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

Volume 439: debated on Wednesday 9 July 1947

The text on this page has been created from Hansard archive content, it may contain typographical errors.

(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—
(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.