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New Clause—(Rate Of Excise Duty On Private Motor Cars)

Volume 466: debated on Monday 27 June 1949

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

(1) For the purpose of calculating 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, the following paragraph shall be substituted for the said paragraph 6, that is to say—

"6. Any vehicles other than those charged with duty under the foregoing provisions of this Schedule—
  • (a) Electrically propelled vehicles—£7 10s.
  • (b) Other vehicles—
  • Not exceeding 7 horse-power—£7 10s. Exceeding 7 horse-power—£10."

    (2) This section shall come into operation on the first day of January, nineteen hundred and fifty.

    (3) Section nine of the Finance Act, 1947, is hereby repealed as from the thirty-first day of December, nineteen hundred and forty-nine.—[ Mr. Renton.]

    Brought up, and read the First time.

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

    The effect of this new Clause, which stands in the name of the hon. Member for Bedford (Mr. Skeffington-Lodge) and other hon. Members on both sides of the Committee, including myself, would be to apply the rates of taxation of motor cars which were introduced in the Finance Act, 1947, to all motor cars instead of merely to those which were first registered since 1st January, 1947. The purpose of the Clause, therefore, is to streamline provisions of the law which in the light of experience in the past two years are shown to be greatly in need of that treatment.

    It would be fair to say that when the flat rates were introduced in 1947 they were greatly welcomed by the manufacturers. They enabled the British manufacturers to design cars suitable for the overseas market without running the risk of being financially penalised in the home market. But as soon as the flat rate tax for new cars was introduced in 1947 it was obvious that it would give rise to anomaly and even injustice with regard to the owners of the older cars. It places the owners of pre-1947 cars, who will continue to pay at the rate of 25s. per horsepower, in a much worse position than the fortunate owners of new cars.

    If I may give an example I would point out that the owner of a new 20-horsepower car pays a flat rate of £10, whereas the owner of a pitiful old car of 10-horsepower pays £12 10s.; that is £12 10s. for a 10-horsepower old car as compared with £10 for perhaps a 30-horsepower new car. That does not make sense; indeed it is something which I am sure hon. Members on both sides of the Committee will consider most undesirable. It makes one law for the rich and another law for the poor.

    I am sure it is agreed that taxes should be fair and equitable, and that they should not unjustifiably penalise some taxpayers in comparison with others. But here with regard to the present Motor Tax we find discrimination against the worthy and inoffensive section of small motorists who simply keep a small old car to take the family about in, when they can get petrol to do so. It is maintained, especially by hon. Members on the opposite side of the Committee, that taxes should be placed on backs which are most capable of bearing them. In this case we find that motorists already bearing a heavy financial handicap by trying to keep old cars on the road are submitted to the further financial handicap of paying a higher tax in order to do so; and the owners of bright new cars, whose costs of repair are obviously very much lower pay the £10 flat rate only.

    There is a factor which the Committee should especially bear in mind. It is that the tendency to license old cars for only part of a year, or to lay them up altogether, must result in a certain amount of confusion and waste in administration, and also result in wastage of valuable motorcar power. I suggest that administration would be greatly simplified and costs reduced if we made a clean sweep and introduced the flat rate as proposed in this new Clause. Therefore it seems on the grounds of justice, reason and convenience that there is a strong case for the proposed new Clause.

    The only argument that it is possible to conceive against it is the ground of cost to the Revenue. Before I go any further perhaps I should disclose to the Committee that although I have no financial interest in this Clause I happen to be a member of the Executive Committee of the Automobile Association, at whose instigation—as hon. Members may very well guess—this Clause is very largely produced. What about the cost of our proposal? In the first place, it is suggested that the flat rate should not be introduced before 1st January, 1950, and it would not cost anything at all until that date. Although one can only speculate with regard to the figures, I suggest that it might not cost very much then. It depends largely upon how many new cars are put on the road to replace the old cars.

    10.0 p.m.

    In July, 1947, the Chancellor of the Duchy of Lancaster, who was then Chancellor of the Exchequer, considered an Amendment on similar lines to this new Clause. He could not accept it and he gave as his reason the loss of revenue to the Treasury, but said that the cost of introducing a flat rate would become progressively less and less. I understand that in 1947—the time at which he was speaking—a Member of the Government in answer to a Question said that the estimated cost would be £5,750,000 a year. That was two years ago. Since then 250,000 new cars have been placed on the road and, of course, a good many old ones have gone reluctantly on their last journey to the scrap heap, never to return.

    By 1950, presuming that no cataclysm prevents the issue of new cars at the rate at which they have been issued during the last two years, we can fairly expect that this peculiar application of the law of diminishing returns will work to felicitous advantage and will not make the cost of this proposal very great. Therefore, I ask for an estimate of what this proposal would cost the Treasury. I suggest, in any event, that it cannot be a very large sum. If it were £2 or £3 million, I suggest that in the present state of our finances it would not be too high a price to pay for securing justice for the owners of small cars, for removing an anomaly—just the kind of anomaly that we ought always to try to avoid when imposing taxes—for simplifying administration, and for streamlining a provision which obviously is now out of date.

    In supporting the Motion, I should like to put the consideration to the Government that there is no doubt that a system of taxation which discriminates between cars of different vintage is an anomaly. This was recognised as an anomaly when it was introduced in 1947. The then Chancellor made it clear that a time would come in the not too distant future when this inequality would have to be ironed out. Perhaps I have a personal interest in this matter as I am the owner of a car of 1934 vintage on which, if this Clause is adopted, I shall save something in the neighbourhood of 1s. a week.

    I should prefer to describe it as a running charge—if the car is still running when this new Clause is adopted. It seems rather odd that, as a result of these fiscal arrangements, people running old cars who are thereby improving the possibility of the export of new cars, should be penalised because they are patriotic or foolish enough to continue running them. I hope that for those reasons it will be possible—if as I understand it the Government realise that here is an anomaly which will have to be ironed out—for this concession to be made at the earliest possible moment.

    I consider this is a very sensible proposal. I also have an interest in the matter; my car is a 1913 vintage. [An HON. MEMBER: "An old crock?"] Well, why should not the old crocks be put on the road? It is this taxation which prevents it being done. On all grounds of equity and common sense, this discrimination against old vehicles which have given good service should be ironed out. I am told that my car would fetch £50 if I sold it. The tax, if I put it on the road, is £50, and therefore it remains on four blocks. It really is an absurd position, and there is really no substance in the arguments put forward by those who oppose this concession.

    There is another point. We are told that at a time like this we must be prepared to make both ends meet, but it is this particular tax which prevents us doing so, because it encourages the spending of money in a way which would not be necessary were it not for this Government's penal taxation. I do not know how much the Government would lose by the concession, but I hope that the right hon. and learned Gentleman will prove to us that he does listen sometimes to arguments put forward from both sides of the Committee, and that he will show some sensitivity to the feeling of the Committee. I am sure that if hon. Members were given a free vote on this question, they would not say that old cars should be taxed considerably more than new ones. I appeal to the Chancellor to listen to the arguments put forward.

    I think it is only fair to the Government to recall the circumstances in which the flat rate tax was imposed. Hon. Members will remember that we pleaded with the Chancellor of that day to introduce the flat rate tax because we were very anxious that the British motor car manufacturer should not be prevented by any arbitrary fiscal policy from building cars which could find a ready market abroad. The Chancellor met us in that respect, because he made it possible for all new cars which were delivered after 1st January, 1947, to be subject to this flat rate of tax. But the circumstances which we have in mind at the time are not necessarily those which obtain today, and I ask my right hon. and learned Friend to take into account the gross discrepancy which exists today between the position of people owning old cars and those fortunate enough to obtain new ones.

    The shortage of petrol makes it possible for only a comparatively small mileage to be covered throughout the year, and I hope the Chancellor will consider the economic difficulties of motorists who have to pay 25s. per horsepower and can only use their cars for a limited mileage. There is the further point that the older the car, the more petrol and oil it uses and it costs more in repairs and to maintain and run than does a new one. The export drive makes it relatively difficult to obtain new cars today in a short period, and therefore people are bound to keep their old vehicles whether they like it or not. In those circumstances, it seems to me that there is an additional penalty imposed upon them, because they have to pay so much more in respect of Excise Duty.

    My final point is this. People can no longer regard a motorcar as a luxury; indeed, it must be regarded as essential today to two-thirds of the people who own one, and that is proved by the fact that two-thirds receive a supplementary petrol allowance. I hope that the Chancellor will take the present circumstances into consideration. Although we quite agree that they are not the circumstances which obtained at the time when we pleaded with the Government to impose the flat rate of tax and that it was not the same argument today as that which we put forward at the time, we must ask him to agree that the position today calls for some consideration of the position of those motorists who are bound to run old cars when they would like to buy new ones. I hope that my right hon. and learned Friend will take those facts into account.

    I wish to add a few words on very broad principles in support of this new Clause. It has always been the function and desire of Chancellors of the Exchequer to see that taxation falls quite fairly on all classes, so that if one drink is taxed another is taxed in the same way. Again, if matches are taxed, so also are cigarette lighters, although that principle appears to have been thrown to the wind by the present Chancellor only a few minutes ago in that he insists on taxing footballers and not cricketers. However, I wish to recall the way that former Chancellors treated the principle of taxing all classes of commodities in exactly the same way, and this is what should be done now.

    I agree that it was entirely right for the Chancellor of the day to adopt the method of the £10 tax on new cars. As we all know, it was done to help the export trade, but I think the right hon. Gentleman should have been far-sighted enough to realise that he was going to bring a great deal of trouble on himself before very long. I expect he did, and now that we have had a couple of years' experience of the matter, the present Chancellor can very easily make this concession. The loss to the Revenue is an ever diminishing one as the months go by and as there are fewer old cars on the road to pay this high tax. He may as well be generous now while it is going to do some of us a little good. It is not a concession to joyriders. As the hon. Gentleman the junior Member for Bolton (Mr. J. Lewis) said, 66 per cent. of the people are using their cars for industrial and business purposes. This unfairness should be removed as quickly as possible. I believe that if it were, it would be of some help to the Chancellor himself in that he would find it much easier to administer a flat rate of tax than one of 25s. per horsepower. I also believe that his officials would get a great deal less bother because instead of taxing their cars by the quarter or the half-year, people would be able to pay the tax for the whole year. He would thus benefit himself as well as the motorists.

    I do not know whether it would be for the convenience of the Committee if I intervened now to express the point of view of my right hon. and learned Friend on this Clause. I venture to think that it might possibly shorten the proceedings if I did, particularly as we have a fair way to go before we rise tonight if we are to deal with as many of the outstanding Clauses as we think essential at this sitting. My hon. Friend the junior Member for Bolton (Mr. J. Lewis) reminded us how this anomaly arose, and an anomaly it undoubtedly is. When it was instituted, under a great deal of pressure from all sides of this Chamber and from interests outside, my right hon. Friend the then Chancellor of the Exchequer realised that he was doing something which, if it continued for a great length of time, would appear to many people to be unfair. He then indicated, as has been quoted by my hon. and gallant Friend the Member for Brixton (Lieut.-Colonel Lipton), that he hoped the matter might be equalised at the earliest possible moment. The difficulty is that it is impossible for me tonight to indicate to the Committee that that time has arrived.

    10.15 p.m.

    This new flat rate was introduced as from 1st January, 1948, on, cars which were registered during 1947 and afterwards. The reason why this rate was introduced was then thought to be overriding, in spite of the anomaly which hon. Members have pointed out tonight. What we wanted to do was to encourage standardisation, to divorce design from taxation, to stimulate the export trade in cars in order to reduce costs, for the reasons I have mentioned as well as others, and also—and I would underline this if I might—to avoid the artificial concentration on small horsepower engines.

    Those who study the proposed Clause will see that a special low rate is mentioned for small-engined cars of seven horsepower. Therefore, if my right hon. and learned Friend were able, on the other reasons, to accept this Clause, it would, in our view, be a retrograde step if we accepted it with the inclusion of this scale for cars not exceeding seven horsepower.

    I think if the right hon. Gentleman compares the Finance Act of 1947 with these provisions he will find that the two rates correspond and that there is no introduction of a new scale.

    We do not want to perpetuate this if we can help it. [HON. MEMBERS: "You are doing so."] Oh, no. For all cars registered from the beginning of 1947 onwards the flat rate is £10. Before I sit down I want to make one further point—and I do not want to take up time which other hon. Members might easily employ. We cannot at the moment make this change so that the new rate applied to older cars. If all vehicles were placed on the £10 tax the cost would be something like £5½ million in the year 1950. Unfortunately, my right hon. and learned Friend cannot afford to forgo that revenue. For that reason alone I must ask the Committee to reject this Amendment.

    Before the right hon. Gentleman sits down, may I remind him that two years ago the cost was estimated at £5¾ million for a full year. Bearing in mind the considerable number of new cars coming on to the road and replacing old cars, how is it that the estimate can still be as high as £5½ million?

    Because the old cars are still running. As a matter of fact, I think the figure to which the hon. Gentleman referred was given in March, 1949, and not two years ago. In response to a question put to him, I think, by the hon. Member for Wood Green (Mr. Baxter), my right hon. and learned Friend indicated that the estimated cost was about £6 million. Because vehicles have gone off the road, and taking a closer estimate because we are nearer the time, we have reduced that estimate, and it would now cost £5½ million. I can assure the hon. Member that, although it may sound fantastic to him, those best able to judge—the experts—estimate that this would be the figure.

    The Financial Secretary has put forward a most extraordinary argument. He spoke of getting on with further Business, but if he is going to handle other Business on lines similar to those on which he has handled this Amendment then it is a very poor outlook. A person who can afford to buy a new car and who has been fortunate enough to get delivery gets away with a low tax, whereas a person who runs an old car, who is confronted with all the difficulties and expense of additional maintenance and repairs has to pay a higher tax. In the last 12 months the insurance on motor cars has increased by something like 50 to 60 per cent. I understand that to some extent that is due to the fact that motor cars are growing older and are becoming involved in accidents because of their condition. The majority of these old cars are small Morris Eights which in the morning are shared by workers going to their work. If there were one class of workers to protect in this instance I would have thought that it was those using these cars to get to their work. Cars used by employers are run by the companies quite legitimately as an expense to the companies, but such is not the case with the small car used by the workers.

    The argument used by the Treasury seems to me to be most extraordinary. When this proposal was introduced the Chancellor admitted that the matter would have to be reviewed in the light of experience. We have had two years to see it working, and I should have thought that this was an appropriate time to review and amend it. There are financial considerations I know, but when we make laws in this Committee they should be fair to all classes. I hope hon. Members will go into the Division Lobby with me to make a strong protest against the unfairness with which this matter is dealt.

    I agree with a great deal that my hon. and gallant Friend the Member for Macclesfield (Air-Commodore Harvey) has said, but I must confess that I do not want to carry too far the argument in regard to one firm, because it is a fact that the anomaly which was created was pressed upon the Chancellor of the Exchequer at the time from all sides of the Committee. We asked him to create this anomaly, because for the new cars, we did not want this new simplified, and to all of us, more progressive method. Therefore, I am not going to blame the Chancellor of the Exchequer because this anomaly exists. The Government, as well as we on this side, must see that if that anomaly came to be introduced, the time must come when it can no longer be sustained. That, indeed, has been the view put forward by successive Chancellors of the Exchequer, both at the time that the new rate was introduced and subsequently when Amendments such as this were moved.

    What we are now considering is whether this year is the appropriate date to remove an anomaly, with the creation of which we all agree, but which we, at some time or other, are going to demand should end. I must confess that I was extremely disappointed to hear from the right hon. Gentleman that the cost of this Amendment will be as much as £5½ million. I had hoped, in view of earlier statements and the fact that already, through great age, cars on the road were being withdrawn at a fairly rapid rate, that this cost was shrinking by some appreciable sum every year, and that the amount given today would have been of a much more moderate size.

    If it had been of a more moderate size I feel we ought to have pressed for the change to be made, but if we must accept—and, of course, we do—the answer given on behalf of the Chancellor the Exchequer, based on the estimates of his experts, that this would cost £5½ million, I must frankly ask myself whether, if we have £5½ million to spare for the reduction of taxation this year, this case is such a deserving one that I must place it first? I must say in fairness I do not think it is. It is a deserving case, and because of that I hope before long that it will be met. However, if the Financial Secretary to the Treasury were suddenly to go off his head—and I do not suggest for one moment that such a contingency is likely to happen—and offer me my choice of any object I liked, on which I could secure a reduction of £5½ million per annum, I should not feel able to give this priority.

    Therefore, I feel that we have expressed the view that sooner or later this anomaly must be met, and that it is only the heavy cost which is required to do it which prevents the Committee from doing it today. As far as I am concerned, I could not press this Amendment I to the Lobby, but certainly in another year I hope it will be possible to take a different view.

    In view of the figures of cost which have been given it is difficult for us to speak with great strength on the subject, but it is important for the Treasury to appreciate the strong sense of injustice aroused by the anomaly. The Financial Secretary said that conditions had not yet come about for the anomaly to be rectified but they must arise some day and we hope that the day may be soon. Possibly the concession might start now and the existing rate of 25s. per horespower be reduced, say, to £1 per horsepower. That would give an earnest of good faith and would not cost very much. It would be a pledge for the future.

    I hope the Chancellor and his advisers, when working out the £5½ million, took into account the number of cars at present not being licensed but which would be brought out if there is a concession and would contribute to a reduction of the £5½ million. A further aspect of the anomaly is that while the tax might not have appeared unreasonable in pre-war days, it appears so now, with the severe restrictions on the consumption of petrol making it impossible to spread the cost of the licence over so large a number of miles per annum as before the war. We hope that each year some part of the anomaly will be removed. If a beginning cannot be made this year we hope that it might be possible next year.

    I have a 1939 30-horsepower car which pays only £10 a year tax. It is very unfair that people with 10 or 15-horsepower cars, also dated 1939, should pay £18 or £20. [HON. MEMBERS "How does the hon. Member do it?"] I am speaking in confidence, and I hope it will not go any further. Actually, I sent £45 to the L.C.C. and they sent me back £35, and I have paid £10 ever since. The actual reason was that the car was not registered until this year. I did not appreciate that an old car not registered until 1947 did not have to pay more, so I think the L.C.C. must have been quite right. The anomaly is unfair. Surely, the right hon. Gentleman could introduce a gradation downwards, taking a half crown off this year and 5s. off next year. If the Government would give a little bit, it would show people that they mean well. People would be encouraged. We need encouragement from the right hon. Gentleman. We do not get it. I ask him to take a little more off the horsepower tax.

    10.30 p.m.

    The Financial Secretary, when he made his remarkable reply, said that it might seem fantastic to some hon. Members on this side that the amount had actually increased over the amount announced from the Front Bench at previous dates. The only conclusion one can come to is that these old cars have been breeding, which, on the face of it, is rather improbable. I cannot help feeling that the right hon. Gentleman may have over-estimated the cost. As usual when he is defending an unworkable case, the right hon. Gentleman gave the case away by saying it was an anomaly and promised from the Treasury Bench that it would be brought to an end, and then went on to say that it would not be brought to an end however anomalous it might be.

    I stress the point made by the hon. Member for Huntingdon (Mr. Renton), which has not received much comment, that those who run these old cars are mulcted for repairs to an enormous extent. I declare my interest in this matter. I have a comparatively young car, 1935, and when one has a car of that age, one finds that almost every month something goes wrong with it. Nowadays repairs cost about three times as much as they did before the war. The real crux of the matter is that it is Government policy that we should find it impossible, or extremely difficult, to get a new car. It is a torture of Tantalus to see in the shop windows new cars whose running costs would be enormously lower in repairs and in tax but which, owing to Government policy, one cannot buy. If you have an old car, as I have, you are bound to run it because you cannot get a new one.

    The right hon. Gentleman ended his oration by saying that we would be taking a retrograde step by rectifying this anomaly. I cannot see why. I should have thought it a sensible step, and a just and right one. I should like to make a last comment on the right hon. Gentleman's speech. He said there was a frightful hurry to get through the list of new Clauses. I see no hurry. Taxation under the Finance Bill affects every single person in the country and where questions of injustice arise, they should be properly discussed and put right. I think my hon. Friend did right to raise this matter.

    There are one or two things I should like to know before leaving the Clause. What is the estimated life of these cars on the road. Apparently there is considerable doubt in the Treasury's mind as to precisely the loss to be incurred now as compared with what it might have been two years ago. The figure is given as one in the neighbourhood of £5½ million or £6 million. Working on that sort of line, it looks very much as if the estimated life of these cars would be something like twenty-odd years, which seems to me to be rather long. The other line of figures which the right hon. Gentleman gave would make it doubly long, because they bring the life of these old cars to over forty years. The Treasury have based these estimates on a rather absurd set of figures.

    Before the Clause is negatived or withdrawn, I should like to know precisely how long it will be before the concession is likely to be made on the rather optimistic line held out by the previous Chancellor. I quite realise that it means a great deal of money, and I would far rather that it should be taken off direct taxation, such as Income Tax; but there is a large number of people who have a definite sense of grievance on this matter. At present they should be encouraged to go on using their old cars rather than to go into the market for new ones. We are told very clearly by the Chancellor of the Exchequer that prices are staying too high. While I was fully in accord with the object of the original flat rate of £10, it might seem to be advisable now to do something to encourage the use of these old cars by lowering the duty.

    I wonder whether it would not be possible for the Financial Secretary to say that although the Government cannot give the whole of the provisions in the new Clause this year, they will cut the duty down so that no old car will pay more than double the duty and that next year they will cut it down to, say, £15 as a maximum. If some concession of that sort could be made—and it would not come into effect until next January—it would not cost £5½ millions this year. A large part of it would spread over the coming year, and many of us on this side of the Committee hope that by this time next year there will have been an election and we shall have a sensible Government and a Socialist Government will not have to face this position. That would go some way to meeting our wishes on this point.

    This appeal has been made in the main for people who are not well off. The new cars are mostly owned by people who are well off and have been very lucky in getting them in many cases. It is always rather a mystery how and why they get them. In any case, most of them are on the other side of the Committee. Many of the new cars go to Government Departments. I make an appeal to the Financial Secretary, especially as the Chancellor of the Exchequer is not here, because I know that if he had been here I would not have had any chance in appealing for the poor man. I see that the Patronage Secretary is here and is obviously feeling the heat very badly, and I therefore ask him to join in my appeal for this concession to the poor people of this country. I hope the Financial Secretary will give us some hope for the future and not tell us to go to our constituencies and say that here is another illustration of the Government's care for the poor, for those who cannot afford a new car; these are the people the Government always tax.

    In view of the high estimate of the cost which the Financial Secretary has given us, I think it would be right to ask leave of the Committee to withdraw the Clause. But in doing so may I ask him to consider the useful and constructive suggestions made to him for easing the burden without completely accepting our proposal. May I also, with due respect to the officials concerned, ask that this very surprising estimate of £5½ million as the cost of conceding the proposal be carefully scrutinised and the basis on which it has been reached carefully examined. I therefore beg to ask leave to withdraw the Clause.

    Question put, and negatived.