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Orders Of The Day

Volume 439: debated on Wednesday 9 July 1947

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Finance Bill

Order for consideration, as amended, read.

Bill re-committed to a Committee of the Whole House in respect of the Amendments to Clause 6, page 6, lines 33 and 45; of the first Amendment to Clause 8, page 7, line 14; of the Amendments to Clause 8, page 7, lines 15 and 18; of the new Clauses ( Rate of excise duty on motor cars (other than electrically propelled)and ( Imported films;)of the Amendment to Schedule 3, page 61, line 37 and of the second Amendment to Schedule 4, page 63, line 33, standing on the Notice Paper in the name of the Chancellor of the Exchequer.—( Mr. Dalton.)

Bill immediately considered in Committee.

[Major MILNER in the Chair]

Clause 6—(Intermediate Rate Of Purchase Tax On Certain Goods)

3.31 p.m.

I beg to move, in page 6, line 33, after second "in," to insert "Part I of."

This is a drafting Amendment. Presently we shall ask for the insertion of a new Part to the Schedule, and this is a paving Amendment which will enable that to be done.

On a point of Order, Major Milner. May I ask for your guidance on this? This Amendment is a lead-in to an extremely important Amendment which imposes double Purchase Tax on certain goods. We are opposed to that proposal. We desire not only to discuss it but to have an opportunity of voting on it. Can we be assured that the insertion of these words at this stage will not prejudice our chance when it comes to a discussion on the main proposal and, it not, on which the lead-in Amendments is it proposed to take the main discussion?

We, of course, apprehend that there will be a desire for discussion. We welcome a discussion on the proposal, and if the right hon. Gentleman wishes to divide, that would be a very natural reaction, unless he shall have been converted by what may be said in the Debate. I think discussion naturally arises on the first Amendment to Clause 8 which provides for a 66⅔ per cent. tax. We have no desire to evade Debate. I suggest we might have the main Debate at that point.

This is a matter of procedure, but the difficulty is that that involves passing other Amendments beforehand. If an Amendment is passed then to delete the actual provision for doubling the Purchase Tax it would leave those words without meaning and it might, therefore, be held out of Order for that decision to be challenged.

I will give the right hon. Gentleman an assurance that such a proposal will not be ruled out of Order in such circumstances. We can come to a decision when the time arrives as to whether an alteration will be required thereafter.

Might I suggest that supposing the Governments subsequent Amendment were withdrawn, the Chancellor of the Exchequer or the Financial Secretary could give an undertaking that on the Report stage the words now inserted would be taken out?

I think the right hon. Gentleman will be content with the assurance I have given.

Amendment agreed to.

I beg to move, in page 6, line 45, at end, to add:

"and the provisions of Part II of the Fourth Schedule to this Act shall have effect as to the ascertainment of the retail value of road vehicles in connection with purchase tax."
This is consequential and again hinges on and ties up with an Amendment to the Fourth Schedule which will be moved by my right hon. Friend later on.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 8—(Commencement Of Two Preceding Sections, And Saving)

I beg to move, in page 7, line 14, after "operation," to insert:

"(a)except in so far as they relate to road vehicles."
This is the point at which we can most conveniently deal with this subject. The proposal which I have now to submit to the Committee is that which I indicated when I made my previous statement on the matter of motor taxation generally. Although we are properly treating the two things separately, this proposal for the double Purchase Tax on the more expensive cars is part of the single scheme. It was not proposed on its own isolated merit but as a balancing factor in the general scheme of motorcar taxation, connected with the reduction of tax to £10 for new cars. I am not dealing with that question at the moment but merely reminding the Committee that this is part of a balanced scheme.

As I indicated on a previous occasion, the reduction of the annual licence fee to £10 carries exceptional advantages for the more expensive cars. Therefore, it seemed to the Government that the equitable way to deal with this matter—and also from the Treasury point of view the way in which to balance our accounts substantially for the present year—was by compensating for the loss of revenue on the reduction of the annual licence fee on new cars. We do not propose, as some have suggested in the past, to do this by an increase on the fuel tax. The method we propose provides that all cars which ex-tax are worth £1,000 or more should be subject to Purchase Tax at 66f per cent. instead of 33⅓ per cent. This may quite properly be regarded as requiring the person who purchases one of these more expensive cars which are now becoming liable to the higher rate of duty to pay a larger lump sum down by way of Purchase Tax in return for the prospective reduction year by year in the future of his annual licence fee.

I was reading something in the "Sunday Times" of 29th June, by their motoring correspondent. That is not a paper which gives unquestioning support to His Majesty's Government on all subjects, and therefore I attach the more importance to this expert- opinion. The motoring correspondent writes a note which is broadly favourable to the proposals I am making, and in it he deals with some of the objections which have been made. He says:
"The effect, it is complained, will be to reduce to a dangerous degree the saleability of such cars on the home market."
That is the whole issue with regard to Purchase Tax. We are most anxious to sustain the export drive, particularly in regard to these cars, which would raise, by reason of their price, a large foreign exchange. [Interruption.]

On a point of Order, Major Milner. Is it out of Order for me to leave a case on the bench for the convenience of another hon. Member who wishes to make reference to certain notes for the Debate? I have brought his bag into the Chamber.

I gather, Major Milner, that it is not so eminently out of Order that you desire to intervene in the matter.

As the matter has been called, to the attention of the Chair and no action has been taken, may I ask is it now to be held, Major Milner, that people may bring into the House despatch cases or even suitcases, and place them on the bench? It would be for our convenience to know that that is now the new Rule.

Frankly, I was not aware what the hon. Member for West Salford (Mr. Royle) had brought into the Chamber. It is perfectly in Order for Ministers to bring in despatch boxes, but it is quite out of Order to bring in receptacles of a different character.

I beg your pardon, Major Milner, I will take it away. One gets into trouble for somebody else's fault.

On a point of Order, Major Milner, now that the case has been removed. Is there any difference in size or appearance between the article removed and the boxes usually brought into the Chamber by Ministers? Why should a special advantage be afforded, even to Ministers, in matters of this kind?

Of course, it is an ancient practice, and one which is peculiar to Ministers, who have the privilege of bringing despatch boxes into the Chamber. It is quite out of Order to bring in receptacles of a different nature or kind, on which it would be difficult to draw a line.

I call you to witness, Major Milner, that I have brought in no box— red, black or brown. I have merely a small sheaf of aides-memoire.

What I was seeking to argue, when we had this interlude, was that in the adjustment of this, the expert motoring correspondent of the "Sunday Times" thought that the danger to the home market of the more expensive cars had been somewhat exaggerated by those who have criticised this proposal. He concludes the discussion of the matter by saying:
"There is evidence"—
I am only quoting one sentence, but the whole paragraph is interesting—
"that buyers of luxury cars are not, in fact. cancelling their orders."
He goes on to say that the agents point out that the savings of more than £50 a year by the flat rate tax offsets the increase of even £1,000 of capital outlay, much of which is recouped when the car is sold secondhand. That is evidence that this is helping the industry. I merely quote this as a dispassionate person's view, who will not be suspected of being on my side.

Is the Chancellor aware that some of these agents have now reduced the price by £1 to keep within the lower tax?

Yes, that is quite true. Certain cars are now for sale at £999 ex-tax. That is all right by me. They fall outside the field of the double Purchase Tax. That is all right. Wherever you draw a line, there will be somebody rather near it who can move across it; we find that in all these tax arrangements. I am merely making the point made by the motoring correspondent, I have quoted, as evidence that the increased Purchase Tax which I am proposing must be set against the annual reduction in the licence fee. In the case of the more expensive cars which, but for these tax proposals, would be paying a higher licence fee of £70, £80 or more a year, if this is worked out, it is bound to result, on the whole, in a balance of advantage to the purchaser of these cars in the home market. He pays so much less each year and, because of that, it is worth while from his point of view to pay a somewhat larger purchase price such as is here involved.

3.45 p.m.

That is the broad argument. It is open to debate where we draw the line, but I would not be prepared to recommend to the Committee the annual licence fee on new cars of £10,however high-powered unless we balanced it, in regard to the more expensive and luxurious cars, by an addition to the Purchase Tax. If we say there shall be an addition to the Purchase Tax, we are limited to considering what the addition shall be. We cannot just make the Purchase Tax any percentage we like; it has to be a certain percentage of 100 per cent—of 33⅓ per cent., which is now levied on all cars for the home market, or of 66⅔ per cent., a step which I have this year introduced into the Finance Bill, and the Committee have approved, and to which already some of the previous 100 per cent. liabilities have been reduced. Therefore, if we are to raise the Purchase Tax as it now stands from 33⅓ per cent., we can raise it only either to 66⅔ per cent. or to 100 per cent. I have not proposed to raise it to 100 per cent.; that, in my view, would be too much. Therefore, our idea is to raise it to 66⅔ per cent., if we are to raise it at all, and that is the proposal I am now defending.

I made this proposal to the House on 17th June, and it is proposed that the change should be made operative as from the day following that statement, in order to prevent forestalling, as from 18th June. The proposal is that the increased rate of tax would apply to all cars within the field here defined, when these are despatched by the manufacturer on or after 18th June. The increased tax will also apply to imported cars. There are not many of them but, in so far as they are coming in, they would also have to pay this tax in so far as tax is chargeable at import, as in most cases it is, provided they are entered with the Customs or through some agent for delivery to a person in this country on or after 18th June.

If my principle of action is accepted, the Committee may debate where the line should be drawn. I have proposed to draw it at £1,000 ex-tax. The provision here of £1,280 cum-tax is the same thing and it is the more convenient, I am advised, so to define it. If it is taken at £1,000 ex-tax, one excludes all except a relatively small number of types of cars. I will not at this stage enumerate these, or discuss their special characteristics, or the market for them. I have, of course, had representations made from various hon. Members, and various private interests have quite properly made representations to me. I have considered them with great care, and it may well be that some of these points will be raised in Debate. It would be more convenient that I should not anticipate those, but should rather deal or ask my hon. Friend to deal, later on with any points that may be raised by hon. Members in the discussion.

Having looked at the thing to the best of my ability, it seems to me that the £1,000 ex-tax is the right dividing line. Everything is experimental in our finances, not least in the field of the Purchase Tax. It always has been so. I am inclined to think—though naturally, we will listen to the Debate as it proceeds —in spite of the representations I have received, that this is the right line at which to distinguish the more luxurious from the less luxurious cars. On those falling below this level, the present Purchase Tax is retained at 33⅓ for the home market and those cars all obtain the advantage of £10 a year annual licence fee. Those which come above this line of £1,000 or more, appear to me to get a pretty good bargain, balanced annually with this lump sum payment, under the proposal I make. Although I may say another word later after the Debate has developed, at this stage I merely move the Amendment.

I must make it clear that if we are to have a general Debate on these Amendments, the Debate ought not to be repeated on the Third Schedule. I am rather in the hands of the Committee, and if they wish to have a general Debate now I am perfectly agreeable on that undertaking.

That would be quite agreeable, provided that it is understood that we can discuss the Amendment in the name of my right hon. Friend the Member for West Bristol (Mr. Stanley) to leave out certain words from the Amendment in the name of the Chancellor to Schedule 3, page 61, line 37.

I listened with interest to the explanation of this new proposal given by the Chancellor and I would like to deal straight away with the points he has made. He bases his case for the doubling of the Purchase Tax on cars of which the price is more than £1,000 almost entirely on the ground that it will provide what he calls a balancing factor to offset a relief which the purchaser of a high-powered car will obtain by a reduction of the horse-power tax to the fixed figure of £10. He goes on to say that anybody having a high-powered car, and paying this extra Purchase Tax, will get a good bargain, because the amount of money he would save over a period of years on the horse-power tax will equal and even, he claims, exceed the additional Purchase Tax paid. I shall be very interested to see how the Chancellor makes out his last proposition. Even if we assume the life of the car, being a good quality car, to be a long one, and put it at 10 years, I should think a simple mathematical calculation would show that a saving of £30 on a 30-horse-power car over 10 years amounting to £300 was nothing like equal to doubling the Purchase Tax on present prices of cars of that type. Many cars of that class cost £2,000, and a Purchase Tax of 66f would amount to £1,300 or £1,400, and the additional Purchase Tax imposed will be £600 or £700. I do not think we can justify this additional tax on the ground that it is to be a balancing factor.

A £1,000 car today is only the same vehicle as cost £400 before the war, and there are many cars of quite small horsepower. 10 or 12-horse-power cars, which are priced today at £1,000 or more. Those cars will be hit by this doubling of the Purchase Tax. On the other hand, there will be cars in the future—and this is the whole object surely of fixing the Horse-Power Tax at £10—of a high horse-power which are cheap vehicles to buy. The whole object of the new arrangement is to enable cars of 20 or 25 horse-power to be built here, mass produced, suitable for sale overseas in the Dominions and Colonies. Therefore, there is no true relationship between horse-power on the one hand, and price on the other. It is intended that in the future there will be very much less relationship between those two factors than at present. A car of 25 or 30 horse-power will be selling very cheap, and some small high quality cars will be selling at £1,000 or more. If the Chancellor wanted to balance this factor of the advantage gained by a reduction in the horse-power tax by an increase in the Purchase Tax, I believe he should have related his rates of Purchase Tax to the horse-power of the car. The Purchase Tax in the home market should be fixed to a relationship with the horse-power of the car, and in that way the Chancellor would get back from the purchaser of a high-powered car an amount which would precisely balance the advantage he gained by the reduction of the Horse-Power Tax.

If that were adopted, it would defeat the whole purpose of the flat rate tax.

Surely, the Chancellor's proposal has exactly that effect, as I think I will be able to show the hon. Member for Chesterfield (Mr. Benson) in the course of a few moments.

The Chancellor goes on to say that if he is to go on to increase the Purchase Tax he has to fix the rate at one of the rates provided, and that he has only the 33⅓ compartment, the 66§, and the 100 per cent. compartment, and that he has no alternative but to step up the rate to 66|. That he should feel himself bound by the three or four compartments of Purchase Tax existing at present seems quite ridiculous, especially when we look at what he is going to do in regard to Customs Duties for imported films. He has made some revolutionary proposals in this Finance Bill, and if he wished to fix graded rates of Purchase Tax, there would be nothing whatever to stop him doing so. I am quite sure that on his first point, that this is a balancing charge to recoup an advantage the purchaser of a car might otherwise obtain, his case is not made out.

I did not suggest that it would be balanced car by car, but, in the end, in terms of revenue.

In the aggregate revenue which the Chancellor expects to get, there is some relation. Actually the right hon. Gentleman is forfeiting £1 million of revenue by reducing the horse-power tax in the coming year, but he anticipates to get £1,500,000, or 50 per cent. more than he is giving away, by this additional Purchase Tax. So the balance, even on the global figures, is a very rough and ready one, and by no means to his disadvantage. This is the first case in which a single type of article has been subjected to differential rates of tax, and it seems to us on this side of the Committee to be quite unnecessary, because, so long as we tax by means of percentage, the more expensive article automatically pays a larger sum in duty than does the cheaper. In point of fact, under this proposal a £600 car will continue to pay £200 in duty, whereas the £1,200 car will pay, not double, but four times that amount of tax. We on this side of the Committee have, of course, a fundamentally different attitude towards the Purchase Tax to that which is held by the Chancellor. We think that it is a bad tax and that the Chancellor's declaration last year that it was to continue as a permanent part of the revenue was an inflationary pronouncement.

4.0 p.m.

Because it induced everybody to go and purchase now; if the tax is never to be taken off, people say that they might as well buy now, instead of keeping their money in the bank. We also think that by setting a precedent of this character in increasing the Purchase Tax the Chancellor will make people much more inclined than they would have been to purchase articles which otherwise they would not buy at the present time.

In this case, this increased tax is being imposed at a particularly unfortunate time. Two years ago there might have been something to be said for this changeover before the motor manufacturers had laid down their postwar designs. Two years have elapsed, and the result is bound to be great dislocation in the shops and the factories of motor car manufacturers. The right hon. Gentleman read a quotation from the "Sunday Times" of a fortnight ago in which their motor correspondent said he had not heard of any cancellation of orders. My information, which is a great deal more recent than that of the "Sunday Times" correspondent, is that the cancellation of orders is going on, and is widespread. In fact, this morning, in order to confirm what is happening, I rang up one of our leading firms of motorcar manufacturers, which makes not only small 10 h.p. cars but also high-power luxury vehicles. The answer I got as regards the 10 h.p. car, was, that I would have to wait three years for delivery. As regard the expensive model I could have one in two or three months time because orders were being cancelled. That, I am sure, is the case. I cannot understand the Chancellor standing up and contending that doubling the Purchase Tax on these vehicles has not involved any cancellation of orders.

When this matter was discussed previously, the Chancellor said that it would be much better if these expensive cars were exported. He expressed the hope on that occasion, which he has not followed up today, that these cars would go into the export market. But surely he cannot have overlooked the fact that motor cars, whenever they cross frontiers, are subject to Customs duties. Our motor cars which go overseas have to bear Customs duties in all countries, I think, and are subject to embargoes in some. In the Argentine there is an embargo at the moment on the import of British motor cars. The only country I know to which these more expensive cars are likely to go is the United States of America. There are not the people in the Continent of Europe today who can afford to buy these high-grade British engineering models, and if the Chancellor thinks that the demand for the high-grade British motor car is likely to be increased in the U.S.A. by crippling the home market here at the present time, I am sure that he is totally mistaken.

There are two points which, I think. are of much more importance than the raising of £1½ million of revenue in this way. I wonder if the right hon. Gentleman consulted the Minister of Supply upon the question of our war potential before he brought forward this proposal. We won the Battle of Britain in 1940 through the courage and skill of our pilots and the wonderful quality of our aeroplane engines. We should never have won the Battle of Britain in that year had we not had the finest aeroplane engines in the world, and it seems to me to be of vital importance that we should not strike a blow at those firms which produce these high-grade products. In the second place, it is these high-grade products which are responsible for the high reputation of British engineering overseas. In every country in the world, even where people have never seen a Rolls Royce, they have all heard of one. It is, in fact, in the high-grade products, as we know, that our export trade in the future, If we are to do an export trade, must be done. We cannot compete with the foreigner in the cheaper lines. If we are to survive in this country we have to produce the highest quality, which will always command a market throughout the world.

Is the right hon. Gentleman really asserting that no British car of under £1,000 without Purchase Tax can be a high-grade quality product?

No. The class of car over £1,000, are the products for which this country has been famous in the past.

Some of the smaller cars are quite good, indeed are very good, but they are, as everybody knows, mass-produced cars, and they are not given the hand finish which the high-grade vehicles, about which I am speaking, get.

This proposal is, in our view, a blow to the British motor industry. I can well understand that it may give some joy to the heart of the equalitarian levelling-down Socialist, that it may give some pleasure to the man who is filled with envy, malice and uncharitableness every time he see a high quality car go down the road. But in our view, it is not worth while, in order to satisfy those base passions, to deal a heavy blow, I would even say a fatal blow, at the highest quality engineering products which this country produces.

I desire to make one or two points in reply to the right hon. Member for North Leeds (Mr. Peake). It is important that we should get in pers- pective exactly what cars are affected and what cars are classed at over £1,000 without Purchase Tax. There are eight firms, I agree with the right hon. Gentleman, which are very seriously affected by this proposal, including one or two famous ones which he has mentioned. But it is quite grotesque to suggest that all the quality cars are affected. There are cars costing £850, £900 and £950 which are recognised as quality cars, recognised as semi-hand finished, though I know that the right hon. Gentleman on the other side of the Committee would not recognise as having hand finish any car costing under £1,000. They are, however, recognised outside this country as quality cars.

I think the hon. Member is thinking in terms of prewar prices, because a £900 car today would have cost only about £300 or £350 before the war.

It would have cost £450 before the war. The cars to which I am referring—

If hon. Gentlemen will tell me what car at £950 before Purchase Tax is a non-quality car, not worth selling abroad, they will be addressing themselves more to the point. I should be interested to know which motor car at that price they regard as a non-quality car.

Let us look at the facts of the situation. There are these eight firms working exclusively on high quality models and there are three other firms which also have models of the same type. When we are concerned with the export trade, let us remember that 75 per cent. of the total cars produced in this country and exported, are cars below the £1,000 mark. I am giving the very limit. I doubt whether 25 per cent. of the cars exported are over the £1,000 mark. Indeed, I heard only the other day in my constituency that one firm of the eight we are discussing, had succeeded in getting under 20 orders for the export of its top model before this tax was introduced. From where are we really getting our sales in the export market? It is not, of course, in terms of bulk for these expensive cars. Our exports will succeed or fail on the medium horse-power car and to some extent, on the baby car.

I am not saying that quality does not matter. I am only saying that, in terms of bulk, our exports, if we are to make any money out of them, must be of the medium and low horse-power cars. We will have a useful adjunct in the sale of very expensive cars abroad. I would remind the right hon. Gentleman the Member for North Leeds (Mr. Peake) that quite apart from America there are, of course, Eastern European governments which are delighted to buy Rolls Royces. The only exports' we have made to Rumania are 11 Rolls Royces for the 11 Commissars of Rumania. I am delighted to feel that British workmanship is appreciated even by the Soviet commissars. On the other hand, I think that what I have to say justifies the decision to keep the tax at the £1,000 level. Over the £1,000 level we have only eight firms making these cars, and three other firms have a single expensive model. The three other firms will not be profoundly affected by the fact that their super-model will have a reduced sale in this country.

What concerns me is the size of the tax. I agree with the objection that 66⅔ per cent. is a crippling tax for these firms. I agree that quality does matter so long as we do not argue for it as providing the bulk of our exports. Quality matters to the industry. It has always been true that the quality car has led the way in development and design. I think we ought to consider, therefore, the preservation of the high quality car because it is vital to the development of the mass produced car as well. The correct way of putting this problem is to say, "Does a 66⅔ per cent. tax cripple the industry as a whole by threatening a close-down of the eight quality firms and thereby of the technical developments which are likely to come, in the first place, in an expensive car?" I am inclined to think that if this Purchase Tax were a permanancy it would have that effect. I am not so concerned about the cancellation of orders. I am much more concerned about rumours I have heard of skilled engineers beginning to say, "It is not worth working for so and so. There is no future in this type of car. I will go into something else." That upsets anybody interested in the industry as a whole. If there is felt to be no future in the high quality car, then I think that the industry as a whole will lose.

The Chancellor says that there are only these grades of Purchase Tax. He can only make it 66⅔ per cent. or 33⅓ per cent. I feel that if a thing is important enough, if the Chancellor feels that 50 per cent. is correct and not 66⅔ per cent., he might well bring forward a special order, which I think would be necessary, to get this tax. It may be said that it is only a question of a few hundred pounds, but every hundred the right way would help. If he cannot do that, I think that the least he could do would be to tell the industry that this is not to be regarded as a permanency and that after this year some reduction will be made. I do not think that in the course of this year the sound firms are likely to go bankrupt. They should be able to carry on with exports. We have at least a few months more of the sellers' market. According to hon. Gentlemen opposite there is no question that we should be unable to export quality cars. During the nine or 10 months left there is no reason why the export drive should not be increased, if the firms are given an assurance that the home market has not been taken away in perpetuity. What they fear is that once the Purchase Tax is clapped on, it will stay there for ever because it is tempting to put taxes on and never take them off.

I do not think that the Chancellor's argument about tax reduction is really sound. If we are to choose between a high horse-power car with the penal Purchase Tax, and another under the £1,000 level, one will choose a cheap car rather than an expensive one. The sensible buyer will say "I will not buy a Rolls Royce now. I will buy another car for under £1,000." Many people will change their orders to cars below the £1,000. I think that we will have to face cancellation of orders in the home market. I do not think that they matter this year; the firms can carry on; but it will matter unless solid assurances can be given that this is not in perpetuity. Of coure, I would prefer to have a reduction to 50 per cent.

4.15 p.m.

I find myself in agreement with the last part of the speech of the hon. Member for East Coventry (Mr. Crossman), Perhaps I can add a little to it in the form of a question to the Chancellor. If we assume for the sake of argument that this tax is sound from a revenue point of view, though I do not say that it is, I think the Chancellor will agree that if it cripples the industry, or sections of it, it thereby defeats its own end. I agree entirely with my right hon. Friend the Member for North Leeds (Mr. Peake) when he says that the home market for expensive cars will disappear when this tax becomes Jaw. Very few people will be able to purchase these excessively expensive cars. The hon. Member for East Coventry indicated that firms dealing exclusively in very expensive cars could carry on for one year with this tax in operation. That may be true. but there are certain qualifications. In the case of a firm like Rolls Royce, they also make aeroplane engines. They are not geared to make cheap cars, but they have another industry closely co-related to the motor production industry and, therefore, I imagine they could convert reasonably easily in order to increase production of aeroplane engines or cars. On the other hand, there are certain firms which are not geared to make cheap cars and which do not make things like aeroplane engines. I wonder very much whether they can carry on for the next 12 months. I dare say that they could carry on but, from a manpower point of view, they would be crippled or dealt a very serious blow.

My question is this. If the Government cannot guarantee very substantial markets abroad to these firms who have all their eggs in one basket, and I do not think they can. are they prepared to run this risk of crippling a certain section of the industry? I do not think that it is entirely the producers of expensive cars, who are of vast importance to the country, who will be crippled, but a certain section of this industry who have only one string to their bow. I hope that the Chancellor will give an answer to my question and to the second part of the speech of the hon. Member for East Coventry.

On behalf of those of my constituents who are vitually interested in this matter, I appeal to the Chancellor to pay heed to the argument of the hon. Member for East Coventry (Mr. Crossman). No doubt the Committee is aware that the production of Rolls Royce motor cars is now concentrated near Crewe. Prior to the war the production took place in Derby. A large Ministry of Supply factory taken over by Messrs. Rolls Royce now employs many thousands of skilled workers. I have had representations from the skilled workers in Crewe. I have passed those representations to the Chancellor. These workers are very concerned about the very heavy tax of 66⅔ per cent. They form a pool of engineers whose skill, once lost, once dissipated, will be very difficult to gather together again. There are not many engineers producing that particular high quality engine for which Rolls Royce and Bentley cars are famous throughout the world. We want to keep the quality that we possess in this matter, which is not a political question at all.

I do not think there is any Englishman, Scotsman, Welshman, or indeed, Irishman, who is not proud of these Rolls Royce and Bentley engines, and we all owe that firm a great debt of gratitude for its intensive research and for the amount of profits which it has set aside for research. That constitutes a great debt which this country owes to that firm, because, in setting aside profits, a firm like Rolls Royce was able to conduct further experiments in the engines to which perhaps we all owe the victory in the Battle of Britain. We do not want to lose these highly skilled engineers, a large number of whom are in my constituency. Branch after branch of the A.E.U. in Crewe has passed resolutions appealing to the Chancellor, and to me to make my voice heard with the Chancellor, because they fear that this tax will be a crippling tax. I dare say that a firm like Rolls Royce could stand on its feet for 12 months in spite of the tax, but if the tax is to be continued at 66⅔ per cent., I say that the age of the Rolls Royce and the Bentley has gone for ever.

I think the Chancellor has probably examined the prices of post-war cars. What do we find? We find a large range of cars up to £1,000, a few between £1,000 and £2,000, and then a very large gap, which goes from £2,000 to about £3,500 or £3,700, which is the Rolls-Royce and Bentley category. That is roughly the position, with the exception of one Daimler, which comes just over £2,000. The effect of this tax will be felt in the weight with which it falls. The right hon. Gentleman the Member for North Leeds (Mr. Peake) said that he had information about the cancellation of orders. I have information which is right up-to-date. Very many cancellations have come into the Rolls Royce works. I do not want to mention the number, because I do not want to disrupt Rolls Royce, but a large number of cancellations have been received by the firm, and a large number of other people are also threatening to cancel. The question may be asked, "What about the export market?" There always is, and I hope there always will be, a large export market for the Rolls Royce car, but the fact is that, on the figures I have presented to the Chancellor—and I assure him that they are correct and reliable—we get 10 home orders for one export order for Rolls Royce cars. I have given the Chancellor some figures, and I do not want to give the Committee a complete statement, because I think the Chancellor has perused a complete statement which I have given him, setting out this case.

I have one suggestion to make to the Chancellor on behalf of these highly skilled engineers. If he cannot, by some special order, reduce the taxation to 50 or 45 per cent., will he consider the possibility of putting a tax of 33⅓ per cent. on the chassis, that is, upon the highly skilled engineering part of the job, and putting a tax of 66⅔ per cent. upon the body. The Chancellor is well aware that these bodies for Rolls Royce and Bentley cars are special constructional jobs which greatly increase the price.

Will my hon. and learned Friend explain this point to me? Is it to the benefit of the country to expend all this first-class skilled labour on nine cars out of 10 for home consumption?

That has nothing to do with it. Politics, or exports and imports, have nothing to do with it. This has to do with preserving this very highly skilled body of workers in my own constituency, who are very worried lest this tax be continued indefinitely, and lest it should be a penal tax. We have no assurance that it will be reduced in the very near future, and this is causing a great deal of concern to these very highly skilled engineers. They have seen customers drifting to the lower-priced cars, and there is a real fear that we shall lose the potential and the great skill of these men.

In the past, this country has depended upon the skill of its engineers, and I hope that in future, we are still going to depend on their skill. This has nothing to do with politics, and I repudiate the suggestion that has been made from the other side of the Committee. My real concern is for the future of a British job which has been exported throughout the world, which has brought great credit to this nation, and which, I believe, contributed in no little way to our victory in the war. May I add one other fact? It has been suggested that perhaps the Rolls Royce firm could turn over to aeroplane engines, but, since acquiring their new factory, Rolls Royce have spent no less than £850,000 in tooling.

I would like to refer to some of the speeches that have already been delivered, and, first of all, to some remarks of the Chancellor. The right hon. Gentleman suggested that there was a sort of over-all benefit to be obtained. We know that the proposals put forward by the motor car manufacturers, which have been adopted to a certain extent by the Chancellor, do benefit a large part of the industry, but the Chancellor, while giving with one hand, has taken away with the other, and he has not taken away from the people to whom he has given. The quality motor cars, by and large, do not benefit. It is the quantity people who benefit, and it is quite impossible to switch over suddenly from the one to the other. Some of the manufacturers who are making a few larger cars and a large number of small ones will, no doubt, be able to adapt themselves, but the makers of the class of car referred to by the hon. and learned Member for Crewe (Mr. Scholefield Allen), and others mentioned by the hon. Member for East Coventry (Mr. Crossman), are not in that position. In regard to loss of revenue, the Chancellor said that it was a good proposition for people to pay capital down and get it back over a period of years. The right hon. Gentleman the Member for North Leeds (Mr. Peake) has shown that it will take 20 years to get it back in many cases.

The suggestion has been quoted from the "Sunday Times" that there is always a second-hand value to think about. Let me remind hon. Members that the second-hand value may be a terrible gamble, and that few people will put down a great deal of money in the hope that, when they want to realise, they will get most of it back again. Cancellation of orders has been referred to. It is very early to talk about cancelling orders, because the people who want special bodies on cars are used to being told that they will not get them for two years. Consequently, a man who has had a car on order for 12 months does not jump in at the first opportunity and say, "I will cancel it." He thinks about it, and waits. He says, "I have plenty of time; I will leave it, and, in the meantime, I will see what I can get." But I can assure the Chancellor that, as time goes on, such people will consider cancelling their orders. In some cases, the makers will not accept cancellations because they have already ordered the bodies for the cars.

4.30 p.m.

Whether people are makers or owners, they are all up against this new proposition. They do not agree with the suggestion of the motoring correspondent of the "Sunday Times," which has been referred to, that it will not be bad. People who are going to buy the cars think it is very bad. The hon. Member for East Coventry, of course, was right, but he was not referring to the same thing as the right hon. Member for North Leeds. When he refers to £900 cars, he is talking about high-grade cars. I drive one myself, and like it. When a buyer looks at the price of that type of car, and compares it with the price of the high quality car about which we are talking, and which costs anything from £4,000 to £5,000, he will not be such an ass as to pay that sum for something which is not considerably different from the £900 car. One cannot fool all the public all the time. The £900 car—I am speaking of present-day values with Purchase Tax added—is really semi-mass produced, whereas the high quality car is hand-finished, thoroughly tested out, and carries a special body.

It is the same with other things. Today many of us are content to get utility furniture, but we understand that if we want special hand-made goods we have to pay considerably more for them. It has been the boast of this country that we produce something which is really high-class, and there are always people who are prepared to pay for such a product. The hon. and learned Member for Crewe suggested that the high grade motor manufacturer did not mind going on under these conditions for a few months. I would point out that the motor manufacturer is a little suspicious when he is told that it is only for a little while. May I remind the Committee—and most hon. Members motor in some form or another —that we are still paying 4d. a gallon on petrol for the privilege of derating. The cost of derating was put on the motor car in the form of a special tax of 4d. a gallon on petrol, and we are still paying it. Every time we take a ride, we are paying that 4d. a gallon. Therefore, one can understand the motor industry being a little suspicious on being told that this extra tax is only being placed on it for the time being, and that one day a benevolent Chancellor of the Exchequer will take it off again. I have never met such a Chancellor of the Exchequer.

The hon. Member for East Surrey (Mr. Astor) suggested that people can swap over. They cannot. If a works is laid out to manufacture motor cars, it has to be completely stripped before it can produce aero-engines. The hon. and learned Member for Crewe pointed out that the Rolls Royce Company had taken their works from Derby to Crewe in order to make nothing but cars. These quality makers—and there is quite a number of them besides Rolls Royce, such as Daimler, Lagonda, the New Bristol, and a number of others—feel that they get no benefit whatever from the Chancellor's new proposition, and, indeed, that they suffer a good deal of harm, because it produces uncertainty. Every businessman knows that the one thing which must be guarded against is uncertainty. To suggest that only 10 per cent. of high quality cars are for export is to misunderstand the position. Such firms are exporting nearly 50 per cent. of their cars, and have undertaken to increase that percentage to 60 per cent.

At the present moment their order books contain only 10 per cent. for export because the export buyer does not wait for 18 months, as we have to do in this country. He asks the agents when he can have a car, and unless they can promise delivery in from three to four months. he does not order it. The reason they can quote delivery is that Rolls Royce and other quality car manufacturers all put through 18 months' supplies in order to get going. The result is that they are putting through 10 times the quantity which appears on their export order books. But as time goes on, nine-tenths of the bulk supply are taken for export. That is the insurance which a manufacturer has to have. It is very difficult to get people who are not manufacturers to understand the importance of that insurance. That is why there has to be a home market.

It sometimes happens that there is a close-down of the foreign market until certain alterations in design are made. Meanwhile, those cars which would have gone for export are sold in the home market. The revenue comes in, the alterations are made, and export begins again as soon as they are ready. A firm cannot run a purely export business; it must produce the quantities. That is why these manufacturers are so concerned. As has been said, in the Rolls Royce car we have today something which is acknowledged to be the best in the world. For 30 years a particular car manufacturer has advertised the best car in the world, and nobody has contradicted him. It is admitted. I was on the committee appointed by the President of the Board of Trade—

Would the hon. Gentleman please clear up the point raised by my hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen), who made it quite clear that his information was that only 10 per cent. of the production of the high quality firms was being exported? The hon. Gentleman is now claiming that 10 per cent. of the orders on the books in no way represents the true figure.

On a point of Order. I would like to point out that that was not what I said. I said that of the orders on the books, only one in 10 was for export. Orders on the books have nothing to do with the percentage which is, in fact, exported.

If my hon. and learned Friend will look at his speech in the OFFICIAL REPORT tomorrow, he will find that he said one in 10

Not on the books. The hon. Member for Edgbaston (Sir P. Bennett) has now told us that not one in 10, but actually the whole production is going abroad Someone must be wrong.

The hon. Gentleman has got us both wrong. I was confirming what was said by the hon. and learned Member for Crewe that 10 per cent. of the orders on the books at any one time are for export. Actually, the quantity going overseas is in the neighbourhood of 50 per cent., and it is going up to 60 per cent. There is no question about that. In fact, I know that the Minister of Supply will confirm it. Of the Rolls Royce output, 50 per cent. is being exported at the present time, and the firm have undertaken to increase their exports to 60 per cent.

The point I was going to make was that here we have the No. 1 exhibit in the world. On several occasions I was on committees appointed by the President of the Board of Trade to organise overseas exhibitions. In every case the British prestige pavilion asked to have a chassis of that particular make, and, later on, an engine, because it was the one thing that is talked about all over the world as the highest example of engineering finish. I do not want to see that endangered. It is of immense prestige value. Why did the Government go to the expense of having these prestige pavilions in exhibitions in different parts of the world? The reason was that they were regarded as an advertisement for the rest of the products of this country, and that is what is happening today with these high-class vehicles. There is in that industry a reservoir of skilled labour which is found nowhere else. Twice in my lifetime we have seen that switch-over to the production of aeroplane engines, and twice we have thanked God that we had a high-class engineering industry to switch over. We do not want anything to hinder that industry. Let no one run away with the idea that it is a small matter merely because the numbers are small. Re- member that the price, at £4,000 to £5,000, is equivalent to the price of 10, 20 or 30 of the cheaper cars. I know that the tooling equipment charges of the three or four factories which are making these high-class cars have run into several million pounds. It means that the labour must be highly skilled, and it is very valuable.

Can one imagine the Swiss throwing away their high-class watch' trade by imposing a penal tax on the watches which they sell at home, when the export market is temporarily held up? I am alarmed at the suggestion that we are going to endanger the position of our high-class motor industry. Those manufacturers say, "Leave us as we were; we do not want the £10 tax; we would rather go on as we were, paying the high registration duty and the 33⅓ per cent." That is one alternative. The other is that which was mentioned by the hon. and learned Member for Crewe. If the Chancellor must retain the magic figure of 66⅔, why cannot he apply it to the special bodies and let us have the engineering at the basic price? It is the engineering with which we are concerned. I should hate to hurt the coach builders, because they are craftsmen of the highest order, but I am anxious that, above everything else, we should maintain our standard of engineering and that we should not throw away the finest engineering trade in the world. I hope the Chancellor's mind is not closed. He will not get much out of this tax. It is a gesture, and a gesture which will harm a great deal more than it will help.

I intervene in this Debate because I have in my constituency a firm which is engaged in the production of this type of car to which reference has been made. Representations have been made to me by the engineers who are a highly skilled class of men. From the practical point of view when a firm has gathered these skilled men together and has formed a pool of expert engineers, it is exceedingly difficult for that firm if it has to allow those men to go elsewhere. Since the war these firms have had a considerable amount of difficulty in gathering together the men who were in their employ in prewar days, and they have made it clear to me that if this 66⅔ Purchase Tax remains, it will be impossible for them to carry on their business. I understood the Purchase Tax was introduced to deter people from making purchases This tax of 66f per cent. will, undoubtedly, achieve that purpose. We ought to make up our minds whether we, as a nation, desire this type of car to be produced or not, and whether it will be for the benefit of the nation if we permit this highly skilled work to be performed. If we make up our, minds that we no longer need that kind of work, let us continue with this deterrent tax.

4.45 p.m.

On the other hand, I am informed that we cannot afford to allow this type of work to pass out. Speaking as a craftsman myself, I deplore the mass production method. I know it has come to stay, but I would like to see retained facilities whereby we shall be able to encourage and train the highly skilled craftsmen. It has an effect not only upon the industry of the country, but upon the character and personality of the individual. We cannot afford to throw these things lightly aside. Therefore, I appeal to the Chancellor to reconsider this tax. It is too high. His arithmetic this afternoon has been proved to be erroneous, in so far as even the period of 10 years to which he referred does not permit the purchaser to make good on the reduced horse-power tax. The capital outlay for a large car of this kind, with such a large tax, will mean that 20 years will have to elapse before a purchaser can recoup himself from the lower engine tax. I hope the Chancellor will give heed to the appeals which have been made. I feel that I would have been lacking in my duty to my constituents if I had not made this appeal to him.

I wish very briefly to make two points which have a certain connection with each other. First of all, I am disturbed about the probable grouping of the price levels around the £999 figure. There may as already suggested in this Debate be reductions from £1,000 or a little over to £999,I do not see any harm in that, but I am disturbed at the possibility that the prices of cars in the £850–£950 class will climb nearer to £999, because the seller will be able to sell to the client the advantage of a reduction on his flat rate licence compared with what he has been paying on his previous car, and, at the same time, will be able to assure the client that he will not have to pay the increased Purchase Tax. My other point is this. The Chancellor's counterpart to his increased Purchase Tax, and his reduction in the flat rate on new cars, is a continuation of the full rate of the licence paid on existing cars. That may, be perfectly fair in regard to, say, a licence fee of something like £30 on a moderate powered car, when it is a new car with the value, the utility and the reselling value of a new car.

But there comes a time when a car of that kind begins to approach the end of its utility and has greatly lost its value for resale. I have seen in the past, even before the war, cases in which cars with several years of good driving still in them could not be used because the original owners did not want to use them, and when they tried to sell the cars the annual licence fee was so big in proportion to the value of the cars at that moment, that they could not get rid of the cars and they were scrapped. I suggest that it is in the public interest, and will continue to be for some time, that existing cars should live out their natural life of reasonable usefulness, without being prematurely aged by a tax consideration. I wonder, therefore, particularly as the Chancellor of the Exchequer, as my right hon. Friend remarked before, has a considerable balance in hand in his revenue proposals on this question, whether he could not use a little of the excess to lower the rate of licence fee on existing cars as they pass beyond a certain age. The 10-year-old car paying a very high licence fee is, in my view, paying much too highly in relation to its value or selling price on the second-hand market. I do suggest that there is a very real case for some relief there, particularly when the discrepancy is being brought into such prominence by the flat rate licence fee for all new cars.

It seems to me that the hon. Gentleman the Member for West Willesden (Mr. Viant) put his finger on the crux of the problem that we are discussing when he said that this Committee must decide whether we want this type of car to be produced or not. I take it as obvious from all the speeches that have so far been made, that we want to continue—in fact, We want to encourage—the production of quality cars, because we see that, in the long run, they are the most likely to be a permanent factor in our export trade. It seems to me that this tax is a discriminating tax; and that, therefore, although it will not have the same influence as the repealed horse-power tax, it is open to precisely the same objection: it is discriminating between one type of car and another, or between one class of car and another.

I do not wish to discuss the merits, because I do not think this is a fit place to discuss the merits of individual makes of cars. But the fact is that, whatever else the motor industry in this country may or may not have done, it produced in the Rolls Royce car a product which is the best car in the world—a product which, in the opinion of all quarters and in all countries significantly, is acknowledged to be of superlative quality, something of unequalled quality in engineering. Its name is a phrase which has passed into the language—not only English, but others —and which is metaphorically used to describe the best in manufactured goods and other things of all types. Therefore, it is clear that we want to encourage, and not to discourage. For the reason I have mentioned, that in the long run—and, it may be, in the short run—it is these quality cars which are likely to be most useful to us in the export trade, I suggest that this increase should be reconsidered. Even if the Chancellor of the Exchequer cannot go so far as to say that he will reconsider it to the extent of not having the extra tax at all, of not having any discrimination at all, I should like to support those who have said it should be at a less steep rate of increase. such as 40 per cent. to 50 per cent.

I was alarmed when this Debate started, to hear the Chancellor of the Exchequer use an expression that I do not think can be fairly attached to this particular class of cars from the engineering angle—that they are "luxury" cars. We are not at the present moment talking about luxury cars at all, and I think that every subsequent speech to that of the right hon. Gentleman has made that quite clear. We are, in fact, talking about a very high-grade engineering product, and it would not matter if it were something other than a motor car. We are talking about a high-grade British engineering product. I should like to bring to the notice of the Committee the effect that the proposals of the Chancellor of the Exchequer will have on a class of firm I am going to mention, that is to say, on those firms that really depend on the production of one class of motor car alone, and not on a variety of models.

I know one firm, which the Chancellor of the Exchequer knows of very well, which made for itself a great reputation in producting aero-engines and aircraft and all sorts of things like that, who were definitely encouraged by the Minister of Supply to keep their extremely highly skilled workers together; and in order to do that they were encouraged to produce a particular model of motor car. It is the only model they produce. Now the Chancellor of the Exchequer comes along and says, "I know nothing about this; I am going to hit your new product sideways." That firm had previously not produced motor cars, though they had produced aeroengines; and they spent a considerable sum of money in preparation for the production of this car, and so tooled up the job as to enable them eventually to reduce the price of it, it may not be below £1,000, but to reduce the price to the home market and to the export market. The effect of this proposed additional tax, in a case of that sort, is really catastrophic. A firm having no prewar reputation in the motor car market is in a far more difficult position than one that has a prewar reputation in the export market and in the home market, and I think there is no possible doubt that those people will suffer dire consequences. Moreover, those highly-skilled men engaged in the production of this motor car will be dispersed, and that against the wishes of another Department of the Government which has urged that they should be maintained together.

I really wonder whether the Chancellor of the Exchequer took into full consultation his colleague in the Ministry of Supply before the proposal was put before Parliament. It seems to me to be a most extraordinary thing. All of us engaged in industry have had conversations with Ministries as to what we could or could not do under certain circumstances. This firm said that they would do certain things to maintain production and to maintain it at a certain rate. Then the Chancellor of the Exchequer comes along and knocks that firm sideways, and makes it impossible for them to maintain their arrangements with another Ministry. That is not sound practice. It is not common sense.

I cannot help feeling that those who have struck a would-be optimistic note as regards the possibility of maintaining these cars in production have not really understood the manufacturing problem at all. It has been proved over and over again, that it is quite impossible to produce for the export market only. The reasons have already been given to the Committee. But let us take the picture as' it will exist if this proposed tax goes through. Not even the Chancellor of the Exchequer would deny that sales of cars for export of these classes are likely to fall. Quite obviously they are likely to fall. They will fall even more rapidly if the cost of the cars in the export market rises. A number of cancellations will be made. One cannot possibly plan production of motor cars at one rate, and then if the rate of production is cut down by one third or one half as a result of the tax, maintain the cost of production at the previous level. It is not common sense, and it is not practical, if the whole production rate of these motor cars is lowered. Therefore, the price is bound to go up on the export market. I cannot really think that that is going to help our export trade.

We have heard a good deal about the export trade; over the next few weeks we are going to hear a great deal more. I think by this tax the Chancellor of the Exchequer is damaging the prospects of the export trade and the prospect of these motor cars overseas. I would ask him, for this reason alone, to look at this matter again. I do not believe modification of the increased tax is going to be of any value in the matter. I believe it is a question of taking it off, or putting it back to 33⅓ per cent. I think that is the only way to deal with the problem. I shall vote against the 66f per cent. proposal. I ask the Chancellor to look at this again very carefully indeed. He will do far more than discourage the use of luxury motor cars on the roads of this country. That has nothing to do with the problem, as I think he would admit to the Committee. It may be that some hon. Members would like to see luxury motor cars taken off the roads. Well, I hope it is not in that sort of spirit that this matter is being approached. This is a discriminatory tax against an extremely important national asset, the most highly skilled and valuable branch of engineering in this country, and, as such, is an attack on the craftsman.

5.0 p.m.

I was delighted to hear what was said about craftsmen by the hon. Member for West Willesden (Mr. Viant), who spoke as a craftsman. The Chancellor's colleague, the Minister of Labour, said something the other day which gave great encouragement to some of us in industry. He then seemed to take an interest in craftsmen, and it was very helpful to hear those words from a Minister of Labour. Cannot the Chancellor speak to him about whether it is worth while doing something which will damage craftsmanship? There is no possibility whatsoever of our being able to compete with the American producers, to any great degree, in mass-produced motor cars in overseas markets. But we can, and shall always be able to, compete in the high-quality product, which is the best advertisement in the world for British engineering. I hope the Chancellor will say that he will change his mind before he does too much damage.

I hope the Chancellor will stick to this tax. There has been only one substantial argument advanced against it today, and that came from the right hon. Member for North Leeds (Mr. Peake), who pointed out that the Rolls Royce company and organisation is a national asset from the war potential point of view. I fully agree with that. I think that if we had not had the Rolls Royce Spitfire engine in 1940 we might well have lost the war. If I thought this tax would damage the Rolls Royce organisation and their production of aircraft engines, I should be against it, but I do not believe it will. I do not believe any real evidence has been advanced to support that contention this afternoon. I say that for three reasons. In the first place, surely the Rolls Royce aero engine manufacturing and research capacity in future will be much greater than it was before the war. The firm are now engaged much more in the production of aircraft engines as against motor engines than before the war. Secondly, we shall have a very large export trade in high quality motor cars. Thirdly, there will surely still remain some market in this country amongst those persons who are still able to pay these very high prices? I suggest that, so far as we can tell at present, those three possibilities together will preserve what is admittedly a very great national asset.

It may turn out that nobody, or at any rate, very few people, will be able to pay these prices in the home market. But we can discover that only from experience; and, therefore, the Chancellor would be well advised to keep this tax on for a year or two. Of course, if experience shows that serious damage is being done to the home market, there would be a case for reducing the tax; but we do not know that in advance. Obviously, this is not, as some hon. Members seemed to suggest, a malicious or spiteful tax. It is one designed to raise revenue, and if it did not raise revenue, the Chancellor would take it off. I think that in this controversy, however, we are all losing sight of what is, after all, the background of the whole matter. Surely, the original, much abused, horse-power tax was imposed 20 or 25 years ago as a form of luxury tax. [HON. MEMBERS: "NO."] Well, it was imposed as a tax which would fall more heavily on the more high powered car than on the less high powered car.

Speaking as a former small car-owner— that is to say, somebody who could afford a small secondhand car before the war, but who cannot afford any now—I have been watching the Chancellor's proceedings in the last few months with some suspicion. What have we done? We have accepted the argument of the motor industry, that if the cubic capacity tax is abolished and a £10 flat rate tax substituted, they will be enabled to produce a new sort of car, which can be exported on a very large scale. That is a strong argument, but I have never been convinced myself that, as a result of doing that and nothing else. we shall increase enormously our motor car exports. Even though the Chancellor was right to accept that it is not a certainty. It is a gamble, and in order to make that gamble, in order to obtain that hypothetical advantage, we have been asked to shift the taxation from the more wealthy motorists on to the shoulders of the poorer motorist. It is quite clear that the motorist with the larger car would be better off as a result of this change if the Chancellor did not raise the Purchase Tax.

The dilemma has always been that either we increase the petrol tax—and I think we all agree that would do very serious damage to industry and trade as a whole—or else, in effect, we make a quite material shift of taxation from the shoulders of the wealthier motorist. As I see the position, the Chancellor has very ingeniously escaped that dilemma by adding this Purchase Tax on to the more expensive car. It is an ingenious solution, and I do not think the arguments advanced against it this afternoon have any force. Unless and until it is shown by experience—and it is my opinion for what it is worth that it will not be so shown—that organisations such as Rolls Royce will be seriously damaged, I hope that for the time being the Chancellor will stick to the tax.

I think I was a little unfortunate that the hon. Member for North Battersea (Mr. Jay) spoke—I may not have heard him aright —as though in the present flat rate proposal we were shifting the burden from the richer to the poorer motorist. The practical effect will be that he is far worse off than before, so I do not see how that question arises.

Since the hon. Member challenges my argument, surely it is clear that somebody who runs a 20 or 25 horsepower car will be better off than before?

Yes, but the hon. Member has not shown how the person running the eight horse-power car will be materially worse off. It is unfortunate that in the discussion this afternoon so much attention has been paid to one particular make out of the 11 affected, namely, the Rolls Royce. It was unfortunate that the Chancellor, in his opening remarks, spoke as though he was thinking only of Rolls Royce and not of other makes of car. I was rather surprised at the arguments he put forward to justify this double Purchase Tax. He argued that those who bought these expensive cars would, in spending less on the annual tax, get back almost as much as they would lose on the increased Purchase Tax. I have not had time to work out many examples, but while he spoke I did work out one simple example. Take the case of a very high-performance 16 horse-power car, the ordinary taxation on which would be £20 a year. With that car it would take 10 years to save £100. The extra Purchase Tax on that car is £417, so it would take over 40 years to work off that amount. I am very glad that the Chancellor has this splendid confidence in the lasting capacity of British motor cars.

When we come to the other end of the scale, taking the Rolls Royce, the figure works out a little bit better, but I implore the Chancellor of the Exchequer not to fix his attention on the Rolls Royce, because there are 10 other makes of cars involved, among which are four of a completely new design, which in every way are excellent, and which are on the lines we should like to see the British motor industry develop. It would be a very unfortunate thing if the Chancellor of the Exchequer were to prevent these models from coming into full production. It has been pointed out already that we cannot ignore the effect on the home market, and that was the very reason why the flat rate was advocated. It has been universally admited that the home market does affect design, and what we want to see is design improved. There is a tendency for the design of the cheaper cars to improve, and to follow the design of the better makes.

There is another aspect of this matter which should not be lost sight of, and that is the improvement in prestige of the British motor industry abroad. The prestige of one particular make has already been stressed, but there is the prestige of other makes to be considered. In the long run, when the sellers' market ends, whether or not we can sell our cars abroad will depend on the prestige of British cars in general. There is no doubt that we need to send abroad, especially to Europe where such things are appreciated cars of smart appearance. Of the 12 models which are affected several are of a kind which will undoubtedly appeal to Continental taste. I have four particularly in mind.

Then there is the question of performance. There is no doubt that people on the Continent appreciate good performance, and that can be seen by the attention which was given to models of good performance at the Geneva motor show. The French, for example, have produced an excellent model with an extraordinarily high performance, and Italy has brought out at least three excellent new models. If we are seriously to compete in this market, we must be able to match their performance, and I doubt whether the cheaper cars will be able to match that performance, if the way is not piloted for them by these more specialised firms. I wonder whether the Chancellor, who is a busy man, has had time to look at the results of the Grand Prix races abroad. If he has had the time, he will no doubt have been depressed to find the Italians winning again, and the British cars not taking their rightful place in these races. Among the cars he is hitting most are just the kind of models which could put up an excellent show in these races, and I ask him to bear that aspect of the matter in mind.

The proposal made by my right hon. Friend the Member for Oxford University (Sir A. Salter) merits attention. I am referring to the very old cars. It has been estimated by experts that we shall be very short of cars in this country for at least four years. If that is so, it will mean that a large number of old cars will have to remain on the roads; some of these cars will be in a pretty poor condition. The man who will buy the old car will probably be the man who cannot afford to pay for a new car. Up to 1935, there was a tax remission on all very old cars, and I suggest that the Chancellor of the Exchequer should consider a remission, say, after 15 years, which would be of great use to the owners of veteran cars, who otherwise will have to pay the extraordinarily high tax.

In conclusion, I ask the Chancellor once again not to consider so much the Rolls Royce and the very expensive types of cars, but those very excellent cars which are being developed now, in most cases by firms which are not very large, because if he strikes a blow at these, he will be doing very serious damage to the future of the British motor industry.

5.15 p.m.

I think it would be convenient for me to say a few words at this stage on the speeches which have been made from both sides. We began the discussion on motor taxation this year on the basis—although I did not make any change in my original Budget proposals—that I was willing and prepared to consult with hon. Members in different parts of the Committee and the interests concerned on what scheme of taxation would be for the greatest benefit of the motor industry and general public, providing always that I did not lose revenue this year. That was the basis. The discussions proceeded, and a number of suggestions were made to me, and I, for my part, made certain suggestions, of which this is only one—I will not deal with the others. Part of the plan was that if I lost revenue on the one side, I had to pick it up on the other, and this is the proposal to pick it up on the other. The only alternative proposal to pick up this amount is that of an increased petrol tax, which no one has advocated. Therefore, we began by considering this as a means whereby I could this year pick up approximately the same amount of revenue—that is, within £500,000—as I was losing. In order to complete this point, I would mention that in the years ahead I shall progressively lose more revenue, because the proportion of cars falling out of the lower annual licences will steadily increase, and the greater the prosperity and success of the motor industry, the more that number will increase.

The argument has been put that this double Purchase Tax, above the £1,000, will do great damage to certain branches of our engineering trade. That argument has been persuasively put by several hon. Members. If I were convinced that this really would strike a blow at an essential part of our skilled engineering craftsmanship and the industrial equipment associated with it, I should indeed be concerned, but I am not yet quite convinced of it. I think the argument comes partly from a slightly pessimistic view of the possibilities of the export trade at the moment. We are considering the present Finance Bill at the moment. As hon. Members know, Finance Bills come once a year, but in between there are possibilities of adjusting such matters, if the proof should really be forthcoming that it should be done.

Yesterday, we were speaking of the great importance of the export drive, but no one has said anything to that effect today. It is extraordinary how, like a lake, which is sometimes disturbed by a great storm and at other times quite still, the mood of the House can quickly change from grave apprehensions such as we had yesterday. It is no good the right hon. Gentleman the Member for West Bristol (Mr. Stanley) shaking his head, because he was one of the protagonists in yesterday's Debate. Everyone was convinced then that to expand exports was one of the most immediate and important national duties.

I do not think that the right hon. Gentleman is being quite fair. The case which Members have made today is that they do not believe that this tax will lead to substantial exports.

May I remind the Chancellor that I mentioned specifically the danger to the export drive which would arise out of this tax?

Whether the hon. Gentleman used those words or not, it is the case—and I am not scoring a debating point—that whereas yesterday everybody was all out for exports, today we are being told that it is the home market that is important. This year we must go flat out for every export we can get. I have had a memorandum from Rolls Royce, and, through the kindness of my hon. and [earned Friend the Member for Crewe (Mr. Scholefield Allen), I have been given further material. I mention this firm because they have gone to great lengths— and I am grateful to them—to set out statistics of their own production and prospects. Of course, other firms are concerned, but what do Rolls Royce say? Their memorandum is dated 4th July, so that the figures about cancellation of orders are quite up to date. They say that between the wars they averaged 1,000 cars per annum, of which only 10 per cent. were exported. That is no good to us now and, of course, Rolls Royce are aware of it. They say:

"Production is now of the order of 20 to 25 cars a week, the ultimate capacity of the factory being 50 a week. Forty-three per cent. of our production has been exported to date, and we shall shortly be increasing this figure to 60 per cent."
That is in accordance with the agreement reached between my right hon. Friend the Minister of Supply and the industry as to what should be the minimum percentage figure for exports. Sixty per cent. of 50 cars is 30, and Rolls Royce are aiming at 30 cars a week. They speak of their orders, and say:
"We have orders outstanding at present for about 3,300 cars, of which 300 are for export."
Therefore, 3,000 out of their 3,300 are for the home market. They speak of cancellations, and say:
"Since the announcement of the imposition of 66⅔ per cent. Purchase Tax, 82 orders have actually been cancelled on this account, and about another 100 customers are threatening cancellation. This, of course, is not a large proportion of the total order book."
The prospective weekly production of Rolls Royce is 50 cars, of which they hope to export 30. They should be able to export 30 a week for some time to come, because they say they have 300 orders for export. This double tax cannot affect export orders, because none of the persons taking an export order will pay Purchase Tax. Even if Rolls Royce do not get additional orders for export, they have 300 to work on, and they are working up to a maximum of 30 per week. I am taking the short view, deliberately. I ask, is their home market in serious danger? They have 3,000 orders on their books; 82, possibly a further 100— let us say 200 altogether—of those 3,000 have been cancelled, leaving 2,800 home orders. They are working up to an output of 50 cars per week, of which 20 will be for the home market. That is a solid cushion for 12 months ahead, and I am not surprised that my hon. and learned Friend the Member for Crewe, who stated their case moderately and reasonably, should say that Rolls Royce can stand it for 12 months. I am sure they can.

Has the right hon. Gentleman the cancellation dates, because it is important to know whether people are cancelling cars for early delivery? They may not take the trouble to cancel an order for delivery two or three years ahead.

The firm have not divided their figures in that way. But we know that there is a very big unsatisfied home demand for cars of all types and makes, and I think it is clear that this is a solid basis for the next 12 months. I do not think it can be shown, on the statement of the firm, which is reasonable and well laid out, that this tax will dry up their home market during the next year.

My right hon. Friend quoted the "Sunday Times" of the Sunday before last—the day after he made his serious statement about a possible cut in petrol. Has he any idea whether that statement may have had anything to do with this cancellation of orders?

It may have had, but I do not know. My statement on petrol was deliberately phrased, so as not to commit us to a reduction in the private motorist's ration. My statement made it clear that the Government were primarily going out to see if we could achieve economy in the petrol issued to the Services, and that issued to commercial users, large quantities of which, it is notorious, slip through into the black market, and which is in excess of their legitimate needs. Since the private motorist was not specifically mentioned, I would doubt whether it had much effect. But I was taking the short view. If it be the case that the home market is not sufficiently buttressed, the figures I have mentioned do not show it.

I must point out that we cannot afford in the state of affairs we discussed last night, to let great quantities of steel, together with the work of our best craftsmen, go into the production of these expensive cars in order to have them run about the roads of this country. That is not the state of mind in which we ought to approach this problem. The hon. Member for Western Dorset (Mr. Digby) from whom I shall be glad to receive particulars, said some hopeful things about the good performance of many of our more expensive cars. I agree with him. He said that that should lead to good export possibilities, and I say that we must not swerve away from our constant concentration on increased exports. I would be happy if a number of these motor firms could go above the 60 per cent. figure. I am talking now about immediate and short-term national necessities. Therefore, bearing that in mind, I am not prepared at this stage to modify this proposal.

5.30 p.m.

There is power in between Finance Bills to make Treasury Orders relating to the Purchase Tax and the Purchase Tax rates. We are always reluctant to make these orders too freely because it is not in accordance with the proper financial procedure of the House, and if carried too far, it might be an abuse of it. But it can be done, and it has been done. As the law now stands, we can only have the Purchase Tax at certain specified rates; none other will be legally possible. The right hon. Member for North Leeds said that we could continually modify Finance Bills to allow for a wider range of operation, but I think that that would be complication without profit.

The offer I make, in complete frankness, particularly in the case of those who have raised the case of other cars—the Rolls Royce case has not convinced me at all—is that if there is evidence that can be produced of a more convincing character from other sources, I will be glad to have it. I have the power, subject to the approval of the House, in between Finance Bills to introduce Purchase Tax orders modifying the Purchase Tax. If I am convinced, by evidence produced in the course of the coming year —in the light of experience and not in the light of anticipation—to that effect, I am prepared to make a Purchase Tax Order, but it will have to be a reduction of Purchase Tax by an adjustment which can be done between Finance Bills, and it must, therefore, be a reduction to 33⅓ per cent. That is the offer I make. I am not convinced by the arguments up to date, and I think that we should adopt the proposal I have made, but I am willing, if evidence is produced during the course of the year, to make a Purchase Tax Order on the lines that I have indicated.

This has been an interesting Debate on a most important matter. Although the right hon. Gentleman showed signs of wishing to respond to the Debate, I must confess that I am not satisfied by the offer he has made. It seems to me that the case made from all parts of the Committee—and there were still hon. Members rising, and I hope that they will rise again to put their case—was all upon one side. The only wholehearted support which the right hon. Gentleman had was from the hon. Member for North Battersea (Mr. Jay), who is fast becoming regarded as the Gunga Din of the Front Bench. It is from the hon. Gentleman's speech, I think, that the Chancellor has got the idea of the offer he has made. The hon. Member for North Battersea, with great frankness and some courage, said that he was prepared to take a gamble. He did not believe that this would ruin the industry, but he was prepared to have the tax on to see if it did ruin it, and if it did, to take it off again at a later period.

The fault of the right hon. Gentleman's reply was that he confused the issue. He certainly confused me as to what was the purpose of this tax. He started by saying that it was a balancing tax, which he was giving to the motor industry in response to their demands—a gesture for which all of us should be grateful. He was giving them a certain amount of money, but in the end he had to have that money back. This was the way he was going to get it. Later in the Debate he made it quite clear that the object of this tax was to provide more exports. The right hon. Gentleman cannot have it both ways. Purchase Tax is not paid on cars which go to export, and he cannot, at the same time, have an increased export trade and get from this tax the money he requires to recoup him for the allowances he is making elsewhere. So far as I am concerned, he must resolve for himself his own intellectual ambiguity. I am interested only in the consequence of this proposition.

I think that the amounts for this year are so small that if this was proved for other reasons to be a bad tax, the Chancellor could well do without the not very large revenue which it will produce. To me the real importance of this tax, and the only argument for it, if it can be supported by figures, is that its effect may be, by making the home market more difficult, to drive more and more of this type of car into the export market. It is on that basis alone that I shall believe this tax to be justified. We have had no evidence produced to us by the Chancellor that that will happen. We have had, on the other side, a good deal of indication that we are likely to have the reverse.

The right hon. Gentleman has fairly read out an important document, but a document coming from one firm—a firm which, I agree, in reputation stands ahead of all others, but a firm which, because of its world-wide reputation, is likely to be affected differently from any of the other firms. My information is that the rate of cancellation with some of the other firms is far larger than that with Rolls Royce. The cancellations in the case of one firm amount to over one-third. The agents for other firms say that their cancellations have been 100 per cent., and I think that there is a great deal of evidence that in the other firms, if we exclude Rolls Royce, the damage to their home market will be very extensive. Is the right hon. Gentleman really convinced of this damage to the home market which, after all, if it is followed by increased exports damages no one but the potential buyer of the big car? It does not matter to the producer. It is of advantage to the nation if instead of selling to the consumer here he can sell it abroad.

Can this gap really be met by an immediate increase in the export of these cars? My information is that it cannot. The export of these cars, although important, is always a small proportion. For many of these cars there is no long waiting list abroad, and there is no probability that we shall immediately be able to switch over to the export market the very substantial number of orders that undoubtedly we are losing in the home market. This is a vicious circle. If the total sales are to be less, it will mean a bigger share of the overheads falling upon what export trade there is, and a rise in export prices which will lead, in the long run, not to an increase but to a decrease of exports. Therefore, I am certainly unconvinced— I have heard nothing yet which does convince me—that the effect of this tax will lead to any increase in exports. One final point. The right hon. Gentleman in his winding up made a great deal of play with the fact that of the Rolls Royce output only 10 per cent. went in exports.

The right hon. Gentleman talked about not being able to spend a great deal of steel in order to allow people to drive from place to place in these great rich cars, and he was cheered, I noticed, with almost equal volume by the hon. Member for West Fife (Mr. Gallacher) and the hon. and learned Member for Gloucester (Mr. Turner-Samuels).

The right hon. Gentleman must withdraw the latter part of what he said.

I did not accuse the hon. and learned Gentleman of cheering me, but of cheering the Chancellor of the Exchequer.

If the hon. and learned Gentleman denies that he was cheering the Chancellor of the Exchequer, I withdraw the unfounded and grave allegation. That is an easy political case to make, an easy thing on which to get cheers—that we cannot afford steel to build this kind of motor so that people can drive about in them. It may well be true, but why has it suddenly been found out today? Why did not the Government find it out two years ago when these very firms were encouraged by the Ministry of Supply to restart the manufacture of these cars and also were encouraged to make new cars? The Minister of Supply or his agent did not say, "We cannot afford to give you the steel to make these new and expensive cars in which people can go about, but, all the same, we want you to make them." They asked these firms to make these cars because it was to the national advantage as well as for other reasons that they should be made.

Were not the expensive cars for export and not for this country?

It was certainly the intention that a proportion of these cars should go to export, but a certain proportion were to stay in this country. Our contention is that it is not possible to increase the exports by the exact amount to compensate for the fall in the home market. It is said we are imposing a tax upon the home market to increase our exports. If we can do that, I think we are all in favour of it, provided it is done without any damage to the company, damage to the engineers and damage to the production. What I am protesting about is the introducing of something into a technical argument which can only be introduced to create bias, and that is talking about rich cars driving about the countryside for which we cannot afford the steel. I say that if that is true, or if the Chancellor of the Exchequer believes it, he ought to have stopped it two years ago and not encouraged these people to spend millions of pounds on new tools and jigs for cars, which they were then told were wanted in the national interest, but which they are now told are a waste of steel.

I hope that even at this late hour the right hon. Gentleman will reconsider this proposal. He has made this offer that if this rains these companies then he will take the tax off again. Certainly I am not content to leave the fate of these companies, even excluding Rolls Royce, to the possibility that if a tax which will do a great deal of damage is put on, then at some future date, when the damage has already been done, some Chancellor of the Exchequer may come down to the House of Commons and ask us to reverse this decision which today we ought not to be asked to pass.

5.45 p.m.

I am interested in the motor industry, for I am associated with the Daimler company, as I think the Chancellor knows. The right hon. Gentleman's attitude is well nigh scandalous and it would be disastrous to the whole motor industry.

Take the position of the Daimler company at Coventry. We took over from the Government a very large factory, and we spent an enormous amount of money in equipping the factory for the provision of cars for export We have organised and mobilised manpower, and the manpower we have is highly technical with specialised qualifications Our motor cars have gone to many parts of the world and are the shop window of the industry. The reputation of the Daimler abroad is well known, especially in our Dominions and Colonies, and it is an advertising medium for the high class products of this country. The Chancellor has said that he is prepared to modify the Purchase Tax in favour of the companies if it is shown that it is injurious to the production of cars. I accept that with pleasure, but I say that that will be too late because the whole industry will be disorganised. I see on the other side of the Committee the hon. Member for East Coventry (Mr. Grossman), and he knows the conditions of our workpeople in Coventry. If they are scattered over the country as a result of this tax crushing the motor industry hard, it will be difficult to get them together again to reconstruct the output of cars when this Purchase Tax is reduced to 33⅓ per cent.

The motor industry has responded magnificently to the call of the Government for more production, and in our works at Coventry we have the highest class of technician to be found in any part of the world. They are men whose skill and craftsmanship are creditable to the country. If the industry is dislocated and these men are scattered to the four corners of the land, how are we to get them back again to produce cars when they are needed? I feel strongly about this and I say that the Chancellor, by this act, is undoing much of the good he has done in many respects to help industry to increase production. This will be a great blow at the motor industry, and at the same time will prevent the maintenance of a high level of employment in scores of firms The Daimler company had to increase their price because of increased costs. We have orders from South Africa, Australia and elsewhere for one of our types of car. That car sold at £1,270. After an allowance for the agent and other deductions it works out at £1,016. Some of those cars go to the home market, and how can we sell them in the home market if we have to add 66| per cent. Purchase Tax? We will not be able to compete against American cars even in our own market I put it to the Chancellor that he is spoiling some of the good work he has done in his public financial policy by loading the motor industry with this tax. It will damage our prestige abroad and it will prevent the production of cars at a moment when increased output is most essential in the interests of the nation.

My right hon. Friend the Chancellor was fully justified in bringing back the attention of the Committee to the very different atmosphere today as compared with that which obtained yesterday. I believe that he was quite right when he pointed out that, so far as the motor car industry is concerned, the export drive, with which we are all supposed to associate ourselves, is entirely dependent on a standardised car and not on the luxury cars we have been discussing this afternoon. I heard several hon. Members refer to the injury which will be done to the engineering industry and to the highly skilled men who are engaged either with the Rolls Royce undertaking or some other firm if this tax is imposed. If it is true that there is such a large concentration of skilled men in any of these factories, the Minister of Labour should know about it, and there should be an immediate redistribution. My hon. and learned Friend the Member for Crewe (Mr. Scholefield Allen) has given instances of the super-quality of the Rolls Royce car, but may I remind him that during the war the Rolls Royce Merlin aero engine—which we all supposed could not be produced by other than skilled labour—was produced with 80 per cent. unskilled labour in the Ford factories with no decrease in quality.

I do not think that the hon. Gentleman should allow that statement to go out unqualified. Of course, the quantities were enormously increased, but it was only possible to use the 80 per cent. unskilled labour because we had the 20 per cent. skilled men.

I could not agree more. In other words, the use of skilled labour in industry today is not in the actual production but in the setting and tool making, as the hon. Gentleman knows quite well. My hon. and learned Friend the Member for Crewe pointed out that there was a large reservoir of skilled labour engaged in manufacturing processes in the Rolls

Division No. 305.]

AYES.

[6.54 p.m

Adams, Richard (Balham)Crossman, R. H SHamilton, Lieut.-Col. R.
Allen, A. C. (Bosworth)Daggar, G.Hardy, E. A.
Alpass, J. H.Daines, P.Harrison, J
Attewell, H. CDalton, Rt. Hon. H.Holman, P.
Austin, H. LewisDavies, Clement (Montgomery)Holmes, H. E. (Hemsworth)
Awbery, S. S.Davies, Edward (Burslem)House, G
Ayles, W. H.Davies, Ernest (Enfield)Hoy, J.
Ayrton Gould, Mrs. BDavies, Harold (Leek)Hubbard, T.
Balfour, A.Davies, Hadyn (St. Pancras, S. W)Hudson, J. H. (Ealing, W.)
Barnes, Rt Hon. A. JDavies, R. J. (Westhoughton)Hughes, Hector (Aberdeen, N.)
Barton, C.Davies, S O. (Merthyr)Hughes, H. D. (Wolverhampton, W.)
Battley, J. R.Deer, G.Hutchinson, H. L. (Rusholme)
Bechervaise, A. E,Delargy, H. JHynd, H. (Hackney, C.)
Belcher, J. WDiamond, J.Janner, B
Benson, G.Dodds, N. N.Jay, D. P. T.
Bevan, Rt. Hon. A. (Ebbw Vale)Donovan, T.Jeger, G (Winchester)
Bing, G. H. C.Driberg, T. E. N.Jeger, Dr. S. W (St. Pancras, S.E.)
Binns, JDugdale, J (W. Bromwich)John, W
Bowden, Flg.-Offr. H. W.Dumpleton, C. W.Jones, Etwyn (Plaistow)
Bowles, F. G. (Nuneaton)Edelman, M.Jones, P. Asterley (Hitchin)
Braddock, Mrs. E. M. (L'pt, Exch'ge)Evans, E. (Lowestoft)Kenyon, C.
Braddock, T. (Mitcham)Evans, John (Ogmore)Kinghorn, Sqn.-Ldr. E
Bramall, E. A.Evans, S. N. (Wednesbury)Kiney, J.
Brook, D. (Halifax)Fairhurst, F.Kirby, B. V
Brooks, T. J. (Rothwell)Farthing, W. J.Kirkwood, D
Brown, George (Belper)Fletcher, E. G M. (Islington, E.)Lang, G.
Brown, T. J. (Ince)Follick, M.Lavers, S.
Bruce, Maj. D. W. T.Foot, M. M.Lawson, Rt. Hon. J. J.
Buchanan, G.Forman, J. C.Lee, F. (Hulme)
Burden, T W.Foster, W. (Wigan)Leslie, J. R.
Burke, W. A.Fraser, T. (Hamilton)Lever, N. H.
Butler, H. W. (Hackney, S.)Gallacher, W.Levy, B. W.
Callaghan, JamesGeorge, Lady M. Lloyd (Anglesey)Lewis, A. W. J. (Upton)
Carmichael, JamesGibbins, J.Lipton, Lt.-Col. M
Castle, Mrs. B. A.Gilzean, ALogan, D. G.
Champion, A J.Glanviffe, J, E. (Consett)Longden, F
Chater, D.Gordon-Walker, P. CLyne, A. W
Chetwynd, G. R.Granville, E. (Eye)McAdam, W
Cluse, W. S.Greenwood, A. W. J (Heywood)McAllister, G.
Cocks, F. S.Grenfell, D. R.McEntee, V. La T.
Coldrick, W.Grey, C. FMoGhee, H. G.
Collindridge, F,Grierson, E.Mack, J. D.
Collins, V. J.Griffiths, Rt. Hon. J. (Llanelly)McKay, J. (Wallsend)
Colman, Miss G. M.Griffiths, W. D. (Moss Side)Mackay, R. W. G. (Hull, N.W.)
Comyns, Dr. L.Gruffydd, Prof. W. J.MoKiniay, A S.
Corbel, Mrs. F. K. (Camb well, N. W.)Guest, Dr. L. HadenMaclean, N. (Govan)
Corlelt, Dr. J.Gunter, R. J.Mainwaring, W. H.
Corvedale, ViscountHaire, John E. (Wycombe)Mattalieu, J. P. W.
Cove, W. GHale, LeslieMann, Mrs. J.
Crawley, A.Hall, W. G.Manning, C. (Camberwell, N.)

Royce undertaking itself. This shows that there is far too great a ratio of skilled people in that firm, particularly when we see that with an 80 per cent. dilution we were able to produce super-quality Merlin engines during the war. I believe, therefore, that the Chancellor would be well advised to continue with his ideas in this direction. I was impressed by what was said by the hon. Member for Moseley (Sir P. Hannon) with regard to skilled labour, and I believe that the decision to go in for motor car export may one day be regretted, but unless we press for standardisation we shall see many people walking the streets of Coventry and Birmingham before very long.

Question put, "That those words be there inserted."

The Committee divided: Ayes. 273; Noes, 128.

Manning, Mrs. L. (Epping)Rees-Williams, D RSylvester, G. O.
Marshall, F. (Brightside)Reeves, J.Taylor, H. B. (Mansfield)
Martin, J. H.Reid, T (Swindon)Taylor, R. J. (Morpeth)
Mathers, G.Rhodes, H.Taylor, Dr. S. (Barnet)
Medland, H MRichards, R.Thomas, D. E. (Aberdare)
Mellish, R JRidealgh, Mrs. MThomas, I. O (Wrekin)
Messer, FRobens, A.Thomas, George (Cardiff)
Middleton, Mrs LRoberts, Emrys (Merioneth)Thomson, Rt. Hn. G. R. (Ed'b'gh, E.)
Mikardo, IanRoberts, Goronwy (Caernarvonshire)Thorneycroft, Harry (Clayton)
Millington, Wing-Comdr E. RRoberts, W (Cumberland, N.)Thurtle, Ernest
Mitchison, G. RRobertson, J. J. (Berwick)Tiffany, S.
Monslow, W.Ross, William (Kilmarnock)Titterington. M. F.
Moody, A. S.Royle, C.Tolley, L.
Morgan. Dr. H BScollan, T.Turner-Samuels, M.
Morley, R.Scott-Elliot, W.Ungoed-Thomas, L.
Morris, P (Swansea, W.)Segal, Dr. S.Walker, G. H.
Morris, Hopkin (Carmarthen)Shackleton, E. A. AWallace, G. D. (Chislehurst)
Morrison, Rt. Hon H. (Lewisham, E.)Sharp, GranvilleWallace, H. W. (Walthamstow, E.)
Mort, D. LShawcross, Rt Hn Sir H. (St. Helens)Watkins, T. E.
Moyle, A.Shurmer, PWatson, W. M.
Nally, WSilkin, Rt. Hon. L.Webb, M. (Bradford, C.)
Naylor, T. E.Silverman, J (Erdington)Weitzman. D
Nichol, Mrs. M E (Bradford, N.)Silverman, S. S. (Nelson)Wells, P. L. (Faversham)
Noel-Baker, Capt. F. E. (Brentford)Simmons, C. J.West, D, G.
Noel-Baker, Rt. Hon P. J. (Derby)Skeffington, A. M.White, H. (Derbyshire, N.E)
O'Brien, T.Skeffington-Lodge, T. CWhiteley, Rt. Hon. W.
Oldfteld, W. H.Skinnard, F, W.Wilkins, W. A.
Orbach, M.Smith, C. (Colchester)Willey, F. T. (Sunderland)
Paget, R. TSmith, H. N (Nottingham, S.)Willey, 0. G. (Cleveland)
Palmer, A M. FSmith, S. H. (Hull, S.W.)Williams, D. J. (Neath)
Paton, J. (Norwich)Snow, Capt. J. W.Williams, J. L. (KelvingroveX
Pearson, A.Solley, L. J.Willis, E.
Peart, T. F.Surensen, R. W,Wills, Mrs. E A
Poole, Major Cecil (Lichfield)Soskice, Maj. Sir FWilmot, Rt. Hon. J
Popplewell, E.Sparks, J. A.Wise, Major F. J
Porter E. (Warrington)Stamford, WWoods, G. S
Proctor, W. T.Stephen, C.Wyatt, W.
Pryde, D. J.Stewart, Michael (Fulham, E.)Yates, V. F.
Pursey, Cmdr. HStrauss, G R (Lambeth, N.)Zilliacus, K
Randall, H EStross, Dr. B
Ranger, JStubbs, A. E

TELLERS FOR THE AYES;

Rankin, J.Summerskill, Dr. EdithMr. Joseph Henderson and
Mr. Hannan.

NOES.

Agnew, Cmdr. P. G.Fletcher, W. (Bury)Macdonald, Sir P. (I. of Wight)
Amory, D. HeathcoatFraser, H. C. P. (Stone)Mackeson, Brig H. R.
Anderson, Rt. Hon. Sir J. (Scot. Univ.)Fraser, Sir I. (Lonsdale)McKie, J. H (Galloway)
Assheton, Rt. Hon. RFyfe, Rt. Hon. Sir D. P. MMaclay, Hon. J S
Astor, Hon. MGalbraith, Cmdr. T. DMacLeod, J.
Barlow, Sir J.Gammans. L. DMaitland, Comdr. J. W.
Beechman, N AGlyn, Sir R.Manningham-Buller, R E
Bennett, Sir PGomme-Duncan, Col. AMarples, A. E.
Birch, NigelGridley, Sir A.Marshall, D. (Bodmin)
Boothby, RGrimston, R. V.Marshall S. H. (Sutton)
Bower, N.Hannon, Sir P (Moseley)Mellor, Sir J
Boyd-Carpenter, J A.Hare, Hon J. H (Woodbridge)Morris Jones, Sir H
Bracken, Rt. Hon. BrendanHarris, H WilsonMorrison, Maj. J. G. (Salisbury)
Braithwaite, Lt.-Comdr J. GHarvey, Air-Comdre A. VMorrison, Rt Hon. W S. (Cirencester)
Brown, W J. (Rugby)Haughton, S. G.Neven-Spence, Sir B.
Buchan-Hepburn, P. G THead, Brig A. HNoble, Comdr. A. H P
Butcher, H. w.Headlam, Lieut.-Col. Rt. Hon. Sir C.Nutting, Anthony
Butler, Rt. Hon. R. A. (S'ffr'n W'ld'n)Hinchingbrooke, ViscountO'Neill, Rt Hon. Sir H
Challen, C.Hogg, Hon. Q.Orr-Ewlng, I. L.
Channon, HHollis, M. COsborne, C.
Clifton-Browne, Lt.-Col. GHolmes, Sir J. Stanley (Harwich)Peake, Rt. Hon. 0
Conant, Maj. R. J. E.Howard, Hon. A.Peto, Brig. C. H. M
Crookshank, Capt Rt. Hon. H. F. C.Hulbert, Wing-Cdr. N, J.Pickthorn, K.
Crosthwaite-Eyre, Col. 0. E.Hutchison, Lt.-Cm. Clark (E'b'rgh W)Ponsonby, Col. C. E
Crowder, Capt. John EHutchison, Col. J. R. (Glasgow, C.)Price-White, Lt.-Col D
Cuthbert, W. N.Jeffreys, General Sir G.Raikos, H V.
Davidson, ViscountessJennings, R.Rayner, Brig. R
De la Bere, RJoynson-Hicks, Hon. L. WReid, Rt. Hon J S C (Hillhead)
Oigby, S. W.Kerr, Sir J. GrahamRonton, 0.
Dodds-Parker, A. DLambert, Hon. G.Roberts, H. (Handsworth)
Dower, Lt.-Col A V G (Penrith)Legge-Bourke, Maj. E. A HRobinson, Wing-Comdr. Roland
Drayson, G BLennox-Boyd, A. T.Ropner, Col. L
Drewe, C.Lindsay, M (Solihull)Sanderson, Sir F
Dugdale, Maj Sir T (Richmond)Linstead, H. N.Scott, Lord W.
Eccles, D MLloyd, Selwyn (Wirral)Shepherd, W S. (Bucklow)
Eden, Rt. Hon ALow, Brig. A. R. W.Smiles, Lt.-Col. Sir W
Elliot Rt Hon. WalterLucas-Tooth, Sir H.Smithers, Sir W
Fleming, Sqn.-Ldr. E LLyttelton, Rt Hon. OSnadden, W. M.

Spearman, A. C. MThorneycroft, G. E. P. (Monmouth)Williams, C. (Torquay)
Stanley, Rt Hon. OWakefield, Sir W. W.Winterton, Rt Hon. Earl
Studholme, H GWalker-Smith, D.
Sutcliffe, HWebbe, Sir H. (Abbey)TELLERS FOR THE NOES:
Taylor, Vice-Adm. E A. {P'dd't'n, SWheatley, Colonel M, JMajor Ramsay and
Teeling, WilliamWhite, J. B (Canterbury)Lieut.-Colonel Thorp.

Further Amendments made: In page 7, line 15, after "forty-seven," insert:

"and (b)in so far as they relate to road vehicles, on the eighteenth day of June, nine teen hundred and forty-seven.

In line 18, leave out "that date," and insert:

"the date of the coming into operation thereof in relation to those goods."—[Mr. Dalton.]

Clause, as amended, ordered to stand part of the Bill.

New Clause—(Rate Of Excise Duty On Motor Cars (Other Than Electrically Propelled))

(1) The rate of the duty of excise chargeable under Section thirteen of the Finance Act, 1920, in respect of a mechanically propelled vehicle of a description specified in paragraph 6 of the Second Schedule to that Act, being a vehicle registered under the Roads Act, 1920"for the first time on or after the first day of January, nineteen hundred and forty-seven. and not being an electrically propelled vehicle. shall be ten pounds

(2) In accordance with the preceding subsection the said Section thirteen shall have effect as if the following paragraph were substituted for the said paragraph 6. that is to say—

Description of Vehicle Rate of Duty

Rate of Duty

"6. Any vehicles other than those charged with duty under the foregoing provisions of this Schedule—
£sd
(a) Electrically propelled vehicles7100
(b) Other vehicles—
(i) If registered under the Roads Act, 1920, for the first hundred and forty-seven—
Not exceeding 6 horsepower7100
Exceeding 6 horsepower—
For each unit or part of a unit of horse-power150
(ii) If so registered on or after that day1000

(3) This section shall come into operation on the first day of January, nineteen hundred and forty-eight.—[ Mr. Dalton.]

Brought up, and read the First time.

I beg to move, "That the Clause be read a Second time."

This matter will not be contentious to the degree to which the last proposal was It is a suggestion to meet a request that was made to me, in order—to use the phrase which was introduced by one of my hon. Friends—to divorce design from taxation. The proposed new Clause aims 'at making all new cars pay a flat rate of £10,instead of either the horse-power rate or the cubic-capacity rate. New cars, as defined in the new Clause, are to be taxed as from the commencement of the next licensing year. Cars registered after 1st January, IQ48. will pay on the flat rate of E1o. We have also to deal with the intermediate class of cars, in order to avoid having three separate taxes operating together, which would be the case under the present law if we did not amend it. Those cars would be paying according to the cubic capacity formula adopted last year. We propose that those cars shall also pay £10 a year. That leaves the older cars, registered before 1st January last, to pay at the old horse-power rate. The argument may be employed in this discussion that we should carry back further the date at which the new uniform tax applies. I had better wait to listen to it, before I deal with that matter. The brief intention that we have in mind here is, while sacrificing as little revenue as need be in this Financial Year, to introduce this change. As I explained on the last Amendment, the loss will tend to grow as the years go on and as the proportion of cars registered from the new date rises. As that proportion rises, we shall lose more and more revenue, because the £10 will be less productive than the old rate. That problem lies in the years ahead. The purpose at the moment is to hold this loss of revenue within bounds while fully carrying out the divorce between design and taxation.

On a point of Order. Is there not a misprint of this new Clause upon the Paper, Mr. Beaumont? I have a Paper which I have just obtained from the Vote Office, and a line appears to be omitted from it.

A line has been omitted in the printing. After the word "first" in (bi) there should appear the words:

"time before the first day of January nineteen."

Subject to an Amendment regarding the question of the date as from which the proposed new Clause is to operate, which Amendment we hope we shall be able to discuss a little later, the Clause is acceptable to hon. Members on this side of the Committee.

Before the right hon. Gentleman proceeds, I should point out that the Amendment to which he has referred has not been selected.

Perhaps I might ask whether it is intended to call any of the Amendments to the proposed new Clause?

Yes, one will be called, the first on the Order Paper, in line 3, to leave out from "Act." To "not," in line 5.

I have no doubt that we shall be able to make our point upon that Amendment, which goes rather wider than the one standing in the name of my right hon. Friend the Member for West Bristol (Mr. Stanley). I am glad that the hon. Member for Oldham (Mr. Hale) has drawn attention to the fact that the second Subsection of this Clause as it stands on the Order Paper makes nonsense and shows signs of the very hasty work which no doubt has to be done in the right hon. Gentleman's Department at the present time. I hope that a suitable occasion will be taken for correcting the Clause before it finds its way into the Finance Act of this year.

Question put, and agreed to.

Clause read a Second time.

I beg to move, as an Amendment to the proposed Clause, in line 3, to leave out from "Act," to "not," in line 5.

It seems to me that the Committee should take the opportunity of looking at this matter again. The Chancellor is removing what must have been one of the most stupid forms of taxation ever known. It was a form of tax which absolutely crippled the designer in this industry, and the step now taken is an important one. I could have wished that the Chancellor had listened a little more carefully to my plea a year earlier, but I could overlook that if he would give some attention to this point. It seems a great pity that the good work achieved in this Clause should be marred by leav- ing very bad feeling, which there is bound to be, among so many people who at the request of the Government will use their old cars much longer than they would ordinarily do. They will be penalised for using their old cars rather than endeavouring to get new ones.

The Chancellor has frequently said that it he gives up revenue on the one hand he must make it up on the other. If I understand his answer aright, in reply to a Question by the hon. Member for Hornsey (Mr. Gammans) on 24th June, he said he could remove this grievance at the cost of £5,500,000. It is a pity that he should leave this bad feeling among so many people who will be driving their cars as long as possible and who do not understand, as we do, the Chancellor's difficulty, and should mar this very good bit of work by making those people continue to pay heavily, and too heavily compared with people driving new cars. It would be in the Chancellor's interest, and the Committee would feel it worth while, to make some sacrifice to create a much better feeling. Although £5 million is a lot of money, it is comparatively small compared with our budget in these days, and it is worth sacrificing a small amount like this for the sake of the good will the Chancellor would create in the community. I hope he will take a second look at this and see if he cannot abolish the horse-power tax altogether and allow everybody to pay a flat rate. He will find himself very popular if he does so, and in the long run it will not cost him very much.

6.15 p.m.

The effect of this Amendment would be to apply the £10 rate of tax on horse-power to all cars irrespective of the date of their registration. The Amendment which you, Mr. Beaumont, have informed me is out of Order, is a similar Amendment but very much more limited in its character in that it would only apply the £10 rate to cars registered on or after 1st January, 1946. I must confess to being a little puzzled that our limited proposal should be held to be out of Order when the far more extensive and far more expensive proposal of the hon. Member for West Middlesbrough (Mr. A. Edwards) has been held to be in Order. I should have liked, with your permission, to address some remarks to the merits of the Amendment in the name of my right hon. Friend and I should also have liked an opportunity of dividing the Committee, if necessary, upon it.

Obviously, that cannot be done. The Amendment in the name of the right hon. Member for West Bristol (Mr. Stanley) has not been selected for Debate. If the right hon. Gentleman would like to make a point he may do so as long as he does not deal with it too lengthily.

I must confess to being in a state of complete confusion why my Amendment should be held to be out of Order. I could quite understand my Amendment not being selected, but I cannot understand my Amendment being out of Order when the far more extensive Amendment now before the Committee has been held to be in Order.

The Amendment standing in the name of the right hon. Member for West Bristol has not been selected, it being out of Order, because if agreed to it would impose a higher charge on some small vehicles.

With all respect, Mr. Beaumont, it certainly would not impose a charge. It would remit an existing charge on all vehicles registered during the calendar year 1946. The Amendment now before the Committee remits a charge on all vehicles quite regardless of their date of registration.

I am informed that the Amendment not selected would impose a higher tax on small vehicles. Therefore, it would be out of Order.

of course I accept your Ruling, Mr. Beaumont, but I must confess that I have not succeeded with my limited powers in properly apprehending it. However, I will address my remarks to the Amendment now before the Committee. I have considered this matter with my hon. and right hon. Friends and we are not inclined to give our support to a proposal which would involve the Chancellor at this stage in what we consider to be a very substantial and serious loss of revenue. We do, however, think that the date which the Chancellor has chosen in his new Clause, that is to say:

…a vehicle registered…for the first time on or after the first day of January, nineteen hundred and forty-seven…"
is not a very happy one. If we accepted the suggestion in the Amendment, a great many cars which had not borne Purchase Tax would in fact secure a reduction in taxation. We think it is right that any concession as regards the horse-power tax should be limited to cars upon which Purchase Tax has been paid. A convenient date for the purpose would have been 1st January, 1946, for the reason that virtually no new cars for private use were registered during the war. By 1st January, 1947, however, considerable numbers of new postwar cars, cars built and registered since the war, were coming on to the roads, and the result of the date which the Chancellor chooses in the Clause will be that, as a matter of pure accident, some cars will be paying a tax of £25 or £30 on their horse-power and other cars of similar construction, also postwar models, will bear tax of £10, and there will be a vast difference in the secondhand values of these two vehicles which, in other respects, are precisely similar. We think he has chosen an unfortunate date, and we wish he could have chosen a date which brought within the scope of this concession all new cars built since the war.

In the first place, I disagree cordially with the suggestion put forward by the right hon. Member for North Leeds (Mr. Peake). While it is true that he has drawn attention to an unfair distinction, there is just as little logic in his selection of 1st January, 1946, as there is in the date selected by my' right hon. Friend the Chancellor of the Exchequer, namely, 1st January, 1947. The purpose I had in mind in putting forward my Amendment, which has not been selected, namely, in line 5, leave out "forty-seven," and insert "forty-one," is to provide that the £10 flat rate for a private car licence should be extended to all cars on which Purchase Tax has been paid. I hope that the Chancellor will accept this suggestion, or give it careful consideration as compromise between what has been asked for by my hon. Friend the Member for East Middlesbrough (Mr. A. Edwards) and what has been suggested from the Front Bench opposite.

The Chancellor's new Clause applies the flat rate to all cars registered for the first time in 1947, and to all cars first registered in 1948 thereafter. No particular reason seems to have been adduced so far by my right hon. Friend for the selection of the date 1st January, 1947. Once he has admitted the retrospective principle, so to speak, in this regard, there is no reason why he should limit himself, neither is there any particular merit in the date he has chosen. In order to gain some information on the subject, I put a question to my right hon. Friend the Minister of Transport about the number of cars first registered in the years 1941 to 1946. I did so in an endeavour to find out how many cars had been registered in respect of which Purchase Tax had been paid. Purchase Tax came into operation, by Resolution of the House, on 1st January, 1941, and I find that in the period 1941–46, 134,083 cars were registered for the first time. It is true that these unavoidably include a certain number of cars which are not primarily used for private purposes and it may also well be that in the case of cars purchased or supplied to Government Departments, Purchase Tax may not have been paid. Some of these 134,083 cars to which I have referred are not affected by the £10 flat rate proposal, being under 10 horse-power. There are no published figures as before the war to show how many of that size were registered in the years to which I have referred, so it would be impossible for me to put forward any figure of the cost to the Exchequer if the Chancellor were to agree to place all cars in respect of which Purchase Tax had been paid— in other words, all cars registered since 1st January, 1941—on the flat rate of £10 per car.

My right hon. Friend has mentioned on more than one occasion that he does not want to have three types of taxation in operation at the present time. That is a legitimate and very defensible attitude to take up, but in respect of the cars that will continue to pay on the old basis of taxation there will none the less be two categories, namely, those cars which have paid Purchase Tax and those cars which have not. I think he might reasonably be expected to give some consideration to ironing-out that form of discrimination which exists, or will exist, in respect of cars registered before 1st January, 1947.

It seems to me that all these discussions about the proposed flat rate of licence duty have been limited to the motor manufacturers; the representatives of the users of the private car, who are more directly affected, do not appear to have been consulted at all. As my hon. Friend the Member for East Middlesbrough has rightly pointed out, the owners of cars first registered before the 1st January, 1947, naturally feel that they are being treated unfairly by comparison with the owners of cars first registered after that date. I hope, therefore, that my right hon. Friend will be prepared to cast a favourable eye upon the suggestion I am putting forward, which represents a reasonable compromise between the two views that have been expressed.

I support what the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) has said, and I think there are some published figures in our Monthly Digest which would help his case. Taking the registrations for cars, 50,000 were registered in the first four months of this year, so all those will be treated retrospectively because the Chancellor has picked upon 1st January, 1947, as a nice convenient date at which to begin. Going back from 1st January this year to October, 1940, when the Purchase Tax, I believe, first came into operation—

That suits me better and I thank the hon. and gallant Member for correcting me. In 1946, for the whole year, 10,000 were registered and in the five preceding years only 1,500. Therefore, there are 11,500 cars in all over six years since the Purchase Tax was put on which will be excluded by this date. I entirely agree with what my right hon. Friend said, that we on this side of the Committee ought not to support a proposal which exempts all cars, because it costs too much in the present state of the Revenue. On the other hand, the amount which it would cost the Revenue to make this logical division between those which pay the new rate and those which must go on the old rate—the logical division being when Purchase Tax was first imposed— can only be a comparatively small sum of money. I cannot make an accurate estimate, but no doubt the Chancellor will give it. I believe it is true that the average tax paid per car today is about £14. If that is reduced to £10, that represents £4per car, so if there are 11,500 cars to bring in, the Chancellor will lose about £50,000 by making what I believe to be a logical—

Surely, the hon. Member is losing sight of the fact that second-hand cars also would be brought in?

Perhaps I have not made myself clear. I am only asking the Chancellor to consider bringing in those cars which were registered as new cars since 1st January, 1941, when the Purchase Tax first came in. There seems to be a definite reason for making this distinction, because the buyer of the car has had to pay—

6.30 p.m.

The hon. Member's Amendment proposes to substitute "forty-six for" forty-seven."

That Amendment has not been selected. I have been impressed by arguments in the Committee, and I am inclined to think that there is more sense in the Amendment of the hon. and gallant Member for Brixton than there is in our Amendment. On looking at the figures I think he is right and I hope I shall be excused for departing from our Amendment. Would the Chancellor indicate the actual cost to the revenue if we went back to 1st January, 1941, because if it is not more than £50,000 that seems reasonable? I hope the right hon. Gentleman will see his way to accede to that because there is nothing logical in going back at all, unless we go back the whole way

I feel in a rather difficult position. I want to agree with everybody. I put my name down to the Amendment which seeks to insert "forty-six" for "forty-seven," because I thought it was all for which we dare ask. Having had very favourable treatment by the Chancellor, I felt entitled, like Oliver Twist, to ask for more. I was impressed by the arguments of the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) and also by the arguments of the hon. Member for East Middlesbrough (Mr. A. Edwards). When I was a small boy taking my first job, they asked me how much money I wanted, and I said, "As much as I can get." I feel very much the same in this case. I would like all these things, and, therefore, I ask the Chancellor why we cannot have them now

When the Chancellor suggested this change, I did not think the ordinary motorist would worry very much about it. I thought he would say, "The Chancellor has made this new arrangement, and I shall benefit in the future." But, getting about among ordinary motorists who will not benefit, and who cannot buy a motor car for many years, I have not been able, by using all the powers at my disposal, to explain to them why some are to have a much larger tax than others, and I am expecting a great deal of trouble as time goes by. Anything which the Chancellor can do to remove this feeling of hardship would be a good thing. I know that whatever system of taxation we have, someone will feel hardly done by, but in this case there will be a large number of people whose purses are very narrow and who are using old cars. They are going to feel this very much The Chancellor would do a great deal of good by looking at the various suggestions, and in going as far as he can to remove that feeling of hardship which is widespread, and which will go on as the years pass.

There has been a good deal of talk about logic in relation to this Amendment, but to me the Debate seems to have been completely illogical. Even the Chancellor seemed a little illogical when he suggested that the purpose of the reduction was to foster design. Removing the tax from cars registered in 1947 does not help the design of those cars at all, because they are conforming to the old designs. To be logical, the date should be 1st January. 1948, but the trouble would then be that no one would buy any new car over 8 horse-power during the remainder of this year. I cannot see the connection in the argument between reduction of this tax and motor cars in respect of which Purchase Tax has been paid. There is no relation between the two forms of taxation. Many people have paid large sums for derelict old cars, and they are in a worse position because of the countless replacements that are necessary, almost weekly. If we are going to do anything different from that which the Chancellor proposes, the tax ought to apply to all cars, new or secondhand Then the only people who would rejoice would be the secondhand car dealers, and we would further inflate the secondhand car market. There would be much more racketeering than there is now. If there is any reduction in the tax, there should be some measure of control over secondhand car prices. It is long overdue. Having taken out a new car this year I am satisfied, but if we are going to be logical, and if the purpose of the reduction is to foster design of new cars, 1st January, 1948, is the date which should have appeared in this Amendment.

On a point of Order. I understand the Amendment is that certain words should be left out. As far as I can understand, no one has discussed that at all. Is it not the case that the whole discussion is out of Order?

If it had been out of Order, I should have ruled it out of Order.

Is anyone discussing whether the words are to be left out, or not? I want an answer, as I might get out of Order later on.

The hon. Member is not discussing the Amendment, therefore, he is out of Order.

The Committee is in some difficulty, or there might be some misunderstanding, arising out of what the hon. Member for West Fife (Mr. Gallacher) said. The Amendment moved by the hon. Member for East Middlesbrough (Mr. A. Edwards) excludes from taxation all those persons with secondhand cars. In the last 10 minutes, or quarter of an hour, the Committee have rather departed from that, and have concentrated on what date we ought to apply this taxation to new cars. I think the hon. and gallant Member for Lichfield (Major Poole) is quite right, at least he is more right than most. The really logical date would be 18th June, 1947, when the proposals took effect. That is the date which the Chancellor should say that the tax on new cars is to be imposed at a reduced rate. I think the Amendment in the name of my right hon. Friend the Member for North Leeds (Mr. Peake) is the fairest on balance but, unfortunately, we cannot vote on it, as it has not been selected. Why you have ruled it out of Order, Mr. Beaumont, I, like others, cannot understand. The Amendment we are discussing remits taxation on a very large number of cars of all kinds, whereas our Amendment would remit taxation on only a very few cars. Where the point of Order arises—

The noble Lord is himself quite out of Order in questioning the Ruling of the Chair.

I apologise. The hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) wants us to go back as far as 1941 and to include all new cars which were registered after that date. These cars are getting a little old now, and they have to move down the road side by side with secondhand cars which have been in garages for a considerable time during the war. There might be a lot of feeling in the country if at one house there was a car which was registered for the first time in 1941, upon which reduced taxation was now being paid, and at a house nearby there was a secondhand car, which had been stored during the war. Its owner might have been away fighting, and he would resent the man who registered his car in 1941, when he was away on war service, being charged at the reduced rate of tax which would apply if the hon. and gallant Member's Amendment was adopted. These considerations should be borne in mind by the Chancellor in deciding what to do. By far the best Amendment is the one in the name of my right hon. Friend the Member for North Leeds, and I hope that the Chancellor will give it further consideration, and see whether, on balance, that is not the fairest date, taking all things into account.

The Amendment on the Order Paper seeks to give this reduced rate of duty to all cars. I am glad to know that I have the support of the right hon. Gentleman opposite in resisting that, as resist it I shall. It would cost £5½million. I cannot afford that money, and if I could I would find many better ways of relieving taxation by £5½ million than by reducing the annual licence fees on motor cars. That would not be by any means the best way of giving relief. Therefore, I must resist that proposal and it is on that. in the light of the Ruling which has been given from the Chair, that a vote will take place, if there is a vote. Other suggestions have been made in the Debate. I have been asked for the costs of the various proposals. I have here the cost of the Amendment in the name of the right hon. Member for West Bristol (Mr. Stanley), which would throw the duty back one year, and would admit 1946 cars to the lesser rate. The cost of that would be £400,000 in 1948, diminishing as the years go by.

I was asked what would be the additional charge of carrying the date back to 1941. The cost would be slightly, but only slightly, greater, for the obvious reason that between 1941 and 1946 relatively few cars were registered. The cost of that would be just over £500,000, as against £400,000 for the other proposal. I cannot give any undertaking this year to move at all from the position which I have adopted in this matter. It is remarkable how, when one comes forth and meets a widespread desire, one is met with happy rejoinders, but on further reflection someone thinks up some further movement which should be made in the same direction, as Oliver Twist used to do, in the words of the hon. Member for Edgbaston (Sir P. Bennett). I must resist Oliver Twist here. I think I have acted pretty well towards the motor industry so far. I must ask to be excused from anything further this year.

I have been asked why not take 1st January, 1948, as the date? The reason is that my proposal does not pick up at the lower end only the new cars, but all the cars which would, if I had not made the change this year, have been paying on the cubic capacity scale. I have explained once that I have thought it desirable, in the general tidying up of this matter. to have only two rates of taxation, not three, running. That is the reason it was necessary to go back to 1st January, 1947, which was the date, under the provisions made in the last Finance Act, upon which we introduced the cubic capacity rate for cars registered thereafter, in substitution for the old horsepower tax. That is an administrative reason. I think it would be a great nuisance to have these three rates of tax in operation together.

6.45 p.m.

It has been suggested that there may be strong feeling in the country about this. I do not believe that for a moment, nor do I believe that the hon. Member for Edgbaston is as incapable as he thought of explaining the matter. We in this Committee have clearly understood it, and I am sure that every intelligent elector in Edgbaston and elsewhere will readily understand the point, which is that the purpose of this change in taxation is not primarily to confer benefits upon any particular car owners; the purpose is to divorce design from taxation and thereby help the industry towards standardisation of models, and to help it to make its contribution to our exports. That is the only reason for doing it. Any member who is in difficulty in facing the owners of old cars is perfectly entitled to say, as I say now, and even if I did not do so he could guess it, that this will be a very transient form of taxation. As the years go on it will amount to less and less. Therefore, though the cost will at first be £5½ million, it will be less in the next year, and it is a pretty safe bet that at some date in the not far distant future the Amendment which has been put down by my hon. Friend will be adopted.

I am making no promise—it would be wrong to do so—for next year. That proposal would not rank very high in the scale of desirable things compared with many other things. When the amount has shrunk a little over a few years it will be an obvious point on which pressure might be brought to bear, and which eventually, when it becomes sufficiently cheap to meet, might be met. I am much encouraged by the promise of the support of the right hon. Gentleman opposite in resisting the Amendment, if there is any need for that support.

Amendment, by leave, withdrawn

Clause added to the Bill.

New Clause—(Imported Films)

(1) The powers of the Treasury, by virtue of paragraph 12 of the Third Schedule to the Finance Act, 1939, by order to vary certain provisions of that Schedule (which relates to the customs duties on imported cinematograph film) shall, in relation to exposed cinematograph film, include power to alter or add to Section ten of the Finance Act, 1935 (which relates to the valuation for duty of imported goods), as if that Section were among the provisions mentioned in sub-paragraph (2) of the said paragraph 12.

(2) Without prejudice to the generality of the foregoing subsection, an order made by virtue thereof may in particular provide—

  • (a) that for the purpose of computing the price which any imported film would fetch on a sale in the open market there shall be made (in addition to the assumptions required to be made by the said Section ten) assumptions with respect to—
  • (i) the inclusion in the sale of exclusive rights of reproduction and exhibition, and. the accrual to the buyer of the gross proceeds of any resale or letting of the film or any reproduction thereof for exhibition;
  • (ii) the proportion of the said gross proceeds with which the buyer will be content in respect of all or any of his costs, charges and expenses and of his profit;
  • (iii) the exclusion of the seller and other persons from any interest, direct or indirect, in the subsequent reproduction or exhibition of the film;
  • (b)that the value of any imported film shall, in such cases as may be provided by the order, be determined by reference to a supposed sale not of that film but of any version prepared or to be prepared for exhibition wholly or partly from that film or a duplicate thereof.
  • (3) Any order of the Treasury made by virtue of the said paragraph 12 may also contain incidental or supplementary provisions for the purpose of securing the collection and recovery of the customs duty on exposed cinematograph film, including provisions—

  • (a) that an application for the registration of a film under Part III of the Cinematograph Films Act, 1938, shall not be entertained unless accompanied by such evidence as the order may require for the purpose aforesaid;
  • (b) that where, with intent to evade the payment of customs duty on exposed cinematograph film, any film not registered under the said Part III is delivered to an exhibitor or exhibited in contravention of Section twenty-two of that Act, any of the enactments relating to customs shall apply with such adaptations as may be provided by the order.
  • (4) In this Section the expressions 'exposed cinematograph film' and 'duplicate' have the same meanings as in the Third Schedule to the Finance Act, 1939.— [ Mr. Dalton.]

    Brought up, and read the First time.

    I beg to move, "That the Clause be read a Second time."

    This also is a matter which has been ventilated in the House previously. I need not speak at length on it, but I will listen with interest to the points which are made, and, if need be, add a word later. The broad purpose of the Clause is to enable us—and I choose my words with care so that they will not be misunderstood by anyone—if it should seem desirable to do so at a later date, to impose this new duty upon imported films. We have no power now to impose a duty of this kind. If we should desire to introduce it later, we must get power to do it now. This is an enabling provision. I make no proposal for the imposition of such a duty now, but I desire to obtain from the Committee the authority to do so later by order, if it should seem desirable. If we did it, the purpose of it would be to make a further economy in foreign exchange. That is its purpose. The form of the duty is not, in its substance, in any way different from the form of a vast number of other duties. It is to levy an ad valoremduty upon the value of the object taxed. That is the subject and purpose of the Clause.

    It is necessary to define how this valuation shall be carried out and we must recall, of course, that it is not the usual practice when a film is imported into this country for it to be sold outright by the importer to some other person. If that were the usual practice, everything would be quite easy. There would then be a valuation based upon the price at which the film changed hands. There may be some cases in which that might happen. It may be that the Rank organisation, for example, may desire to purchase outright certain films manufactured outside this country. If so, the thing is very simple from a fiscal point of view. If we decide to operate this, we shall put a levy at the rate prescribed upon the value as revealed by the sale.

    But that is not the normal proceeding and, in order to determine what is the value on which the levy should be charged, we must endeavour to arrive at i4. from the earnings of the film. These only gradually become known. Therefore, we must have, as it were, a trial shot, a ranging shot, at the earnings. An effort will be made, and no doubt the Customs will be able to do it with reason able accuracy. A shot will be made, in the first instance, at what the earnings seem likely to be as an indication of the value of the film. In the first instance, the duty will be levied on the basis of this trial shot and later on, if it should prove that the shot has gone wide in either direction, an adjustment will be made either by repayment by or to the Customs, as the case may be.

    I think this is an ingenious way of doing it. I am much obliged to the ingenious people who thought of it. It did, for a little while, baffle us, but I think now that an ingenious method has been devised. I can think of no more effective method. If the purpose is accepted, namely, that we should have it in our power to reduce the flow of foreign exchange in respect of imported films—and that has often been put to me as a thing that at least we ought to have the power to do, and many people have gone further and said we ought to do it, whilst some have said that we ought to have done it some time ago—these people ought now to give their general support to this proposal. I will not say any more at this stage, but I will be glad to reply to any points that may be raised.

    I do not think it will be denied in any part of the Committee that some machinery of this sort should be at the disposal of the Chancellor in our present predicament. "Food before fags" and now, "Food before films."

    Exactly—with some doubt as to just how long the food will be forthcoming in its present volume. All these things have been brought home to us very sharply. It was only yesterday that my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) pointed out that in the last half of last year our expenditure on machinery was 5 per cent., on films it was 7 per cent., and on tobacco it was 32 per cent. Therefore, no one will be in a mood to object to some apparatus of this sort being at the disposal of the Chancellor of the Exchequer. What I think should be said is that perhaps ingenuity may have been carried a little too far. In this new Clause there are certain rather new departures from our normal procedure.

    The right hon. Gentleman indicated one of them when he referred to the shot in the dark in the first place, with a calculation which will follow a little later. This, of course, is an entirely new principle. This also imposes what is in effect a tax on the profits made on the showing or exhibition of the films in various parts of the country. One does wonder—and I think this should be said at this stage —whether the right hon. Gentleman will succeed by this method of control in preventing the tax from being passed on to the renter and the exhibitor. It seems to me that some of the smaller independent cinemas outside the great combines and groups with which we are all familiar might find that the tax descends upon them with harshness. Then, of course, there is the one old bogy of ours which has cropped up so very often during this Parliament. However desirable the objective may be, I think it must be stressed upon the right hon. Gentleman that again we are giving away certain of our powers. We are going to allow the Chancellor a very wide range of activity by way of regulation—

    Yes, but we all know the circumstances in which affirmative Resolutions are taken. Generally it is at 1 o'clock in the morning with the Closure applied after a Debate of three-quarters of an hour or an hour. That safeguard is not quite the strength and stay that it used to be in the days of Tory Government when there were affirmative resolutions. These things are now taken in the night watches with a tired and generally hilarious gathering. The Financial Secretary has had to cope with some of the hilarity frequently. He will realise the force of what I am saying. I must also mention that no rate of duty is here specified, so that really we are giving the right hon. Gentleman a good deal. Even those who have faith, and they are a diminishing number both in this Committee and outside, must look at their responsibilities as private Members before they give too much away. While it is necessary to curb the import of American films—and that is something which I think will be supported by my hon. Friends on this side of the Committee; certainly, I support it—I think we ought to proclaim some disquiet at the method which is being adopted to do it.

    I rise merely to ask for some little explanation. Personally, I welcome the steps that are being taken in the new Clause, not least because I think it will help eventually not only to save dollars, but to get the cinema trade in this country to put its house in order. What I wish to know is the relationship of non-discrimination in this matter. Are we taking powers in the Regulations to tax films from all countries abroad? I should regret that very much. While I would keep out every American film—I do not like spending dollars on them because they are mostly bad—I should very much regret having to exclude in any way, or even make it difficult to bring here, every French film that is made. They are all charming and delightful, and I would be sorry if it would have that effect.

    Indeed, the places where one can buy films cheaply are the places where good films are made. I regret that the Chancellor has indicated that my fears are well founded.

    7.0 p.m.

    Yesterday's discussion made it very clear to everyone in the House, and I hope in the country, that what we were suffering from is the stranglehold of the American dollar. That is correct. [Interruption.]Hon. Members should read the Debate yesterday and see what the Chancellor said. Anything the Chancellor can do to loosen that stranglehold will be work well done and will help this country to recover, because it will be impossible for this country to make a recovery while we are dependent upon or tied to the dollar. So I am with the Chancellor in any cuts he makes. It will save him from having to chase around the world for dollars. Two men may stand together: one may look to the West, and see that all is dark and gloomy; the other look to the East, and see blue skies and sunshine. That is quite a common experience. We could go now to the terrace and look one way and find blue skies, and look another way and find dark clouds.

    I am not quite clear whether the hon. Gentleman is describing a new film or referring to the new Clause.

    I will get to the Clause. Yesterday the deputy Leader of the Opposition said that he was very concerned about the discrepancy of two voices last week. The Chancellor was depressing when he was looking to the West and the dollar situation, but, the next day, the Food Minister was looking to the East and new trade agreements and we had a speech of blue skies and sunshine. The dollar is the factor that is condemning this country to hardship and austerity, and not until the Chancellor gets us out of the clutch of the dollar will we go ahead. So, accordingly, I support the Chancellor in any cuts he may have to make, and I say to the right hon. Gentleman that the people of this country—if he has to make cuts, however regrettable from certain points of view, they may be—will face them with the same spirit as they faced many other hardships. I am quite certain the people of this country are prepared, if it is necessary, and the Chancellor considers it desirable, to face any cuts he may make, and to tighten their belts if need be. They will echo the desire of the Chancellor for: "Food before Fags" and "Grub before Grable."

    As the Chancellor of the Exchequer has said, there are two issues involved here. One is the question whether there should be an import duty on films and the other is the form which that duty should take. On the second question, I have some reservations. On the first question, I am wholeheartedly behind the Chancellor. It seems to me of first importance that an import duty should be levied very early. Indeed I am only sorry that there have been, in the presentation of this proposal, so many qualifying "ifs," and I hope that, in fact, the Chancellor, although this new Clause is only a permissive one, will take an early opportunity to implement it. The Chancellor, I understand, has also had the unanimous endorsement of the workers on the production side of the industry, through their joint organisation—the Film Industry Employees Council—which has passed a resolution to that effect. That is not altogether surprising, because, quite recently, they issued a memorandum in which they called for precisely this proposal. They said:

    "If it is practicable, we would propose tax being made on all box office takings on all foreign films."
    I am a little puzzled, therefore, at the attitude of my hon. Friend the Member for West Nottingham (Mr. O'Brien) who, apparently, opposes this import duty, or so committed himself during the course of a broadcast. I am all the more puzzled because the union of which he is an official is also a signatory to this document, and made no reservation. I have read the report of his broadcast speech, which prompted me to the reflection that, although the hands were the hands of N.A.T.K.E., the voice was the voice of Mr. Rank.

    As I understand it, his three arguments are these. He points out that the present output of British films accounts for 20 per cent. of existing screen time, and he holds that it would be impossible to extend this percentage within five or even 10 years. That seems to me to be unreasonably defeatist. I know what the restricting factors are. Studio space is foremost: and, in a letter to "The Times" the other day, Lord Grantley pointed out that the maximum that the studios could turn out was 68 British films a year. Nevertheless British screen time could be expanded, for example, by the re-issue of British films, and not necessarily of very old British films, films no earlier than those made four years ago. Studio space could also be used more economically. Moreover, it is possible for extensions to be made; at present, there are extensions to stages being made and building work being carried on. It might be a national economy for this to continue, and further extensions be made within reason. I say that with some reluctance, and certainly no building project of that kind should take place without careful vetting. For instance, it should not be carried on exclusively at the expense of the local building resources. There is no reason why the immediate locality should bear the whole burden of such building. Also there should be much stricter overseeing of the temperamental tendency to extravagance to which film companies are addicted. If they want to build a new wash house, the only standard they know for a wash house—or can remember—is the standard of the Savoy.

    On a point of Order, Mr. Beaumont. For our own guidance, may we know whether we shall be allowed to discuss the sanitary ideas of film company directors, which would seem a little remote from this new Clause?

    Owing to my being otherwise occupied, I was not listening with very close attention to what the hon. Member was saying. We must not, however, discuss irrelevant matters.

    Surely, the provision of studio space is relevant to the question of expanding the output of British films. The second argument advanced by my hon. Friend is that any cuts in programmes such as this proposal might well result in, would mean that cinemas would actually have to close down. I really cannot accept that argument. What it means if it means anything at all, is that if a new tax on imported films reduced the number of films available, and, as a result, the exhibitors had to revert to the old practice of single-feature programmes, then, according to my hon. Friend, the public would be so distressed that they would either strike or sulk, and stay away altogether if they could not see two films in one programme. I cannot accept that argument for one moment. There is no reason why single-feature programmes— if they were universally and uniformly accepted in view of any stringent measure which the Chancellor may have in mind— should harm the cinema business in any way.

    Apropos of that, the extraordinary auxiliary argument was advanced in the course of this broadcast that there would be less taxation for the Chancellor. I suggest to my right hon. Friend that, in point of fact, there might be more, not less, Entertainment Duty available because a single-feature programme means that it could be shown to four of five audiences a day instead of, perhaps, to only two or three. It would be profitable from the point of view of the exhibitors, the industry, and my right hon. Friend the Chancellor of the Exchequer The third point—and this is really the heart and core of the argument put forward by my hon. Friend—is this I will quote him verbatim:
    "If we cut American pictures we would embarrass Mr. Rank just when he hoped to arrange for 20 million dollars' worth of British pictures to be exported to America."
    Mr. Rank has been hoping for a very long time, and has been putting up a very brave fight. He has been wrestling with the American markets, but there is very little concrete evidence that he is really having any substantial success. Whenever a measure of the sort which my right hon. Friend is now putting forward comes on the tapis,there is always immediately talk of new deals, and we are asked, "Please do not rock the boat; let the negotiations proceed." I take the view that it is now time that we had the actual facts and figures stated fully in public. Let us have no more of these vague suggestions of what may be done, of what it is hoped to do. There is talk of a new deal with American organisations amounting to 12 million dollars. It is not said, however, whether that is a guaranteed 12 million dollars; it is not said whether it is a gross or a net 12 million dollars. What we really want to know is the net figure, and whether it is guaranteed. We have not got that information, and we never get it. I suggest to my right hon. Friend the Chancellor that the time has now come when we should strike, in public, a balance sheet in dollars for the whole film industry and its ramifications.

    Therefore, I should like to ask some specific questions which are really relevant to this discussion. The first is what have British films grossed in dollars in the last two years: secondly, what have they netted in dollars after all promotion costs have been deducted and what amount of dollars have therefore been available for bringing back into this country. Thirdly, what, if anything, has been spent in dollars on the acquisition of theatres in America or in Canada by the Rank organisation, or any other organisation? Might I have my right hon. Friend's attention on this point, as it is a specific question which I would like to put to him?

    I have allowed the hon. Gentleman a good deal of latitude, but I think that he has now gone too wide of the subject under discussion.

    7.15 p.m.

    I am trying to argue the desirability or not of an import tax and whether or not it is true that without such a tax there is a reasonable chance of the industry in its present condition succeeding, as it claims, in getting dollars from America. I think that that is really relevant to the discussion, because, as far as I can see, that is the only argument against an import tax.

    What I would like to ask my right hon. Friend, if I may, is whether it is true that theatres have been bought, acquired or built at the expense of dollars by any British film company and, if so, how many dollars have been involved? Fourthly, I would like to ask what dollars, if any, such theatres are bringing into this country in the ordinary way of business? I also understand that a general allowance of dollars is made to the British industry. May we be told what the annual amount of that allowance is, and for what purposes it is expended? Considerable expenditure has been made and continued to be made on the importation of directors, actors and technicians. I would like to know what is the sum involved. It should, of course, be offset by equivalent figures for the export of our own tech- nicians to America. What is the balance between those two?

    Finally, what do all these factors amount to in dollars? Is the balance very heavily against us? If so, how much is it against us and should not that sum be added to the £17 million of dollars which we lose to America every year? When we have these figures we can then examine fairly and reasonably the claim of the Rank and other organisations to be allowed to paddle their own canoe on the dollar question. Moreover, even if Mr. Rank's hopes were justified, and even if he should succeed in America, I think we should still hold to our course because the only argument against doing so is the fear of retaliation. That is not a fear which we need entertain because what it means is that we are afraid that, if we reduce our £17 million worth of dollars for American films, they will retaliate by reducing the odd half million pounds' worth that go back the other way. Is that a threat we need worry about? If it is a question of competition in tariffs or quotas or duties between ourselves and America in regard to films, that is one competition which we could go into quite fearlessly because they vitally depend on our market, whereas we would merely like to get into theirs. Theirs is extra to us, but ours is their life-blood. We have the whip hand in that connection, and there is nothing of which to be afraid.

    As to the form of the tax, for my own part, I prefer what is called a footage tax—that is to say, a flat tax of so much a foot on imported films. The objection to an ad valoremtax is that it is extremely difficult to administer. It is inevitably difficult to administer. The Chancellor has not yet told us how it is proposed to make the initial assessments. Will a body be appointed by the Customs and Excise to sit on each of 300 odd films which come into the country? I cannot think that that is practicable. At what point will it be decided that there is no more money to be derived from a film, that its life is exhausted? Surely that is a very difficult thing to assess. Secondly —this point has been made by my hon. Friend the Member for West Nottingham —what arrangements can be made to ensure that the tax is not passed on to the consumer? I understand that the Board of Trade is satisfied that that point can be looked after, but I think the Committee should be told about it.

    My main objection to the proposed form of tax, however, is that it fulfils only one function; that is to say, it collects dollars. That is very important, but it is not the only thing that a tax could do. The advantage of the footage tax, as against this, is that it gets the dollars just the same. It is much simpler to administer. It keeps cheaper and inferior films out of the country, because obviously, if one has to pay £60,000 or £70,000 flat on any film, regardless of cost, one will not undertake that additional expenditure if the film costs only that amount. On the other hand if the film costs £500,000, the additional £60,000 or £70,000 will not be a deterrent.

    The general standard of imported films, therefore, will be improved by a footage tax. Also, it promotes the export of British films to foreign countries, because the proposal is that it should be linked with a rebate, so that an exporter who has to pay his £10, or whatever it may be, a foot tax on exporting into Great Britain will get a rebate in respect of any films which he imports. The net result would be a considerable help to Mr. Rank and others in their negotiations with the Americans. Also it would not keep out other foreign films, because apart from the Americans, most countries import more British films than they export into Britain; so that they would not be cut out, whereas the present tax—an ad valoremtax—might have the great disadvantage that we would be cut off from all foreign films except American films, which is not a desirable state of affairs. The Chancellor has told us that the Clause is permissive and, that being so, I hope that the alternative proposal for a footage tax will be sympathetically considered.

    One thing is clear from the speech of the hon. Member for Eton and Slough (Mr. Levy), and that is how pleased he must be that there is no tax on shadow boxing, because that is what he has been indulging in steadily for the last half an hour. He has been attacking a speech which has not been made in Parliament at all by the hon. Member for West Nottingham (Mr. O'Brien). He has not spoken at all today and, therefore, this superstructure based on a speech which has not been made here cannot have quite the value as a contribution to this Debate that it might have. My other point arising from the hon. Member's speech is this. I was brought up on a poem, one couplet of which was:

    "And even the ranks of Tuscany Could scarce forebear to cheer."
    The "Ranks" of Odeon are not likely to cheer the speech which we have just heard. The Chancellor was reproaching us, on another Clause, on the basis that when he gave us an inch we always asked for an "ell" of a lot. He is asking us for the widest possible powers to adminster this tax. Some years ago I was in the cinema owning industry myself —not on the high level on which hon. Members opposite are, in big groups; not the super cinemas, but just what are technically known as "flea pits," which is the technical trade term for the cinema which is not gilt all over and with a magnificent foyer. When I was an owner, before my chain of cinemas was absorbed, like so many other things are, by the Coop, I discovered that when any form of taxation is brought in to the cinemas, it is invariably the small cinema and not the big group that suffers. I have the greatest fear that in giving the Chancellor of the Exchequer these very wide powers— whether one calls them permissive or any other name one likes—the eventual result must inevitably be to harm the small independent cinema which is an integral part of the life of a small town or village. A great deal of harm is done by the mass-produced super cinemas which do not fit into the landscape or the ideas of the small town or village. Any form of taxation which will tend to punish the small cinema, and encourage monopolists, who are the natural friends of the Chancellor and of this Government, will undoubtedly do something extremely harmful.

    It was delightful to hear the hon. Member for Eton and- Sough, who is one of the ruling protagonists of the live form of entertainment, in the dirge that he was singing on the "Corporation of canned culture." One thing is certain, that if we continue this practice of allowing the Chancellor as free a hand as possible in the administration of the tax, whether it be good, bad or indifferent, we will find that its incidence will be harmful to exactly that class which we ought to seek to protect.

    My right hon. Friend the Chancellor of the Exchequer last week gave an assurance that before he exercises the powers which he seeks to obtain, he would not only consult me as a Member of Parliament, but he would also consult with the interests of the industry. That assurance has robbed me of much of the criticism which otherwise I would have levelled at the proposal. I do not know where my hon. Friend the Member for Eton and Slough (Mr. Levy) found that I had opposed the proposal. I opposed the timing of it, and the way in which it has been done, but in Parliament I did not oppose the issue and the principle at all, and I do not think the Committee will agree that I am called upon to justify an opinion on this matter which I have expressed in a broadcast speech. Surely, on such an occasion I can state what opinions I like, so long as I am within the law. If I express them I ought not to be the subject of criticism such as my hon. Friend has levelled.

    I am sorry to interrupt my hon. Friend, but I did not appreciate from what he said on the B.B.C. that he would not consider himself responsible for it. Therefore, in discussing his opinion, it seemed to me perfectly clear that what he said on the B.B.C. represented his opinion.

    7.30 p.m.

    Let us get down to the plain facts. Imposition of a tax of this character would have an effect on the future of the British film industry as a whole. British films as they are made now—the producing side of the industry— cannot possibly expand or even be maintained at the present rate of expansion without a considerable access to the American market. That is a fact which anyone who knows anything at all about the film industry of this country could not possibly contradict. There are sections in the film production side who would, no doubt, profit considerably by the Chancellor's carrying out the proposals that he wants. There are certain interests— important, and small, probably—that could get considerable advantage out of this proposal. But I am not taking the view of any one particular section. I am looking at the industry as a whole.

    If we want to develop the British film industry, if we want to have our pictures on the screens of the world, we must not adopt this method. We cannot do it by this method. The approach is psychologically bad. I wish to concentrate on that point. Mr. Rank is quite capable, with his vast organisation, of looking after himself; but it is precisely to prevent Mr. Rank becoming a private monopolist in this country that I and many of my colleagues are opposing the way in which this is being done. Where are the distributors to get the films from? The only producer to be producing films on any large scale will be the Rank organisation, and we shall put that organisation into a position in which it will become almost a monopoly. Mr. Rank has been attacked from time to time—and my hon. Friend the Member for Slough has taken part in the criticisms—for being a private monopolist. This is going to make him completely a private monopolist, not only dominating his own cinemas, but having a far-reaching domination of the independent distributors whom the hon. Gentleman the Member for Bury (Mr. W. Fletcher) mentioned just now.

    I am not going to develop the whole thing fully, but I do beg of the Chancellor, when he deals with this matter later on, as he will, to have regard to the position in the United States. We can gibe at American films, but when I was in the States a few weeks ago I met Mr. Herbert Wilcox. He is an example of a British independent producer away from the Rank organisation, away from all the big money in the film industry; and he is doing, and has been doing, a good job of work for this country in producing and selling British pictures. His last picture, made with his wife—Anna Neagle—starring in it, has gone to the United States. He went round the big film offices trying to sell that picture to America, trying to bring dollars back to this country. I do not know what has happened, but I think he has had a certain degree of success. Just imagine the position of Mr. Wilcox or anybody like him, in going round these commercial film offices—meeting the big shots of the American film industry, trying to get his picture shown on the screens of America, and trying to bring dollars back to this country—in that atmosphere, that bitterness, that has been created by the timing of the Chancellor's proposal. We can take another example, that of Sir Alexander Korda, who has just come back. No doubt he has informed the Treasury of the arrangements or deal he has made in America. That was made, of course, before these proposals were known. Whatever may be the success of Mr. Rank in getting his pictures over there remains to be seen, but, on the whole, we cannot expect our pictures to go over into America to earn dollars for this country unless the feeling that we are trying to do something wrong is removed.

    Everyone sympathises with the Chancellor's difficulties about dollars. But let us try to approach the problem in the interests of the British film industry itself, and do not let us try to solve one problem by creating another and more difficult one. I have already said that the future of the film industry of this country is involved in this matter. Production is involved also in the success we have in getting our pictures on American screens. We do not want any threat of retaliation. We do not want anything like that. Perhaps there will be no retaliation, but we should not put ourselves in the position of asking for it, and making things more difficult for our industry.

    I would not say we need fear it. I do not know what the American film industry leaders will do if this proposal is put into operation. I do not know whether they will try retaliatory measures, or try to keep our films out of America. But this is not a good atmosphere; not a good background. We hear a good deal of talk about competition between different countries. This is not a satisfactory background at this very moment when we are doing everything possible in the interests of the British film industry, and when we are trying to get our commodities over there, and trying to bring money that we want over here.

    Yes, we have been trying for years. We ask the Chancellor for certain information about dollars. The Chancellor will give that information if he wants to give it. But when we are breaking into a country, when we are trying to open up a new market for films, especially in the United States, we must understand that we have to create a considerable organisation, a distributing organisation, a sales organisation there exactly as the Americans have done over here. The only organisation in this country that could make the experiment and that would have the capital available would be the Rank organisation. I do not know of any independent producer who could possibly afford to set up a vast distributing organisation in the United States. My hon. Friend should remember that dollars earned by British films in the United States have to pay for the creation of this vast organisation.

    I am sorry to interrupt the hon. Gentleman, but he may not discuss the details of the question of the export of films on this new Clause. That is not under discussion now.

    Thank you, Sir. I was making a comment on a remark which my hon. Friend the Member for Eton and Slough made in his speech. However, it takes a good deal of money to establish a distributing organisation in any country, and we must not overlook the fact that that is paid for by the earnings of British pictures in that country. With regard to the effect of this proposal on labour, on the workers of the industry, I do ask the Chancellor to have regard to the fact that wage conditions, wage and working conditions, particularly of the cinema workers, may be adversely affected. It will certainly make the negotiating task of the union more difficult. Wages and working conditions in cinemas can be improved, and ought to be improved, in the ordinary way of negotiation; but if the exhibitors of this country should be confronted with serious difficulties arising from this proposal, that will be bound to affect the particular standards of livelihood of those who are in this business. I do ask the Chancellor seriously to take that fact into consideration.

    As to the production side. Obviously, if our films cannot get out of this country the production side will be affected. We cannot expand our studios. It will be five or ten years before we can treble, or even double, the present studio space. While priority must, of necessity, be given to housing and industry it will not be possible for us to make in Britain sufficient films to supply all the cinemas, even with one feature programmes; that cannot be sustained at the present rate of output. No doubt when the Chancellor replies he will be able to give further assurances on the lines asked for, and will say that he will try to meet all the interests jointly—both the labour and the proprietorial sides —and no doubt he will explain to us more fully what can be done. If that is not possible, I hope he will implement the assurances he gave last week. In the interests of the British film industry as a whole—the production side, the rental side and the exhibiting side—I ask that nothing shall be done which will damage or prejudice its development in this country and abroad.

    The hon. Member for West Nottingham (Mr. O'Brien) and the hon. Member for Eton and Slough (Mr. Levy) both speak with considerable knowledge and experience of the films business, and, therefore, we listen to what they have to say with a great deal of interest. No doubt they will forgive me if I do not intervene in the difference of opinion between hon. Members opposite about what they wish to do with Mr. Rank. It is always extremely difficult for this Committee to have a Debate on films without Mr. Rank's name cropping up a good deal. I have no association with Mr. Rank in the film business, although I have been connected with the film industry for 14 or 15 years. It is a little early to say whether the Rank organisation will succeed or not in the great attempt it is undoubtedly making to secure in the United States of America a market for British films. As has been said, a great deal of spade work has been done; a large number of dollars have been spent in printing, promotion expenses, and so on. But whether we should now draw the line, add up the dollars, and say whether they have succeeded or not, quite frankly, I do not know. The Board of Trade must know more about this, and I have no doubt that sooner or later the day will come when the Board of Trade must take a decision. If the Rank organisation's experiment to obtain dollars for British films is a success, then this new Clause will not be necessary, and the Chancellor will not have to impose these restrictions.

    Surely, it is not very good business to put down £7 million in order to get back £4 million?

    The hon. Member appreciates quite well what the hon. Member for West Nottingham was referring to. He knows the fundamentals of film production, and that in the very earliest days the Ostrer brothers made the same experiment—I acknowledge that —that the Rank organisation is making today, and they failed, in costs and everything else. One of the fundamentals of film production in this country is, and always has been, that there is a home market comprising a population of only 48 million.

    The costs must always be related to that, and whether the American market is obtained or not, it is a gamble. Obviously, the American companies, with a home market comprising a population of 120 million film-minded people, can spend very much more than the film companies in this country on scenario writers, technicians, sets, the "star" system, and so on. When American film companies produce a film they can spend three times as much as we can in this country. The hon. Lady the Member for Epping (Mrs. Manning) referred to French films, about which I am in agreement with her in saying that they are very much better value for the money. But the American companies can spend two million dollars on a film, on which they can break even in the home market, and they make their profit over here, because we are both English speaking nations, and there is not the language difficulty as in the case of French films, and over the years we have grown to like American films. Of course, the British market is vital for the American film producer. The right hon. Member for West Bristol (Mr. Stanley) has had some experience in this regard, because he it was who was responsible for introducing the Cinematograph Films Act which imposed the last quota.

    7.45 p.m.

    Is it not the case that it is not a question of liking American films, but of the American films being foisted upon the British public whether it likes them or not?

    The fact is, there is a block booking system; there is an interlocking arrangement with many of the United States companies, which means they can supply to hundreds of cinemas every week one or two films, as the case may be. I disagree with the hon. Member for Eton and Slough and I agree with the hon. Member for West Nottingham. If the Chancellor came down to this Committee next week and prohibited a large portion of the American film imports into this country it would mean virtually the shutting down of the cinemas and the putting on of variety.

    There is at present, as the hon. Member for West Nottingham has said, a great studio shortage, about which the Board of Trade knows. If all the American films were excluded from this country—and I personally would have no grievance about it, none at all—we should be forced to produce films in cowsheds, in order to keep the cinemas open. The Board Of Trade have some responsibility in this— unless they want the cinemas to be shut down, or unless we are merely to show a film in this town this week end and in another town next week. To maintain a regular supply of films week after week requires a gigantic production, of which this country is not capable at the moment. Another important factor when dealing with the home market is that the cost of films is rising seriously today. We must face the fact, that in order to break even and make a profit, a British film can rely only on the home market here in Britain, whereas, an American produced film can break even in the United States and make its profit over here. The British film industry has no guarantee at all that if the production costs exceed the return obtainable from the home market, it will be able to recoup the balance from the United States.

    That, I suppose, is what the Rank experiment is all about. It is a gamble. Many people think it will fail disastrously. Undoubtedly, the Board of Trade and the Chancellor must have had some information about the net results. Whether they are in a position to do what the hon. Member for Eton and Slough suggested— namely—to present a dollar balance sheet —I do not know. But I do think that before they use the powers of this enabling Clause it would be only right and proper —because the Committee takes a great deal of interest in this subject—to give us a dollar balance sheet I suggest that he should give some sort of interim report so that we can learn whether this Rank experiment will succeed or not. Another difficulty, which was referred to by the hon. Member for Eton and Slough, is not only the shortage of studios and the rising costs, but the definite shortage of artists. The United States, with their enormous contract powers, can turn round and make very large offers for artists. If this Clause is accepted. shall we be in a position to find enough artists to increase production so that we can fill the cinemas?

    Can the hon. Member give an indication whether his statements are in favour of this Clause or against it?

    I found some difficulty, in listening to the hon. and gallant Member's introductory speech, in finding out whether he was in favour of it or not. Many attempts have been made to deal with the importation of films The right hon. Gentleman the Member for West Bristol (Mr. Stanley), when he was President of the Board of Trade. enacted the quota Measure, which is to be re-enacted next year. I say that this is an experiment well worth supporting at the present time.

    I am sorry that the right hon. Gentleman the Member for West Bristol is not going to make a speech, because if the Government cannot do what they want under this Clause, they will have to do what they want when his Act is re-enacted next year. Some hon. Members still think that we can get enough films, but how many prosecutions will have to take place because of non-fulfilment of quota obligations, I do not know. As I say, the Government ought to give us a balance-sheet. I have no doubt that before the right hon. Gentleman's Bill is re-enacted, we shall have the same sort of arguments he had to deal with on whether the exhibitors' quota is right or wrong

    I have no doubt that as a result of this Clause there will be discussions going on in the film industry in this country and in the United States. I suggest that it might be possible to draw a line, and to say to the United States film industry that they can import into Britain a certain number of films, but if they import over that number, they must take the same number of British films in return. I think that it is a scheme which would work. It might be well worth considering if negotiations are open between the American and British interests. This is another attempt to deal with the importation of films into this country, and an attempt to reduce the dollars the Government have to remit. It is a complex and difficult problem, but, on the whole, the Government should be given support on this Clause.

    I should like to consider first how we are to put on a tax, if we have to put on a tax, and next whether the tax should be put on at all. I have no objection at all to this way of putting on a tax. It is novel, and it is simple. Each film pays according to what it earns. We have to consider what will be the result. It is generally admitted, I think, that the average American film depends for its profits on the net earnings it gets overseas, and the bulk of those earnings are in this country. If we are to put a tax on American films coming into this country, we shall have to put it on at a substantial rate to get anything appreciable, and by so doing we put a considerable tax on the profits of American films. I do not pretend to be as well informed as my hon. Friend the Member for Eton and Slough (Mr. Levy) or my hon. Friend the Member for West Nottingham (Mr. O'Brien), but I am inclined to the view expressed by the latter. I feel that there may be a certain degree of American reaction, to put it no higher than that. It would be a very unfortunate thing at the present time, although I have no tenderness for American films which I do not think anything like as good as English films, if we did not have some regard to American interests.

    I come to the alternative method mentioned by my hon. Friend the Member for Eton and Slough, namely, that we should put a footage tax of, say, £10 per foot on imported films. That would have a comparatively small effect on the expensive American feature films, but it would probably shut out the cheaper American films, which may not necessarily be bad films. I have been told by many people in the film industry that a film upon which a comparatively small amount of money has been spent is not necessarily a bad film. That takes us to the question of whether we have the capacity, in our film studios, to produce the requisite number of films to take the place of those which are shut out. I do not think we have that capacity. There was the letter in "The Times" by Lord Grantley, to which reference has already been made, showing that we can make only 68 feature films; he also estimated that there might be an expansion by about 10 under certain conditions. It is improbable, therefore, that in the next two or three years we shall be able to take up the slack caused by shutting out some American films.

    I do not wish to take up a long time on the question of the pros and cons of a single feature programme. A good point is that this would give the greatest possible impetus to the production of British films of all kinds, and in particular British shorts and documentary films, which are generally considered to be predominant throughout the world. It would have an educative effect on the public to see British documentaries instead of less good American feature films. Against that there might be a decline in cinema attendance. Some people might argue differently, but, as I understand the matter, it is likely that there would be a decline in cinema attendance, with the result that the revenue to be derived from Entertainment Duty might be reduced. For that reason, I prefer the method which my right hon. Friend is suggesting. The real point is whether we should put on this tax at all. I want to go a little further than my hon. Friend the Member for Eton and Slough, who seemed to throw cold water on this question of whether the Rank organisation would get films into America in a fairly big way. I speak subject to correction by the Parliamentary Secretary, but my information is that some kind of agreement has nearly, if not quite, been fixed up, that a definite number of British feature films will, for the first time, go into the big American circuits for showing in America. Obviously, that might earn a considerable greater number of dollars than anything we could obtain by putting on the tax which the Chancellor envisages. It was explained by the Lord President of the Council yesterday that it is the policy of the Government to proceed along expansionist lines. Those lines are particularly favoured in America, and I appeal to the Chancellor not to put on this tax unless he is certain that British films will not get a showing through American circuits. We should aim at expansion, rather than restriction, in the interests of our two countries.

    8.0 p.m.

    The Committee has had four or five speeches from experts on this subject, and two from the hem. Member for West Nottingham (Mr. O'Brien), to whom I want to say that I preferred the speech he made himself to the one which the hon. Member for Eton and Slough (Mr. Levy) made for him. I have no expert knowledge of the making of films, but I would like to say a few words about the tax. Can the Chancellor explain how he will ensure that the tax will not be passed on, because this is an income tax dressed up as a Customs duty? Unless the Board of Trade have complete control over the price at which each film is sold, or rented, so that this additional burden will not be added to the old price, we shall not save any dollars. We shall have to remit to America the same amount of dollars if it is possible for the person who sells the film to put up the price. Somebody would then have to pay more if the price was raised. We must be sure that there is no possibility of the price being advanced to cover this tax. That is a difficult administrative operation, but I hope we shall have an explanation of how it can be done.

    I join with every other Member of the Committee in being anxious that we should cut down our dollar expenditure, and it is clear that films are less essential than many other things which we buy from America. I want to ask the Chancellor to take this point into consideration. Our dollar position is so bad that it is evident that many different negotiations and adjustments will have to take place between the Government and the Americans, so that we may get into a solvent position again. Is it in the best interests of the over-all dollar position that we should make these piecemeal pinpricks against the Americans? I am thinking about this matter as a businessman. If I have to deal with another businessman, and I want to sell to, or buy from, him a large number of articles, it is not likely that I would think that the best way to go about that would be to try to make him deal with me on a tender spot first. Our dollar shortage is so serious that what is wanted is general negotiations with America about our im- port programme. I think solutions might be found by that method. I hope the Chancellor will assure us that this tax will not be put on unless he is sure that it fits in with all the other various changes and modifications that will Have to be made in our import programme from the United States.

    Finally, I would like to see discrimination between French and North American films. I suppose that is impossible, and that under our agreement with the Americans, if we tax American films, we must tax all other kinds. [An HON. MEMBER: "SO we should."] Yes, I agree in principle that multilateral trading is much better in every way than any other kind of trading, but where shall we be if our dollar loan runs out, and another large loan is not made to us? We shall have to buy from those countries which are willing to sell; we shall be forced to make that sort of bargain and, that being so, I think it would be better to have French films here, and not shut our cinemas, than to have no films at all

    I realise that there is a strong desire in some parts of the Committee to get on to other matters, but I think it is right for a few minutes to continue this Debate, because it raises most important issues for a very important British industry, and we should consider this question, not only from the point of view of the dollar situation, which is a serious matter, in all conscience but, as my hon. Friend the Member for West Nottingham (Mr. O'Brien) said, from the general aspect of what will benefit the British film industry. The hon. Member for Chippenham (Mr. Eccles) brought the Debate back to the question of our dollar expenditure. It is because of the general feeling of the Committee about this matter that the Chancellor has the support of the Committee for the tax which he is proposing. Personally, I would be very much happier if he were actually putting a cut into effect, if he were actually proposing such a cut to the Committee. But all he has proposed is an enabling provision. In my view, there has been an unconscionable delay in applying cuts to the imports of American films on which we have to spend dollars.

    There is a marked contrast in the way the Government have dealt with different items of dollar expenditure. There has been great speed in applying cuts to, say, newsprint, and long delay in applying them to films. On balance, on the grounds of culture, or whatever may be advanced, newspapers have the right to be considered more favourably than films. That we should have the situation where, over two years, action has been taken on two or three occasions against the newspapers and the book trades, while nothing has been done in respect of films—

    The hon. Member must keep to the question of the film industry, and not make the Debate too wide.

    I apologise, Sir Robert, if I went too far. We hope that action will be taken on the subject of film imports. I think it is valuable to discover why there should have been this delay. I think the reason why there has been delay, and why there is still delay, is because of the excessive tenderness of the Board of Trade towards the Rank film monopoly, and because of their excessive readiness to treat the claims of the Rank monopoly organisation at their face value. The hon. Member for West Nottingham told us quite clearly what is the argument, and it is also the argument of the Rank films organisation. The argument is that even if we are spending £17 million worth of dollars in importing films from America, it is still true that they are trying to earn dollars in America, and we must not jeopardise the whole of that development. That is the whole of the Rank organisation argument. I support the plea that is made that if we are to base action on that kind of argument, and therefore delay in applying these cuts, it is essential that we should have in this Committee the figures on which we can make up our minds.

    Never once has the Rank organisation made any attempt to give to the public of this country the figures on which they are basing their argument—the figures of what are the prospective earnings from the United States and the figures about these extraordinary arrangements that go on for bringing American stars and even American directors over to this country and giving them huge dollar incomes free of Income Tax. They have never given an account of these things, and of the amount of money spent in propaganda in America in order to earn the dollars which they say are coming along later. They even boast about it. There was a remarkable article in the "Evening Standard" a week or so ago in which this matter was very plainly explained. It was a good deed in a naughty newspaper to reveal these facts. That article concluded with a remarkable statement by Mr. Rank's public relations officer to the reporter of the "Evening Standard." This was the statement: "The Rank organisation never gives any figures." We know that applies in their dealings with the British public, but does it apply also to the Board of Trade? Have they managed to extort any figures from this private organisation which is a powerful monopoly? We know what howls there are from the other side of the House if, for instance, the Coal Board do not provide figures every month. Here is an organisation, with a powerful monopoly situation in this country, which boasts that it never gives any figures. We want those figures, and before this Committee decides what it will do about the film industry, it ought to have the facts upon which these cuts can be based. I say that the facts revealed in the "Evening Standard" article, particularly in view of the critical dollar situation of this country amount to a first class scandal. It is our business today to try to get to the bottom of that scandal.

    The main argument of the hon. Member for West Nottingham was a perfectly valid argument which he is entitled to advance. It is equally valid for us to contest it and strictly relevant to the kind of methods which we should use to check the import of films from America. The argument concerns the principle on which we are trying to base the prosperity of the British industry. The hon. Member for West Nottingham says that he believes that it is right for the British industry to base its prosperity on the idea of crashing into the American market. That has been the view held by the Rank organisation for a long time. Mr. Rank is now trying again, and he will not give any figures as to how far he has got, but he asks this Committee to hold off any cuts on films, although he does not give us the figures. This view of the Rank organisation that we can base the British film industry on crashing into the American market—

    The hon. Member keeps referring to the Rank organisation, but there are others in the British film industry besides Mr. Rank and his organisation, such as Alexander Korda and Herbert Wilcox—large independent producers of feature productions—and they all agree that it is necessary to get into the American market, so there is unanimity of belief in the trade on that point.

    I hope the hon. Member is not going to follow that up. We are not dealing with films going into America, but the importation of films into this country.

    8.15 p.m.

    I hope I am not going outside your Ruling, Sir Robert, but I think the Debate has gone very wide, and I would submit that it is a proper consideration to discuss, when we are imposing a novel tax like this, the effects of that tax generally upon the British film industry. There are two alternative views on that subject to which I hope I shall be able to refer—one, the contention that we should crash our way into the American market; and the second that we should build up a British film industry by providing as many films as we possibly can for the British market. The hon. Member for West Nottingham says that the whole British film industry agrees with his view. I do not think so, because I know that many people in the film industry have long since argued that it is much better to go in for less expensive films and seek a policy from the Government which will assist that process. Instead of that, unhappily because of this delusion that we can crash our way into the American market, which the American companies themselves can fully provide for, for they can fill all the screen time in America, we have the attempt at the present time to Americanise the British industry which is a serious threat. We have got in charge of the Rank organisation today not the technicians and the artists and the people who in the last four or five years have enormously enhanced—

    I must ask the hon. Member to keep to the subject before the Committee—that is, the importation into this country of American films and the tax thereon. There may be another view on this question, but that does not give the hon. Member the right to discuss it here.

    I am sorry if I have gone outside what is legitimate, but I think if we are to deal with this matter in a way which would best assist not only the purpose of gaining dollars but would assist also the British industry we should discuss not merely the matter of a makeshift film tax such as we are discussing at this moment, but the renewal of the quota Act plus, possibly, some kind of a tax which would enable—

    Let us get back to the new Clause and what it deals with. The hon. Gentleman is not dealing with the facts of the new Clause before us, and those matters with which he deals do not arise here.

    I apologise again and I would appeal to the Chancellor to say that this tax is only to be regarded as a temporary measure for dealing with this problem and that it would be much better to have a quota approach to it. I appeal to him to recognise that a different kind of instrument will be needed to deal with the whole situation in a way which will assist the industry, and I would ask him to regard this tax as a temporary measure when dealing with the much bigger questions which it would be wrong for me at this moment to try to discuss.

    We have had a long and at times heated Debate, and I am sure no one who listened to our debates would have been prepared for the fact that at the end of that Debate everybody was going to support the Clause which we are now discussing. This may be tempting for one who was President of the Board of Trade and responsible for the Cinematograph Act, but despite the fields that have been opened up as to the Rank organisation, the proper way to build up the film industry in this country and whether we should Americanise the industry or not, I feel that we can leave that for next year when, as has been said, there will have to be another Cinematograph Act, and when all those questions will not only be important and interesting but will even be relevant.

    I want to speak for only a very few minutes to say that we on this side of the Committee accept the new Clause which the Chancellor has put down. I do not mean necessarily that we accept it with glowing enthusiasm, or without certain criticism, but in the first place it is obvious that no one who had listened to yesterday's Debate, or who was aware of the seriousness of our dollar position, could question the necessity of being in a position to take steps to reduce our dollar expenditure on films. No one, therefore, is entitled to oppose the Chancellor's proposals unless he is prepared to put forward proposals which will be equally useful from the point of view of dollar exchange and, as he might think, less disadvantageous or more advantageous from the point of view of the film industry. I confess at once that I do not particularly like the method which the Chancellor has chosen, but though I can think of other and, I believe, better ways, I think that when the hon. Gentleman comes to wind up he may be in a position to give me reasons why they are impracticable.

    First, I dislike the Chancellor's proposal because it is a novel method of taxation and, therefore, one of whose operation we are uncertain. I sympathised very much with my hon. Friend the Member for Chippenham (Mr. Eccles) when he asked for an assurance that this tax, which is supposed to be a tax on dollar exports, will not in fact be converted into a tax on the cinema exhibitors in this country. In other words, are the Government satisfied that there is no way in which this tax can be passed on to the consumer in this country? Secondly, I agree with the hon. Gentleman the Member for Devonport (Mr. Foot) that it is a very great pity that when we are faced with a new tax of this magnitude and importance it is not possible at the same time to tell us what the rate of that tax is to be. Why was it not possible, at the same time as the new Clause was put down giving this power to the Chancellor, to tell the Committee, and to obtain the assent of the Committee to the way in which that power was to be used, at least in the first instance? I dislike giving powers of this kind unless we have at the same time an indication of the methods in which those powers are to be used.

    Surely it is a question of how many dollars were expected to be earned in America by British films?

    The right hon. Gentleman knows how many dollars are earned or expected to be earned. What he must know approximately is how many of those he wants to stop. What I should have liked to know was the rate of duty he intends to put upon the film after the new and rather complicated process of valuation has taken place. I should prefer to have that information now than to wait for a quite indefinite time and then have it given to us in an Order. Quite frankly, I should have preferred to deal with the matter by the ordinary method which will be open to us within a few months—namely, by raising the quota of British films. That is the way we have done it in the past, and, on the whole, I think that it is still the most satisfactory way. I understand that the objection to it is one which, for the present at any rate, we certainly cannot overcome—that the studio space, technicians and so on are not sufficient to allow this country immediately to fill the gap which would be left if we reduce the number of American films by as increase in the quota.

    The other alternative, which certainly would seem to me to be preferable, would be for the Chancellor of the Exchequer to say exactly how much in dollars he was prepared to allow film companies to take out, and to freeze the rest—that, in fact was the method adopted in the early days of the war—and say, "In addition to that, you may take out from this country, pound for pound, or dollars for pound, what you allow us to earn in your country." You would thus have a basic amount which the American film industry could count on, and above that an unlimited extra amount according to the opportunities that they gave us, and the success We-can make of those opportunities. There again, I am afraid that there is a snag. Even if the right hon. Gentleman were sympathetic to it, I am afraid that probably Bretton Woods or the Loan Agreement would prevent us from freezing the requisite number of dollars in the way I have suggested, and I have, therefore, reluctantly come back to the conclusion that if we are to take power to cut down the film imports—and obviously we must not only take powers but the time must come, and many think it has come, when those powers will have to be exercised— there is no alternative to the plan adopted by the right hon. Gentleman until we are able to increase our own abilities to produce.

    For that reason we certainly shall not oppose the proposal in the Lobby, but may I say one word in conclusion? A great deal of this Debate turned on the activity of Mr. Rank. I have no connection with him and do not even know him, but naturally, since Board of Trade days, I have taken an interest in the film industry, and I have followed what Mr. Rank has been doing. He may be right or wrong, he may be going to succeed or fail, but when a man is at any rate trying to do what he and a great many others believe is a great thing for our film industry and for the trade of the country as a whole, I think it is a pity to refer to him as if he were just a money-making monopolist trying to get away with anything he can. I particularly resent the reference to his refusal to give to the public the exact figures of what he is making or hopes to make in America. The hon. and learned Gentleman the Solicitor-General is here. He and I have been sitting day after day in Committee on the Companies Bill upstairs, and it was laid down there, without any party division, that there may well be instances where it might be damaging to the whole prospects of a company to reveal publicly, estimates as to the business they are likely to do in a certain field before it is actually done. For that reason the right hon. Gentleman defended a proposal whereby the disclosure of that kind of information should not be made compulsory upon a company. I am sure he will be the first to say that in that refusal of Mr. Rank to which reference has been made, there is nothing really that could be regarded as against. the interests of the country or as a desire to keep from the public information the public are entitled to have.

    8.30 p.m.

    Is it not an insult to the public that on a matter of public interest— the amount of dollars earned in America —Mr. Rank's organisation should say deliberately to the reporter of a reputable newspaper that Mr. Rank's organisation never gives any figures?

    I am not defending the words P.R.O's use. I have not the same experience of P.R.O's as the hon. Member for Devonport (Mr. Foot). When the P.R.O. says that Mr. Rank never gives any figures, he is talking nonsense. Mr. Rank has to publish a balance-sheet.

    The right hon. Gentleman the Member for West Bristol (Mr. Stanley) will be out of Order if he pursues that subject.

    I will most certainly not offend against your Ruling, Sir Robert, but I was under the impression that as you had allowed the hon. Member to put a question to me, you would allow me to answer it.

    The hon. Member for Devonport raised the matter but on that and other matters I ruled him out of Order. The right hon. Gentleman must not extend the explanation and carry on discussion on the matter.

    Then we will carry it on no further, except to say that we shall have an opportunity, I hope, next Session to discuss all these very important, very interesting and very controversial matters in a new setting when they will be more relevant. Meanwhile, I feel that we have no alternative but to support the Chancellor in what he is doing.

    I will do my best, although it is rather difficult, not to transgress if I enter into a discussion on the many controversial matters mentioned during the last two hours. I could wish that more of the time had been devoted to dealing with this simple, straightforward issue of what form the import duty is to take if it is to be applied. The right hon. Gentleman the Member for West Bristol (Mr. Stanley) said he would like to know during the Committee stage the rate which would be included in the orders. That must depend on the circumstances existing at the time if and when an order is made. The very making of an order is bound to depend on what happens to the present adverse dollar balance. It may be that some of the matters referred to today, will influence the making or otherwise of this tax, and they will certainly influence the rate at which it will be imposed.

    We were faced with the necessity— with which every hon. Member who has spoken agrees—of reducing the dollar expenditure on films. Last year some- thing over £17 million of dollars was paid out for the showing of American films in this country, and the flow in the opposite direction was exceedingly small. We could have gone straight out for a cut in the importation of American films and could have restricted the number coming into the country, but it has been stated quite correctly by several hon. Members this evening that in this country we just do not possess the studio space and the other things required to make the films to meet the needs of this country.

    It would not be the desire of any hon. Member that we should, at this time, deprive our people of the opportunity to go to the pictures if they want to do so. That is not the kind of cut we want to impose on our own people. It has been suggested by hon. Members, including the hon. Member for Eton and Slough (Mr. Levy) that we could have had a direct footage tax, but the objection to the footage tax is that we may not be trapping the same number of dollars as we should if we dealt with the ultimate value of the film in the way we propose. We might have a film of short duration, costing little money. It might be what would be called a "money spinner" in this country. If we had a footage tax, we should have had as much as we could get, quite irrespective of the amount of money earned by the film. We should be restricted to that smaller amount. Obviously, of course, you may have a large and expensive film of the kind which we are accustomed to receive from Hollywood, which may turn out to be a "flop," and then you would be faced with the necessity of revising your values. The only alternative which commended itself to us was this scheme, which aims not necessarily at stopping American films from coming into this country, but at stopping American dollars from going out of this country to the United States of America in payment for the showings in this country.

    There is another possible alternative to which I do not wish to refer at length. That is the expansion of the British film industry, and the showing of more British films in the United States of America. On that I would only say that I join with the right hon. Member opposite in deploring some of the suggestions which have been made tonight about a certain organisation, particularly the suggestion that the Board of Trade is too tender-hearted in its dealings with that or any other organisation. I do not think it is a question of being tender-hearted; I believe that all these organisations—it is not confined to one—which are doing their best to expand the British film industry, and particularly to expand trade with the United States of America, should be given the support of the Government Department responsible, without necessarily Government Departments indulging in tenderheartedness which, I can assure the right hon. Gentleman, they do not.

    It seemed to me that one of the really important points which emerged from the discussion was that raised by the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) who opened the Debate, by the right hon. Member for West Bristol and by several other hon. Members who have spoken. That was the question of the passing on of the duty, and I have been asked to deal with that. To forestall any alarm which may be felt in this country and to make the position clear in America—it is important, because we do not want to do anything which will lose us the good will of the American film industy, particularly at a time when some organisations are doing their utmost to advance British films in that country—I would make this clear: If and when these higher duties have to be imposed, we should not hesitate to take any action to prevent them from being passed on by an increase of charges, to the cinema proprietors or to the cinema-going public.

    The object of the duty is to save dollars, and if the cost of the duty were passed on to the consumer—to the proprietor of the cinema or to the person who goes there—obviously we would be frustrating our own object and would not be saving dollars. What we would attempt to do in the first place would be to get some price-freezing voluntary agreement inside the film industry. If we could not get a voluntary agreement, obviating the necessity for a statutory control of rentals, we would have to use such powers as we possessed. We possess powers under existing price control legislation, under the Goods and Services Act, 1941, and under Defence Regulation 55AB and I assure the Committee that if there were any evidence for the necessity of using those price control powers, we would not hesitate to use those powers to stabilise rentals at what we would regard as the proper level.

    There has been some talk about the earnings of British films abroad and the possibility of producing a balance sheet. I do not feel that in connection with this particular tax, the permissive power for which we are seeking tonight, it is necessary or desirable for me to attempt to pose before the Committee a balance-sheet of the kind which has been suggested. In any case, I quite agree with the right hon. Member opposite, that even if those figures are possessed by the Treasury and by the Board of Trade, as, of course, they are. I do not know that it would be proper for me or for any other representative of the Government to pass on, willy-nilly, to the general public information which has come into our possession in confidence.

    Then my hon. Friend the Member for West Nottingham (Mr. O'Brien), who has a very great interest in and knowledge of the film industry, expressed his apprehensions that perhaps the timing of this announcement may have been unfortunate. The last thing we would wish to do would be to interfere with the work of anyone who was attempting to further British interests on the other side of the Atlantic Ocean. But we are faced with this very bad adverse balance of dollars in the film industry. The payment out of the country is £17 million, and the amount coming in is very much smaller. Our friends must understand that this is not directed against the United States film industry because we do not like United States films, but is a matter of sheer necessity for this country to save dollars, which we hope will be saved by this method.

    My hon. Friend asked that the Chancellor should consult with both sides of the industry on the operation of the tax. I think he has already had that assurance from the Chancellor, and I hope as, when, and if necessary the Chancellor will take the trade into consultation and endeavour to agree with them as to how this tax should be imposed, how much it should be, and any other matters of detail which are necessary. The Government are entitled to assume that the Committee are agreed, first, that it is necessary to do something about reducing this dollar ex- penditure, and, secondly, that while there may be several alternative methods of dealing with it, this method, while it may be novel and, therefore, must be regarded with the closest attention by those who give attention to fiscal matters, is about as practicable as any which could be advanced. I hope we are going to be given this permissive power this evening by a Committee which agrees, if not with all the details, with the necessity for it, and agrees that we should have that power.

    All that is sought in this new Clause is

    "power to alter or add to Section 10 of the Finance Act, 1935"
    It is very difficult for the Committee to assess the exact value when we do not know exactly what is going to be put into operation. There are, however, two or three things which must be considered in connection with the American film industry and the dollar situation at the moment. An hon. Member on the Opposition side said that this was not the time to bring about pinpricking with the United States. I entirely disagree. I think this is the time when every section of any industry in the country that requires dollars should face the fact that food must come first. Every other interest must be subordinated to that, and that in turn must be transferred to the United States. It must be forced on them that unless this country gets some kind of relief from the situation which was outlined in the Debate yesterday, certain interests in the United States are going to suffer.

    I deplore the fact that some hon. Members are prepared to put the interests of a particular section of the community here before the interests of the whole nation. Has not the whole Debate yesterday, and the whole of past experience, proved that we are facing a situation which has never faced any country before, and that the necessary relief and wealth of the nations devastated by the war are centred in one particular nation? These problems have to be brought home to the people in that nation. How can we bring them home? By telling them frankly and plainly that we cannot bring their films into the country and pay for them, but that we require from them something far more important. As a matter of fact, if this- country were in the normal prewar position, I would still support this proposal because of the question of the educational value of films. We pay great sums of money for the education of our children; they are taught to speak English in school—

    8.45 p.m.

    The hon. Member is getting wide of the new Clause. I must ask him to keep within its scope.

    Certainly. That is what the Committee is doing; but it is not a question of bringing in a matter of the kind which the hon. Member was raising.

    On a point of Order, Sir Robert. In a case of this kind, when an hon. Member is arguing in favour of a tax on American films, if it should be necessary, is it not a good argument to say that we spend a lot of money on educating our children, and that it is very bad policy to spend money to destroy that education by buying American films?

    The question before the Committee is that of putting a tax on films. That is the point to which we have to keep, and not proceed as though we were making speeches on Second Reading.

    I find myself in great difficulty if I am not allowed to discuss why we should or should not impose this tax. I am examining the reasons why a tax should be or should not be imposed. I have listened to hon. Members putting forward a case against any tax being imposed. I cannot understand how it is not in Order to put a reason why the tax should be imposed. The power which is to be given to the Chancellor, if this Clause is approved, is for the primary purpose of meeting the dollar situation, according to the information we have been given. The argument has been advanced against it that it will injure the infant industry of film-making in this country. I thought that my hon. Friend, when replying, might have told us, "We shall be very sorry if we injure the growing film industry of this country, but when we have Hobson's choice of food or films, obviously it must be food." That is the situation.

    On the other hand, is the proposal to be considered from the point of view of whether the loss of these films if this tax were imposed, would be a national loss? I am of the opinion that the country would benefit greatly if the cinemas were only to be open one day per week. I think that the sort of education provided by Hollywood films largely destroys the morality of the children. For that reason, we should advise the Chancellor to impose the highest tax he possibly can, even if times were normal. It is no use the Chancellor raising money and taxing us on everything else for the great educational scheme upon which we have embarked, and allowing someone else to come along and destroy it. That is what we are getting today. Even the English language has been largely destroyed. It is quite common to hear, "O.K." and "Oh, yeah."

    The hon. Member must address himself more to the point of the new Clause.

    In conclusion, I say to the Chancellor that when he imposes this tax, I hope it will be sufficient to destroy the evils of the cinema and place the country in a far better dollar position than it is in today.

    Question put, and agreed to.

    Clause read a Second time, and added to the Bill.

    Third Schedule—(Purchase Tax—Intermediate Rate)

    I beg to move, in page 61, line 37, at the end, to add:

    "3. Mechanically propelled road vehicles constructed or adapted solely or mainly for the carriage of passengers, or having, to the rear of the drivers' seat, roofed accommodation lit by side windows and fitted with, or constructed or adapted for the fitting of, seating for passengers, being vehicles of a retail value of more than one thousand two hundred and eighty pounds the vehicle."

    This Amendment is consequential.

    It is not quite consequential, because it brings out a point which was raised last week, unless I have misread the Amendment.

    It may be true that this matter was discussed last week. The Chancellor's Amendment was discussed with the three Amendments on Clause 8. Does the right hon. and gallant Gentleman wish to move his Amendment to the proposed Amendment.

    I beg to move, as an Amendment to the proposed Amendment, in line 2, to leave out from "passengers," to "being," in line 4.

    I do not think that we need keep the Committee very long on this matter because the main question has been discussed. The important words here are:
    "…or having, to the rear of the driver's seat, roofed accommodation lit by side windows and fitted with, or constructed or adapted for the fitting of, seating. …"
    I think that is a misprint. It must be that the comma is in the wrong place. I understand that this brings within the ambit of the duty utility vans in respect of which an Order was passed last week. I would like to ask whether I am right in that because, if so, it opens up an argument which I did not intend to repeat but which we put from this side of the Committee last week. We still feel that it is wrong in this case to bring utility vans within the scope of this provision. Primarily speaking, they are goods carrying vans. There is no question about that. They are limited as such. They are limited in the speed per hour that they legally are allowed to go. I understand, for example, and this is only one example. that they are prohibited from going into the Royal Parks. Therefore, as utility vehicles, they are considered to be goods carriers. If they have these side windows they are to come within the full scope of the tax. I understand that already a considerable export trade is being developed in utility vans which have side windows. The Financial Secretary the other night, in his disingenuous way, said that anybody could get out of paying the tax. He said that they need not have the windows and that that would take them out. That may or may not be true, but, of course, the foreigner who buys these vans would be rather surprised if he expected to have side windows and found they were not there, and that they had been taken out just because of the rather odd incidence of taxation in this country.

    We have had all that before. I was not proposing to go into it again, but if the hon. Gentleman wants it he can have it. I was merely making the point that the foreigner would find it rather difficult if he had expected the utility van which he had ordered to have side windows and it turned up without side windows because they had been taken out—

    Mr. Glenvil Hall