps. I have no personal knowledge of the general economics of the industry as have my hon. Friends, but I would urge upon my right hon. Friend that if the hon. and gallant Member for Hornsey was right in the opinion he expressed—that the right hon. Gentleman might get completely united representations on this subject—that his mind should not be closed. I know it would not be, from what he said, but I would like to be quite certain that by passing the Resolution in this form we would not prohibit him from adopting any new suggestions.

May I put it the other way? Very often it is only after the production of the Resolutions that real discussions start with all concerned, and if he found subsequently that agreement could be reached upon some other basis, I hope he would not hesitate to come down to the House again, and, if necessary, introduce a different Resolution covering any agreement which was completely unanimous on the part of all concerned. It may be rather Utopian to think that is possible, but my hon. and gallant Friend the Member for Hornseyhas, I think, some reason for putting that point of view, and therefore I hope that no difficulties of a procedural nature would make it awkward in acceptance. However, I still would urge my right hon. Friend that, if he does not think this is the right moment, he would bear in mind that he may not be quite right in saying it is impossible to sacrifice any revenue out of motor taxation.

As I see the Resolution, it apparently envisages the possibility that when the new scheme of taxation comes into effect, whatever it may be, there will be two different kinds of licence charges running—existing motor cars will be charged upon the present basis and new ones upon another basis—

That may be a little awkward administratively, but possibly it is the only way out. I hope the right hon. Gentleman will look into the problem still further, because it is of vital importance that we should, if we can, go ahead in the export market in motor cars.

4.15 p.m.

As the right hon. and gallant Gentleman opposite has just said this is a matter of very great interest to almost everyone. We have, however, to remember the situation in which we are placed today. This Resolution is the one which the ex-Chancellor, the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) introduced with his April Budget, and this one, an interim Budget, carries forward and implements the Resolution as he laid it down. As to agreement among the manufacturers, even supposing it were possible for this Resolution to be withdrawn now, I doubt whether we could get agreement among them. As the hon. Member for Edgbaston (Sir P. Bennett), who speaks with great authority on this subject, has already said, the manufacturers were divided. The majority of them were in favour of this Resolution, that is procedure by small steps and there were others too, I believe, who wanted something else. What all manufacturers and users of cars would be agreed about would be that we should abolish taxation on cars altogether. Obviously, that is not possible. The ex-Chancellor said in his April Budget that he wanted revenue, and my right hon. Friend, as he said last week in introducing his Budget, cannot make any changes now. But that does not mean that at some future time something cannot be done. I think it is quite likely, as expenditure goes down, that something can be done.

Does the hon. Gentleman recognise that this is a great moment for doing something, because at this stage designs for post-war cars are coming out?

That, of course, is fully realised by my right hon. Friend. Now is always the great moment, but I would not quarrel with what the Noble Lord has said. The fact is, however, that the Chancellor cannot do without this revenue and the only other way of raising it at the moment would be on petrol. My right hon. Friend, I think, carried the House with him the other day when he said that it would be inadvisable, to put it no higher than that, to let this charge fall on petrol users. It would cause a good deal of difficulty, assist the gentlemen who make their living in the black market, and it would add to the cost of living. It is, therefore, undesirable both on those and other grounds I have not mentioned. Some semi-humorous play has been made in the Debate of a previous speech of my right hon. Friend the Foreign Secretary. None of us likes to sit anywhere with our knees in our mouths, and if we could get more room in cars we should all be delighted. But the speech my right hon. Friend made was not a speech against this proposition as such. It was in favour of the wider steps as against the narrow steps, and on that point my right hon. Friend the Chancellor has still an open mind. It may well be that before the Resolution becomes embedded in the forthcoming Finance Act his mind which, at the moment, is open will be still more widely open.

Do I understand that even if all the interests representing motorists, whether manufacturing or users, came along, having reached agreement, the right hon. Gentleman would not be prepared to change the Resolution?

I said nothing of the sort. I was not talking about representative associations coming to see the Chancellor. I was referring to an entirely different thing. What I was saying was that manufacturers and other interests have seen my right hon. Friend and that, as he indicated frankly in his Budget statement, the views put to him were in conflict. As he had to come down on one side or the other he has come down, for the moment, on this side, but he has an open mind and is still open to convincement the other way.