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Clause 1—(Hydrocarbon Oils—Rate Of Customs Duty And Rebate)

Volume 476: debated on Wednesday 14 June 1950

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It may be for the convenience of the Committee if I say that I propose to call the first Amendment on the Order Paper on the understanding that the general principle involved will not be debated again on the Question "That the Clause stand part of the Bill." I hope the Committee will agree with that, and, on that understanding, I call Mr. Oliver Lyttelton.

3.35 p.m.

I beg to move, in page 1, line 17, to leave out subsection (1).

We on these benches quite understand, Major Milner, that if the general argument is developed upon the Amendment which you so kindly call—a procedure which will, I think, be for the convenience of the Committee—it will not be open to us to raise general matters again on the Question "That the Clause stand part of the Bill."

May I say at the outset that the Opposition are deprived of the presence of my right hon. Friend the Member for Bristol, West (Mr. Stanley) and also of my right hon. Friend the Member for Leeds, North (Mr. Peake) by illness, a thing which I personally very greatly regret, and I think that my regret will be shared on all sides of the Committee. The deliberations on these matters would have been greatly assisted by the wit, urbanity and Parliamentary experience which my two right hon. Friends are accustomed to develop on these occasions, and I ask for such indulgence as the Committee is prepared to give me in trying to be an unworthy substitute for them.

The object of this Amendment is perfectly clear; it is to abolish the increase of 9d. a gallon on petrol. I should like to remind hon. Members of the history of the Petrol Duties. After a lapse they were reintroduced at 4d. a gallon in 1928, raised to 6d. in 1931, and, as a crisis measure, to 8d. plus 1d. in 1938. Our discussion on this Amendment must, to some extent, be bound up with the matter of petrol rationing, especially on the yield of the taxation, and I find it extremely difficult to discern any general theme running through Government policy on the matter of petrol.

During the Budget speech, if I read the Chancellor aright, he regarded the Petrol Duty mainly as a means for reducing consumption. In fact, he used the rather curious or inverted phrase:
"Fiscal inducements to economy have become necessary."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 74.]
I should have said that fiscal burdens were to be put upon the population in order to reduce consumption. Since he used those words, petrol rationing has been abolished altogether, and, surely, we are entitled to ask whether the Petrol Duty was intended primarily as a revenue tax or to restrict consumption. Furthermore, we are entitled to ask whether the Chancellor anticipates success for his policy of reducing consumption or whether he anticipates its failure, in which case his estimates of the revenue to be derived from the tax would have to be raised upwards. That is a point on which, I think, the Committee is entitled to have further information from the Government. We are now among the most highly taxed in respect of petrol in the whole Commonwealth, and only in Pakistan, Ceylon and Malaya are these taxes exceeded.

I ask the Committee to accept this Amendment for several reasons. The first is a general point. We consider any increases in taxation not to be tolerable at this time considering the present general level of taxation which, at 43.7 per cent. of the national income, is the highest in the world. We consider that there should be no increases in taxation, and that where relief is obviously necessary it must be made out of economies in Government expenditure. On this Amendment we cannot, of course, deal with the general budgetary position, but must attack those taxes which appear to be against the public interest, and I borrow the phrase from one which is continually in the mouths of hon. Members opposite—"The public interest"—a catchword very often. If the Government reject this Amendment it will only redouble and add weight to our representations on others.

Secondly, there are massive trade reasons which make this duty thoroughly unsound. It will raise the cost of production and the cost of distribution, for example, by increasing fares all over the country and by making the transport of components within the various assembly plants in industry more expensive. Thirdly, it represents the pursuit of the anti-motoring and anti-motorist policy which is a feature of the intentions of the present Government, both in the past and now. I have already dealt with the general point that we consider any increases in taxation intolerable at the present time. I want to go on to discuss, in greater detail, first of all the trade reasons and then the motoring reasons.

Allied to the trade reasons is the matter of the cost of living. The Chancellor himself estimated that passenger transport costs would go up by 4 per cent., I think, in the country and by 5 per cent. in London. I do not think that these percentages, though no doubt quite accurate, give a really true picture of the burden which the population will have to bear. Many of these increased costs cannot be absorbed by the existing transport organisations and industry, and increased fares will become inevitable. The signs of these are already clearly to be seen.

The additional tax in a full year on these undertakings, as far as I can obtain estimates, is as follows—British Transport Commission £6 million, London Transport £1,250,000, Scottish Motor Traction £156,000, and in South Wales £50,000; and there are many municipalities which are working on a very fine margin and will have to pass on the increased duty to the passenger.

Manchester estimates the increased cost at £185,000 a year, Birmingham at £188,000, Liverpool £105,000, and there are corresponding increases in smaller municipalities. We think that this steady rise in this particular cost of living is one of the most unsatisfactory features of our present economy. To keep some perspective of this duty it is necessary to see what the cost of living has been. The Ministry of Labour official index of retail prices begins in 1947 at 100. In 1948 it was 104, in 1949 109, in December, 1949, 113 and in April, 1950, 115.

It must be expected that the increase of this Petrol Duty will most hardly hit the middle classes and what is called in America the white collar worker, not because they necessarily use more transportation to go to work than the industrial worker, but because their salaries and wages have not shown the same buoyancy during the last five years as those of people engaged in industry. Even after the Lord President discovered the middle classes at about the time of the General Election, and before he discovered Scotland considerably afterwards, hon. Members opposite have been courting the middle classes and expressing sympathy. But when it comes to action we find a tax which will particularly hit them. Not only the middle classes, but the whole of that section of the population who travel to work will find the cost of getting to work, particularly in great cities, greatly increased. All these costs are a very important item in the family budget.

Let me turn for a moment to the effect upon the cost of production, which is very much wider than one would be led to expect when looking at the tax at first. We have become accustomed, and none of us has any complaint about that, to a continuous stream of exhortation—necessary exhortation—to lower British industrial costs. Only by lower costs are we going to maintain even our present standard of living and break into new export markets. The exhortations are so familiar that I need hardly repeat them. It is only when it comes to action that these exhortations are seen to be mere words. They are mere lip-service to an idea.

3.45 p.m.

We do not need to be told that our economic life exists in buying raw materials, working them up into a finished article and exporting some of them. The general matter of internal transport costs can be very well illustrated by the case of Birmingham. Birmingham imports raw materials from the seaboard, pays inward freight, works the materials into finished articles and distributes them over the country or sends them to a port for export. So, Birmingham, in the centre of England, is particularly interested in the matter of costs of internal transport. The burden, so to speak, is doubled compared with many cities nearer the seaboard. Rail freights have already been increased by 16⅔ per cent. A city like Birmingham will have to bear this on inward and outward freight. Now the alternative of transport by road—very much used because it is more efficient in many cases—is to bear a new tax.

May I use another instance very familiar to hon. Members in all parts of the Committee? There were times in the cotton and textile industry when cotton in various stages of processing used to move from one works to another by rail. Piece goods went to the weaver and woven goods to the finisher, bleacher and dyer and so forth by rail. Now this traffic is largely covered by road, because short-haul road traffic is a much more efficient means of carrying cotton through the various processes than transport by rail, and for no greater reason than that obviously transport by road involves only two handling costs. All through the report of the American Productivity Committee runs the thread that we must try to reduce our handling costs in Great Britain. Here, where we are trying to do it, an extra tax is imposed.

In face of these exhortations about reducing costs, and particularly costs in handling, it is a dismal paradox that not content with raising rail freights, the Government should now put an extra burden on road freight. It makes us believe that these exhortations are mere words and that it is Government deeds that raise costs. Nothing will persuade me that the Government, in desiring to make road transport more expensive, are not trying somehow to support the nationalised railways. That is a very vicious principle and if it is carried out, as it may be in other fields, it will have a disastrous effect upon the whole national economy by turning traffic away from methods which are most efficient.

I have mentioned textiles more particularly, but there are many industries I could cite. The increase in the cost of building is going to be serious as a result of this tax. I have a copy here of a letter from an area market manager of the National Coal Board. This is what he says:
"Arising from the increase in haulage rates and haulage costs resulting from the 1950 Budget, it has been found necessary to increase the price of common building bricks ex works. At the same time, it is also necessary to increase the road haulage rates. I therefore beg to announce that as from and including Monday the 15th inst. the price of common building bricks ex works will be increased by 2s. 0d. per 1,000 and that as from the same date road haulage rates will be increased by 7½ per cent."
Having learned the official jargon to some extent he finishes:
"Trusting to be favoured with a continuance of your esteemed orders. I am, yours faithfully, Area Market Manager for N.C.B."
But he has let a considerable cat out of the bag in the course of this agreeable letter.

Now let me refer to the cost of distribution and to the often reiterated demands, with which we on these benches concur, that the cost of distribution should be reduced to the minimum consistent with efficiency and with the convenience of the consumer. Again it seems to us that these exhortations are mere lip service. When it comes to trying to put them into effect the Government introduce a tax which will have the effect of raising the cost of distribution all over the country.

Already I see forecasts on such varied subjects as laundry, vegetables, perishable goods and milk, which show that the cost to the consumer of these articles will have to be increased as a result of this tax. I notice that "The Times" estimates the total rise in the cost of living to be about 1 per cent. That is a serious matter at any time, but I think hon. Members will agree that it is doubly or trebly so now when a fall in the cost of living should be one of the prime objects of our economic and fiscal policy.

The third point which I want to put before the Committee is what I call the anti-motoring and anti-motorist policy which the Government have always pursued. I think this arose originally from the idea that the motor car belonged to the privileged few and that, therefore, to be anti-motorist was to be a good Socialist. Unfortunately, the momentum of these past heresies has carried forward into the minds of hon. Members today when the situation is very different and when one of the semi-necessaries, or semi-luxuries if you like, which the population most desire is a motor car and when motoring is carried on so much by the small man. It is entirely wrong to think that motorcars belong to the privileged few, even to Ministers.

This idea that motoring is a specialised activity which can be singled out has been much reinforced by some of the economic advisers to the Government who advised them that the British export motor industry was down and out. Their view, as so often happens with economic advisers, has been entirely disproved by the event. The figures will show that the export of vehicles is the largest single export to the hard currency areas out of the whole of our exports. I think it has exceeded our traditional first export to hard currency areas, namely whisky. We shall be referring later to the figures referring to commercial vehicles but in commercial vehicles alone, the increase in our exports has been 1,000 per cent. since 1938.

The motor industry itself will be affected by this tax particularly in the transport of components into the assembly works from a variety of sources, and these are efficiently carried only by road. Of course, it is very pertinent to remember that the motor industry is a large consumer of petrol for engine testing, vehicle testing and for delivery to docks for export and so forth. This tax will bring a direct increase in the cost of our exports at a time when I should have thought it would be clear to everybody that the margins in our favour are very narrow.

I believe that the cheapest American automobile is the Chevrolet 21 horsepower, now selling at about 1,550 dollars, and we have to try and compete with that with smaller types of vehicles, of which I think the 10 horse-power is the very smallest which has any chance of competing in that particular market; these are selling at just under 1,500 dollars today and are doing a fairly good business. I estimate the increase in the cost of these vehicles at between £10 and £20, which is just the critical cost in the export market.

Lastly, there is a very technical matter with which I must weary the Committee for a moment, and that is connected with the general design of our motor cars. The present Minister of Town and Country Planning when he was Chancellor of the Exchequer eventually agreed that the tax upon horse-power, calculated upon the old formula, distorted the design of British motor cars, and I should think that every hon. Member would agree that where taxation has a direct effect upon design it is bad. At least, the then Chancellor thought so, and on this occasion he was, I believe, wise and far-seeing. I cannot speak for any other occasion. Since the flat rate of tax in 1947 was introduced, the British designer has been able to design motor cars and engines for the needs of the user and not primarily for the need for reducing the fiscal burden on the motorist.

The figures show that this has indeed happened. Since 1947 the average motor car engine size has increased from 1,391 cubic centimetres to 1,700 cubic centimetres. We should all consider that in modern conditions that trend towards larger engines is highly desirable, especially for export. I believe there is no single cause which is more responsible for the buoyancy of our export of motor cars than the fact that we have been able to design bigger engines.

Clearly the doubling of the present Petrol Duty—that is what it is; it is a 100 per cent. increase—will nullify many of the previous measures, and it is once again going to swing us back on to high speed small engines designed primarily to reduce the consumption of petrol. I think that what appeared to us before to be an enlightened realisation of the possibilities of export by the then Chancellor of the Exchequer will be cancelled out by the doubling of this tax by his successor.

My arguments on this Amendment might be summed up like this. We do not believe in any general increase in taxation. An increase of 100 per cent. in the Petrol Duty will send up the cost of living and will bear hardly upon family budgets, particularly of those who have to be carried to work as so large a proportion of the workers in the country are. At the same time, as a husband finds a most unwelcome increase in his budget due the increased fares, his wife will find when she goes shopping that the increased cost of distribution brought about by this tax will put up the price of the things which she buys, and will give a further impetus to the rise in the cost of living which is such an evil feature of our present times.

Lastly, the motorist, who for reasons best known to hon. Members opposite is regarded by them as a man using a luxury, is going to have a very sharp rise in the cost of his motoring. I estimate that to be, on the most modest use of the motor car, about £12 10s. a year, and in many cases it will be £20 or more. There are some people so hedonistic in outlook that they actually like to take their cars out for pleasure and go to the seaside or to the country—most reprehensible, no doubt, and entirely against the New College and Winchester view of what is proper. But there it is, these unregenerate people think they are entitled to a little fun. If we ignore the idea of going to the seaside in a small motor car, we must not ignore the fact that there are many other forms of motoring like that carried on by doctors, surgeons, midwives, nurses and school teachers upon whom this tax will bear very heavily. It is very difficult to fasten upon them the terrible charge that their motoring is for pleasure. They will find their cost will rise sharply. It seems to me that, at this time, the tax goes quite against what should be our policy. I think it is a very ill-judged measure. It will have a great effect not only on the cost of living but also upon the cost of production, upon our ability to export and upon the cost of distribution.

4.0 p.m.

It is with most unusual diffidence and humility that I rise to make my maiden utterance in this House, particularly as my maidenly status is, to say the least, becoming a little long in the teeth, and it is with added diffidence that I face the Wykehamist cohorts across the Floor as a humble member of Winchester and New College who most definitely opposes their views.

I find it very difficult to understand what is the object of this tax. The idea of saving petrol and dollars does not seem to have been carried very far in consequence of the tax and it seems to me that the effect on so many of the function of this country, as my right hon. Friend the Member for Aldershot (Mr. Lyttelton) so ably pointed out, will be disastrous. I should like, in particular, to mention one point which unduly hurts the members of the constituency which has done me the honour of sending me here, and it is the effect of the tax on bus transport.

In the constituency from which I come, we have a small 'bus company, the Gosport and Fareham Omnibus Company, which carries an enormous amount of traffic. For 50 years, ever since it started with horse tram cars, the company has never once increased its fares and for 10 years past, during which time the cost of wages and other expenses has risen by £35,000 a year, this company has succeded in so increasing its traffic and efficiency as never to ask for more money in fares. Now has come this sudden blow in this Budget which will cost this small company £9,000 a year straight away. It has at last reduced the company to calling upon the authorities to allow an increase in fares—and that after such a long and splendid record.

The increase will hit everybody using this company, which provides a service that may well be the envy of Londoners, because it is one of the very few in the country which has a penny fare. From now on, there will be an addition of a halfpenny on every stage and there will be a halfpenny on every workman's ticket. From now on, everybody using the company's services, which in effect is everybody in the district, will have an addition to the budget for every member of the family.

I think this is a most iniquitous and unfair imposition, an extra burden on the cost of living which should be avoided. The tax does not seem to have any clear purpose except that of "raising the wind" and I should like most humbly, and as a maiden speaker, to offer my support of this Amendment to annul it.

It is with very real pleasure that I offer my sincere congratulations to the hon. and gallant Member for Gosport and Fareham (Surgeon Lieut.-Commander Bennett) on his most successful maiden voyage. He has had, of course, a very good education and he has also a very distinguished war record. All of us very much enjoyed his speech which, if I may say so, I think with the agreement of all hon. Members, was almost unnecessarily brief. We could well have listened to him longer, and we look forward to doing so on many future occasions.

I should like also to join with the right hon. Member for Aldershot (Mr. Lyttelton) in expressing our regret at the absence from the Committee of the right hon. Members for Bristol, West (Mr. Stanley) and the Member for Leeds, North (Mr. Peake). I hope I shall not be giving offence to any other right hon. or hon. Gentleman opposite if I say that we regard them as among the wittiest and most penetrating speakers on the Opposition side. Of course, in the present state of affairs in this Committee we cannot regret the absence of any Member of the Opposition, but had it been possible I would gladly have had them here to speak, so long as they disappeared immediately they had concluded their speeches. I say all that despite the fact that both right hon. Gentlemen were educated at Eton and not at Winchester.

The implications of this Amendment are, of course, perfectly clear. It not only involves the complete abolition in so many terms of Clause 1—of, indeed, all the first five Clauses of the Bill—but, if carried, it would completely transform the Budget because it would also mean dropping Clause 19 and the reliefs in Income Tax proposed in that Clause. [HON. MEMBERS: "Why?"] The reason is that the purpose of the Petrol Duty was to "raise the wind"—to use the phrase of the hon. and gallant Member for Gosport and Fareham—to relieve Income Tax. It is true that other arguments have been brought into the discussion and will be brought into it, but the purpose of the tax is perfectly clear. It was introduced in order to provide the necessary finance to secure the reduction in the rate of Income Tax from 6s. to 5s. and from 3s. to 2s. 6d. on the first part of income subject to taxation. Indeed, the actual amount of revenue to be raised by this Petrol Duty is expected in the first year to be £68½ million, whereas the Income Tax reliefs cost £72 million.

My right hon. and learned Friend the Chancellor of the Exchequer made the position perfectly clear in his Budget statement, from which I should like to quote a few words. At the end of his speech, he said:
"The Committee will therefore see that what we propose—apart from a few minor adjustments—is the increase of an indirect tax which is very broadly spread in order to give proportionately more relief in direct taxation to the lower income groups, although all Income Tax payers will get some benefit."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 78.]

The right hon. Gentleman will perhaps agree that his right hon. and learned Friend also gave other reasons which appear in column 74 of the OFFICIAL REPORT, the principal reason being to achieve a reduction in consumption.

I have already said that, of course, other arguments were brought into it. When one wants to "raise the wind" for a particular purpose, in this case for the relief of Income Tax, one naturally looks round to see what is the best way of doing it. Various considerations then come into the picture. I will deal with those in a moment, but I must first make it perfectly plain that if it had not been for the desire of my right hon. and learned Friend to relieve Income Tax it would not have been necessary to impose this Petrol Duty, and one cannot really separate the two things one from the other.

I am very sorry to interrupt again, but this is a very novel type of argument which is seeking to link some particular rise in revenue with some particular reduction in taxation. I think the argument falls completely to the ground. The right hon. Gentleman can deal with this position only from the point of view of the whole budgetary position.

So far from being novel, it was in fact precisely the argument used by the right hon. Gentleman the Leader of the Opposition when he introduced the original Petrol Duty in 1928. He was there seeking to find the funds, or "raise the wind," if hon. Members prefer that phrase, to provide money to relieve industry from rates, and that was his argument brought into the course of the Debate again and again.

It has been suggested, not by the right hon. Gentleman today but in the Press—and no doubt it will be suggested by other hon. Members—that, because of the de-rationing of petrol and the increase in revenue which follows from it, it is no longer necessary for us to have this tax or at any rate to have such a large tax. I think it will be for the convenience of the Committee if I explain straight away what is the attitude of the Government to this matter.

Of course, the effect of the Amendment would be to reduce the increased revenue from the Petrol Duty from the present figure of £68½ million this year, plus a further £20 which we expect will be received as a result of de-rationing, to approximately £10 million. In other words, the increased consumption as a result of de-rationing will bring in another £20 million on top of the £68½ million, whereas, if we were to do away with the tax altogether, the only addition at the old tax rates would be the extra £10 million from de-rationing.

Is the right hon. Gentleman assuming that there will be no reduction in consumption?

May I make the point clear? If there is no reduction in consumption, the tax will yield more.

The figures I have given are perfectly clear. The original estimate was £68,500,000 after taking into account any reductions there might be—

In consumption. As I say, we then had de-rationing, which we estimate will bring in another £20 million from the Petrol Duty. I was only saying—it is a small point really—that if the Amendment were carried, instead of getting this total of £88,500,000 we should get only about £10 million from de-rationing. In addition, we expect to increase the revenue from licence duties, because of the bringing to an end of the half-rate concession, by another £3,500,000, so that the net effect of de-rationing should be some £23,500,000; and it is that sum—or something like it—which has, of course, been discussed in the Press, and various suggestions have been made as to what might be done with it.

I have to tell the Committee straight away that the greater part of it has already been absorbed by the changes which have been announced and with which the Committee are familiar. In particular we shall need to find another £7 million this year to provide the National Assistance amounts which the Minister of National Insurance announced recently—I think just after the Budget speech. Furthermore, we shall need to find another £3,500,000 to meet the cost of the special grants to agriculture in order that it may be relieved from this particular tax so far as agricultural vehicles are concerned. That makes £10,500,000. The third important change which is going to cost us some revenue, since the tax was announced, is the new Clause on unilateral relief for double taxation. Without going into the matter in detail at this moment, which would obviously be out of order, I can say that we expect to lose some £9,500,000 as a result of that Clause, making in all about £20 million which has already been absorbed. The right hon. Gentleman emphasised that what he was criticising was the level of Government expenditure. Of course, quite rightly, he did not go into details, and I do not propose to do so either, for it would be quite out of order.

I say again that the real issue is this. Was it a good plan or was it not a good plan to make this switch in taxation? Was it a good plan on the one side to reduce the rates of Income Tax and on the other to find the money for it by increasing the Petrol Duty? I do not think there is very much doubt among any hon. Members that the tax remissions are something which we all desire. It is very seldom that tax remissions are not desired. But I would go further than that. I would say that these particular remissions, the reduction of the 6s. and 3s. rates to 5s. and 2s. 6d. were particularly favoured by the Opposition themselves. Indeed, I think I am right in saying that they claim the authorship of them. [HON. MEMBERS: "Hear, hear."] They presumably cannot object to the reasons for the increase in the Petrol Tax. [HON. MEMBERS: "Oh."] They really must face up to this. The reason this tax on petrol has been increased is entirely to find the money for the Income Tax remissions. [HON. MEMBERS: "Nonsense."]

Now I will come to the special considerations which also enter in so far as Petrol Duty is concerned. The first thing to which I want to draw the attention of the Committee is this. The Petrol Duty, as the right hon. Gentleman said, was first introduced in 1928. It was 4d. a gallon. It was increased in two successive bites at the cherry to 8d. a gallon and by another 1d. to 9d. a gallon in 1938. It has a very respectable pedigree, supported by both sides of the Committee. If I may say so, many of the arguments which the right hon. Gentleman used against this particular increase in taxation being made now were dealt with very admirably by Conservative speakers and Conservative Front Bench men during the Debates in 1928 and again in 1938. No doubt the right hon. Gentleman made himself familiar with those arguments in order that he might know what the reply of the Government was likely to be.

4.15 p.m.

I am just coming to that. The significant fact is surely that the proportion of the Petrol Duty to the total revenue had, of course, fallen very substantially before we put if up again. Ninepence a gallon before the war brought in a sum of approximately £60 million, which was then, in proportion to the total revenue, 6½ per cent. In 1949—that is, the last tax year—the Petrol Duty revenue was very little changed. It had gone up by about £2,250,000 to £62,500,000; but, the percentage of the Petrol Duty revenue to the total revenue had fallen from 6½ per cent. to just over 1½ per cent. [Interruption.] I do not understand why the right hon. Gentleman thinks that is so peculiar or thinks it so irrelevant. It is, of course, extremely relevant to any serious fiscal policy because, in fact, what has happened is that we have had very substantial increases, not only made by this Government but made by the Coalition Government during the war, in Income Tax, Death Duties, Purchase Tax, Tobacco Duty, Beer Duty—all the other things—

—while all the time the Petrol Duty has remained unchanged. [HON. MEMBERS: "Why."] I ask hon. Members to pay attention to what I can assure them is a serious argument. [Interruption.] Somebody says it is too intellectual, but really a little intellect is not a bad thing.

Is is obviously the duty of any Chancellor of the Exchequer, when every Budget comes, to consider whether there should be changes in the level of taxation as between different taxes, and my right hon. and learned Friend, in my view, is absolutely right to say that Income Tax, in relation to the Petrol Duty, has become too high, and that it would be a good thing to increase the Petrol Duty and reduce the Income Tax. [Interruption.] I am bound to say I cannot understand why the Opposition find it so difficult to appreciate what obviously is the duty of any Chancellor of the Exchequer.

We are defending a perfectly legitimate policy. The right hon. Gentleman talked about the matter being silly but, if I may say so, he will not find it nearly so silly if he looks at it from the point of view of the Income Tax payer. I should have said that, far from its being silly, there is everything to be said for reducing a tax which is very keenly felt and increasing a tax which, whatever may be said about it—and I shall deal with the criticism in a minute—is certainly not going to be felt nearly so keenly. [HON. MEMBERS: "Oh."] If hon. Members opposite or their predecessors in fact found in the then Budget and the then national income that the tax should be 9d. per gallon, they should certainly not be against a tax of 1s. 6d. a gallon with a far higher national income and a far higher total revenue. [HON. MEMBERS: "Nonsense."] That is, I think, a very important consideration.

I should like to turn to one or two other arguments. Reference has been made by the right hon. Member for Aldershot to the position in other countries. Well, it is very relevant. He referred to the Commonwealth. It is quite true that, for the most part, the taxation in the Commonwealth is lower. If we turn to Europe, what is the position? Taxation in all the countries of Western Europe—I am afraid I am not so well-informed about the position behind the Iron Curtain—is still, after this duty, above the rate of petrol taxation in this country. For instance, in Denmark, the duty is 1s. 11d.; in Norway, 2s. 1d.; in Sweden, 2s. 10d; in Switzerland, 1s. 8½d.; in Belgium, 1s. 9½d.; in France, 2s. 5d.; in Italy, 4s.; and in Holland, 1s. 7d. Now in all these cases, or nearly all, not only is the duty higher than here, but it has also been increased during the last two years.

Is the right hon. Gentleman dealing solely with the tax on petrol or with the total taxation upon road vehicles?

I am dealing with the Amendment, which is concerned with the tax on petrol. [Interruption.] Really, I am not going to be driven into getting myself out of order just because of jeers from the Opposition.

Surely the figures the right hon. Gentleman has given us about the Petrol Duty in these other countries is, on his own showing, quite useless unless he tells us what the Income Tax in those countries is.

On the contrary, it is extremely relevant, because one of the arguments which is frequently put forward against this duty is that it will penalise us, our industry and our road transport, compared with other countries, whereas that quite clearly is certainly not the case so far as the Continent of Europe is concerned. On the contrary, it is—

I have given way a good deal, and I must get on.

It is quite clear that in comparison with other countries we are still taxed less highly. On the question of tourist traffic, as to whether tourists will go to France, or Italy, or other parts of Europe, or come here with their cars, we still have a substantial advantage, and that I claim is certainly most relevant when considering the arguments about this duty.

The right hon. Gentleman referred to the need which my right hon. and learned Friend had emphasised, to restrict consumption, and I should like to deal with that. Of course, since the Budget, rationing has come to an end; and it has come to an end because we have been able to obtain agreement with the American companies that they will supply for sterling oil for which we previously had to pay dollars. That leads, I think, to two rather different arguments. In the first place, the abandonment of rationing has meant that there is no other way by which we can, if it were desirable in the economic interests of the country, restrict the consumption of this important commodity except by taxation.

We have therefore to rely purely on fiscal means, if it is desirable still to restrict imports. Well, is it? Obviously it is not so necessary to restrict imports of this commodity, since we are not in the same position so far as dollars are concerned. But it remains the fact—and I must emphasise this to the Committee—that the so-called sterling oil that we obtain still has a quite substantial dollar content; and I would certainly go so far as to say that on that account, and in the interests of the balance of payments of the country as a whole, economy in petrol is most desirable. I submit that it is certainly a serious thing to have done, to have increased the duty, still leaving it at a comparatively low level, in order to exercise some brake on the consumption of this commodity.

Criticisms of the duty fall, I think, into three different groups. First, there is the criticism on behalf of the private motorist. Frankly, I do not believe that many private motorists are worrying very seriously about this duty.

It is fair to say this, that although of course there is no causal connection between de-rationing, or even the increase in the ration, and the Petrol Duty, this duty has nevertheless to be considered against the background of the fact that de-rationing has come, and there is not much doubt—at any rate from my experience with them—that the motorists are pretty satisfied with de-rationing plus the duty. We must not forget that motorists also pay Income Tax, and most of them at any rate get a substantial benefit from that, which, in many cases, considerably exceeds the increased duty that they will pay on the petrol.

The second main criticism concerns commercial vehicles. While nobody denies that the increase in the Petrol Duty is bound to increase their costs, we really must preserve some sense of proportion in this, and here are some figures showing the increase in operating costs resulting from the increase in the duty, comparing them in each case as a proportion of fuel costs to operating costs, with what the position was before the war. To start with, I take the light 10 cwt. delivery van doing, say, 200 miles a week. Before the war, in 1937, their operating costs were about 5.38d. per vehicle-mile; the fuel cost of that was .6d., making a percentage of 11.2. By 1948 the operating costs had just about doubled to 10.73d. per vehicle-mile; the fuel costs had gone up to .97d.—just about one penny—so that the percentage had fallen from 11.2 to 9 The duty which we now propose to put on increases the fuel costs to 1.33d. per vehicle-mile—an increase of one-third of a penny per mile; that is the substance of it; an increase of 3 per cent. in their operating costs. Seriously, I cannot see how anybody can say that that will be crippling and will do serious damage, or indeed will upset the finances of the business to any considerable extent.

May I put one question which, if the right hon. Gentleman can answer it, must support his argument? When he takes the figure of 200 miles, is that a figure for which he has any sort of supporting figures? It appears to me to be extremely low, and therefore to vitiate his argument.

These figures were, in fact, based on cost tables published by the "Commercial Motor," which is certainly not a Government publication, and I think this is a reasonable figure to take.

I do not want to weary the Committee with too many examples, but perhaps I may just take the figures for the larger vehicle of four tons doing, say, 300 miles a week. There is the same sort of picture: the increase in their operating costs is only 4 per cent.

Only 4 per cent., yes. We have had thrown at us increases of 7½ per cent. in their charges as though they were due entirely to the Petrol Duty. Well, they certainly are not justified by the Petrol Duty; they clearly cover other increases in costs as well.

I am sorry, but I have given way a good deal already and I must be allowed to get on with my speech.

I daresay the hon. Gentleman will have an opportunity later. We shall be here for many, many hours still to come, and there will be plenty of opportunity for him to put his question then.

For the public service vehicle, again the same sort of picture obtains: the fuel costs have gone up from 2d. per vehicle-mile to 2.9d. per vehicle-mile, but the percentage of their operating costs represented by fuel costs is still below what it was before the war. That comes back to the point I was making earlier, that as a percentage of costs the Petrol Duty is still low compared with before the war, and it is the relationship of this duty to total costs that is the relevant consideration.

The third criticism concerns industry itself. Obviously, if the effect on the costs of commercial vehicle operation is only 4 per cent., then the effect on total costs of industry must be negligible, even compared with that. Only in cases where transport costs formed a very high proportion of the total costs would it be anything like 4 per cent., and in most cases it would be well below 1 per cent.

4.30 p.m.

There are several Amendments on the Order Paper on this special case of oil for particular industries, and I do not propose to trespass on them, but before I sit down I must deal with one or two remarks which the right hon. Gentleman made towards the end of his speech.

I cannot accept the extraordinary story that we are in any way prejudiced against motorists. [HON. MEMBERS: "Oh!"] As a matter of fact, having been Minister of Fuel and Power, I think I can say that I have had a good deal of experience and contact with the motoring organisations, and I assure the Committee that my relations with them were, despite the somewhat difficult circumstances of petrol rationing, always extremely cordial, and I do not think that they would ever suggest that there was any prejudice in my mind against motorists. Why should there be, seeing that I have been for many years a member of one of the motoring organisations concerned, and seeing that my right hon. Friend, so he tells me, was one of the pioneer motorists of this country? [HON. MEMBERS: "The red flag."] It may be that the red flag was appropriate in that case, and it is a pity that it was not also appropriate in the case of some of the pioneer motorists on the other side. Really, this extraordinary story is complete nonsense.

As a matter of fact, it is as a result of the efforts of my right hon. Friend the Minister of Fuel and Power, and, if I may say so, my own attempts when I was Minister of Fuel and Power, that we managed to secure this agreement with the American companies which has brought rationing to an end; and to say that we were prejudiced against motorists in doing that is obviously absurd. The right hon. Gentleman also said, for some reason which I cannot understand, that the advisers of the Government were prejudiced against the motor manufacturing industry. That is complete nonsense. As a matter of fact, my right hon. and learned Friend, in the course of his Budget speech, went out of his way to pay a special tribute to the motor manufacturing industry [HON. MEMBERS: "He was wise."] He may have been wise, but I say that the argument that we were in any way prejudiced in this matter cannot be sustained.

The other argument the right hon. Gentleman used was that this tax would have a detrimental effect on engine design. I should like to deal with that point. In the first place, it is sheer nonsense, when we take it in conjunction with de-rationing, to suggest that there will be any great difficulty for the motor car manufacturers to sell vehicles on the home market. It is quite obvious that de-rationing will tend enormously to increase the demand for these vehicles, and I should have thought, although I have not been into it, that the second-hand market for cars is already booming. Therefore, to suggest that they will change their designs because of an increase in the Petrol Duty affecting the home market, affecting, that is to say, 20 or at the most 30 per cent. of their total output, is obviously ridiculous.

It might interest the right hon. Gentleman to know that motor car designers are at the present moment designing smaller cars. I can tell him that from personal knowledge.

I do not know whether they started doing that since 18th April, or whether it began earlier. It may be so at the present moment, but I was going on to add a further argument. It cannot be sustained, if we are attempting to sell cars all over the world, that we can and must sell cars with only large engines. In every country in Europe there is a high petrol duty. How are we going to sell cars with a high petrol consumption in those circumstances? No doubt, the motor manufacturers are thinking in terms of those markets, and are probably thinking in terms of petrol economy in other markets as well. All I say is that in that case it cannot be said that this particular tax is seriously interfering with their business. The fact is that we have a choice here. It would have been very easy for my right hon. and learned Friend neither to have increased the Petrol Duty nor to have reduced the Income Tax. He could have introduced a Budget that made no substantial change at all. That would have saved us all a lot of trouble. He came to the conclusion that it was right to make this change, and that is what we are concerned with this afternoon.

I am sure that he was right, and that it was desirable to relieve taxation at the particular point where the first rates of Income Tax come to be paid. I am certain that many millions of people who have been getting the benefits of this remission for the past month will agree that he was right in doing that. The increase in Petrol Duty has come at a time when we can be satisfied that, although it will of course have some influence on distribution costs, there is nevertheless no reason to apprehend that it will have a very serious effect on our trade, and it will be balanced by the benefits resulting from the reduction in Income Tax. I hope, therefore, that the Amendment will be rejected.

Will the right hon. Gentleman be good enough to elaborate one point? He told the Committee that the increased revenue was being earmarked to meet increased National Assistance allowances, concessions for agricultural vehicles, and other matters. I ask him to elaborate that argument.

The point is this: Did the Government, in announcing the increased allowances on 19th April, know that petrol was to be de-rationed, because the Secretary of State for Commonwealth Relations told us yesterday—

I think that the hon. and gallant Gentleman is going far too wide of the mark.

The right hon. Gentleman has made what I think Members of the Committee will agree was a remarkable speech; he certainly opened up a number of issues on which I imagine widely different views will be held. I shall deal with some of the points that he made in the order that he made them. The first matter on which I desire to pursue him, if I may, is the point of the £20 million and the £10 million. He said that the Chancellor of the Exchequer reckoned that he would get from this tax in the circumstances in which he introduced it so many million pounds. Then there came de-rationing, and he calculated that that would put up the yield by £20 million, and the effect therefore of this amendment would be that the new revenue which the Chancellor of the Exchequer would get as the result of de-rationing would be reduced to £10 million, presumably half of the extra £20 million. I am glad that the right hon. Gentleman is with me so far.

These figures show that there is absolutely no basis at all in the Chancellor's contention that he desired to reduce the use of petrol by this tax. The purpose of increasing the tax was to reduce the consumption of petrol; therefore presumably if the tax is not put on there will be no reduction in consumption. Therefore there will be the yield from the gallons of petrol which are not saved and also a yield from the extra petrol used as a result of de-rationing. I should have thought that that point was fairly obvious, and the right hon. Gentleman cannot have it both ways. In a moment I shall attempt to deal with what the Chancellor of the Exchequer said which will underline the point that I have tried to make.

The next point with which he dealt was that the Chancellor of the Exchequer, when introducing this tax, quite clearly linked it up with the remission in Income Tax. Of course, we welcome the remission in Income Tax, which is one of the few sound things in the Finance Bill. It is rather curious, however, when we read the Chancellor's speech, to see exactly what he said under the heading "Tax Changes: Major Proposals." This is what he had to say:
"I now come to a major matter which has a bearing upon our dollar balances as well as upon our domestic revenues. We are one of the few countries that have not yet tried to persuade users to economise in petrol—a commodity still very expensive in dollars—by means of price increases. In almost every other country which relies so largely upon imports of petrol, the retail price is a good deal higher than it is here."
He then gave the figures.
"The time has come when some of the other automatic methods of restricting the consumption of petrol, such, for instance, as the shortage of vehicles, are disappearing, so that fiscal inducements to economy have become necessary. Indeed it is difficult to think out a better case for fresh taxation. We here have a commodity costing us a great many dollars; where demand at present prices exceeds supply; where the rate of tax has not been increased since before the war; where rationing in a large part of the field—that covered by commercial vehicles—cannot effectively restrict consumption and where some of the factors which have hitherto tended to restrict consumption are now disappearing. Furthermore, an increase in the tax on petrol, which is at present only 9d. a gallon, will, we hope, lead to savings in consumption by commercial vehicles, so that it will be possible without any great increase in imports, to do a little better for the ordinary car user."—[OFFICIAL REPORT. 18th April, 1950; Vol. 474, c. 74–5.]
And so, he said, he proposed to increase the tax. Not one word was said about the primary purpose of imposing this tax being to raise revenue.

That is because the hon. and learned Member quotes only one part of the speech and leaves out the other part altogether.

I should not have thought it unreasonable to read the passage where the right hon. and learned Gentleman introduces the proposition.

It is surely right also to read the passage where my right hon. and learned Friend sums up the consequences and effects of the Budget as a whole.

That is the argument which the right hon. Gentleman would not have. He would not permit us to take revenue and expenditure as a whole, but told us that we had to link up these two specific matters. It is surely not unreasonable, when looking at the reasoning which led the Chancellor to introduce a particular tax, to refer to the passage of the speech in which he introduced the proposition.

The right hon. Gentleman's next argument was that we had to have regard to the proportion now borne by petrol taxation to total taxation as compared with before the war. What he left out altogether was the enormous increase that has taken place in indirect taxation, which vitiates his comparison. He then went on to a comparison with other European countries, in connection with which, I submit, the question I put was a perfectly fair one. It is completely inconclusive to draw such a comparison, unless one takes into account the total vehicle taxation in each country. I am told that in France there is no actual vehicle taxation, and that in Italy the vehicle taxation is less than it is here. The right hon. Gentleman's figures are quite valueless unless he also shows the other taxation imposed on road transport by way of licence duties, Purchase Tax and the equivalent.

4.45 p.m.

He then dealt with the criticisms put forward against the tax by the various types of users, and spoke of the private motorists. It is very important that the Committee and members of the public should realise the amount of petrol used by private motorists. I do not know whether these figures are correct, but they were given in the "Sunday Times" on 23rd April. Of the total pre-Budget consumption of petrol and heavy oils, 7 per cent. was attributable to the basic ration for private cars, 23 per cent. to supplementary rations, which were presumably granted for the most part for purposes connected with business or industry, and 38 per cent. for commercial goods vehicles. Passenger vehicles took 10 per cent., and the remaining 22 per cent. was used by aircraft, stationary engines, industrial processes and so on.

So, even if the right hon. Gentleman is right and the pleasure motorist has no objection to this increase, it goes a very little way towards justification for it. In fact, a great deal of the pleasure motoring is done by people with very small means, people who are living on a comparatively small margin. To them, this is a very substantial imposition.

The right hon. Gentleman then dealt with the costs of exports, and he put forward the argument that it would really have no substantial effect in increasing costs. Perhaps I might be allowed to give a practical example. This is a letter which was sent the day after the Chancellor had introduced his Budget, and it comes from a shipowner.
"When speaking to our docks office this morning, I asked as a matter of interest how many vehicles delivered cargoes for a particular ship loading in London. The answer was 162. The weight of the fuel tax, plus the new Purchase Tax on commercial vehicles, will presumably fall heavily on firms delivering cargoes to the docks. I suppose that there will be dozens of vessels which will be affected. The figure of 162 was just about typical for every day in the year."
Anyone who has any connection with the ports knows that vast convoys of commercial vehicles are constantly descending on the docks, bringing goods for export or taking away raw materials or other imports. I should have thought it was a proposition that could hardly be sustained, that this will not result in a substantial increase in the cost of our exports at a time when we are fighting in many cases against very keen competition. An increase of 3 or 4, or 10 per cent., or whatever it is, is definitely a matter which cannot be lightly endured.

The next point with which the right hon. Gentleman dealt was that of engine design. I really thought he missed the point altogether, or else he is not in tune with the action that was taken by his right hon. Friend, the present Minister of Town and Country Planning, who reduced the horse-power tax because he thought it would be a good thing to encourage motor manufacturers not to concentrate upon small engines, as we were in danger of losing markets overseas by doing so.

Surely the reason for the change in the horse-power tax was to get away from too many rates of taxation leading to too many different designs.

I know that some of my hon. Friends are much more qualified to speak on this than myself, but I clearly understood that one of the primary reasons was to avoid the concentration upon small engines. At any rate, that is what we were told at the time. People in this country had been led by the heavy rate of horse-power tax to go in for small vehicles. They were demanding 8 horse-power cars which would bear a tax so much lower than 25 horse-power cars. It meant that the manufacturers were being encouraged to produce small cars, in the same way as this increase in the tax on petrol will encourage them to go in for cars with the smallest petrol consumption.

Will the hon. and learned Member tell us the number of cars we have exported of under 12 horse-power since the new tax, as compared with the period before the new taxation was introduced, because then we can discover whether we are selling small cars abroad?

I am afraid that I cannot give the figures, but I do not think it would be of the slightest relevance if I could give them, because the cars which have been exported in the past few weeks are as a result of orders taken months ago.

I thought the hon. Member was referring to the time when the Petrol Duty was increased.

I do not know what that figure is, but if the hon. Gentleman does, no doubt he will contribute it to the discussion. The fact is, as was said by my hon. Friend the Member for Edgbaston (Sir P. Bennett) the motor manufacturers at the present time are studying the matter again, and they are seeing if as a result of this tax, they will have to go back to smaller designs, but I think that that would have been sufficiently obvious—

Is it the hon. and learned Gentleman's argument that the Petrol Duty should never be altered?

That is a hypothetical question. What I am suggesting is that the Petrol Duty should not be doubled, because if the cost of running cars is increased, there is bound to be a greater demand for smaller models.

There are two further matters to which I wish to refer briefly. One is the question of passenger fares, with which the right hon. Gentleman dealt very shortly. I am told that the Passenger Vehicle Operators Association, which can speak for 80 per cent. of the independent buses and coach owners, estimate that the increase in their gross operating costs will be 10 per cent. as a result of this increase. That must mean a substantial increase in their fares throughout the country.

The other matter to which no reference has yet been made is the effect of this duty upon the ratepayers. In the comparatively small district where I live I am told that the effect of the duty will be a 1d. rate because of the extra operating costs of the municipality. In larger cases the cost will be even more. That is yet another example of the way in which this new impost is going to increase the burden of the cost of living upon ordinary people in this country. It is a thoroughly bad tax. If one can go back to the Chancellor's own words, that it is difficult to think out a better case for fresh taxation, it reminds me very much of some of his pre-devaluation statements. I do not think there could be a better case for not having this increase in taxation.

I should like to reply to some of the points made by right hon. and hon. Gentlemen opposite. I do not think it can be said that those who represent motor car cities can be accused of being anti-motorist. In Coventry we have more motorists per head of the population than any other city in Britain. I made very careful inquiries in Coventry about the effect of the Income Tax concessions as offset by the increased Petrol Duty. I did not find a single working class motorist who did not get considerable gain by the new concessions in Income Tax, even if he is likely to pay more for his petrol at the increased price. It is no good anybody telling me that the average working class motorist is going to lose in this connection. He is going to get more by his Income Tax concessions than the extra cost of petrol even after the ending of de-rationing.

I want to come to the central point which interests motor car cities, and I feel that the Opposition have not been fair with this Committee today. After all, this is a product with a dollar content. It is like tobacco. We did not ration tobacco by coupon. We rationed it by price. Perhaps I would rather have seen it rationed by coupon, but we did not do it. Nobody on the Opposition benches has ever objected to the principle, that, if imports with a dollar content have to be reduced and the Government are not prepared to ration them by coupon, then the price has got to be increased. What other way can be found to ensure that the amount of dollars being expended is something which we can afford?

Hon. Gentlemen opposite have been furiously opposed to rationing. They have been demanding the end of rationing of petrol for over three years. If we are not going to ration by coupon, but are going to restrict the dollar expenditure on petrol, how can it be done except by price?

I do not think that many Members in this Committee need me to tell them that even sterling petrol has a dollar content. It is also unnecessary for me to tell this Committee, apart from the hon. Member for Louth (Mr. Osborne) that with de-rationing there will be a slightly greater expenditure of dollars than if we had rationed petrol. Even under the new agreement with the American oil companies, it is well known that we shall have a slightly greater expenditure of dollars—taking the dollar content of sterling petrol into account. We could not have afforded this extra concession except for the additional prosperity which we are enjoying.

So if we are not going to ration by coupon, and consideration has to be given to the dollar content, the only other method of rationing is by price. Further, the price must be fixed at the sum at which it is calculated that it will cause a restriction in the volume to the amount which we can afford to use. Therefore, I should have thought that even if we had not increased the duty in the Budget before de-rationing we should have had to increase it now, unless we were going to waste this amount of dollars. I believe that argument requires answering at least once from the other side of the Committee if they are concerned in getting this country independent of American aid and getting us out of our dollar expenditure difficulties.

The right hon. Member for Aldershot (Mr. Lyttelton) had a contemptuous passage in his speech in which he said that he believed there must have been some consideration in the Government's mind for the railways when they imposed this tax. I should think there was! I know there are no railway directors on the other side of the Committee, and they are only concerned now with private enterprise road haulage. Obviously, the retail price of petrol is largely determined by the tax. There is nothing "natural" about the net price of petrol. It is fixed in terms of general public interest, partly in terms of "dollar content" and partly in terms of getting a fair balance between road and rail. Whether the petrol price is low or high, it has an influence on the railways as well as on the road.

Nobody here can tell this Committee that this Government has been anti-motorist. For over four years this Government have been helping the motor industry in the sense of permitting a vast increase in the number of motor vehicles on the road, and making competition with the railways more severe than in 1938. I quite understand the accusation that the Government are anti-railway, but not the accusation because of the increased duty on petrol of being anti-road. That is the most fantastic accusation ever made.

Is the hon. Gentleman aware that all the heavy transport is oil-driven and is not subject to the same tax?

I understand that it is the same tax.

I have made a little calculation of the comparative cost of road and rail transport to the ordinary person. Suppose one is travelling from Oxford to London—

Winchester would mean too intimate a conversation. Suppose I take the other College to which we are all attached. If I go from New College to London by road and take my wife with me, in a ten horse-power car, allowing something for depreciation as well as oil and petrol costs, the amount comes to 14s. By rail it costs £2. Is that being unfair to the motorist? Is that weighing in favour of the nationalised industry against the motorist? The motorist, of course, today—and this is the problem we are up against—cannot afford to go by rail, because even with the increased tax, travel by road is so much cheaper than travel by rail.

In arriving at 14s. for this particular journey, has the hon. Gentleman not considered that there are many more costs in motoring than petrol and oil?

5.0 p.m.

It is a very difficult calculation, but 12s. was allowed for petrol and oil, and we threw in 2s. for depreciation of the car. [Laughter.] Yes, hon. Members can laugh. The amount allowed for depreciation is a very high percentage if I may say so, and I considered that I was not being unfair in the calculation. I am grateful to hon. Gentlemen opposite for laughing at the figure because if there is a distortion in my figures, it is to overstate road cost against rail. [An HON. MEMBER: "First or third class?"] Third class by rail, including buses at either end, for two people. Fourteen shillings was the actual cost, and that is the thing with which people are concerned. That is why it is so fantastic for the Opposition to say that the Government's policy has been anti-motorist or that the motorist cannot afford the extra 9d. If the Opposition are not prepared to give a subsidy to the railways, which in my opinion is absolutely necessary, they cannot possibly resist this slight increase in motorist's charges which still leave motoring more than twice as cheap as third class rail travel between two cities in this country.

I come to the other factor. The right hon. Member for Aldershot told us that the Government had been "anti" the motor car industry. What industry has made larger profits in the last four and a half years? I agree that it has done a jolly good job, but let no one tell me that the motor car industry's exports will be ruined by the increased price of petrol, even if it costs a little more to take the cars down to the docks. This is an industry which could afford to offer Sir John Black £100,000.

If it is really concerned about the export drive, the industry need not pass on this slight increase in its costs. It can carry the increase by way of a slight reduction of profits. That is all that the increased cost of petrol can possibly mean to the motor car manufacturer. I never heard anything so disingenuous as the argument that the poor, bankrupt, motor car industry is going to be ruined because the terrible cost of petrol in taking cars from their factories to the docks will just make the difference between selling a car in America and not selling it. What nonsense all that is, but that is what has been solemnly stated.

The hon. Member represents a motor car constituency and he ought to know that in the great majority of cases, motor cars sold in the United States of America are sold at a trading loss.

In that case I cannot see that the very slight increase in the cost of petrol to the docks will decrease the net profit of the motor car companies, who are apparently engaged in their industry for pure, altruistic reasons. That is something that we in the motor car cities do not believe. We do not believe that the motor car companies make a loss. We believe that they are building up a long-term business in America, because they think that they can make money there.

The hon. Gentleman is stressing the huge profits and is suggesting that there are very large profits in the motor car industry. Am I right?

Then may I ask the hon. Member what is the percentage of profits to the capital employed in the motor car industry?

The suggestion that I should be asked to go into the percentage of profit of each motor car firm is fantastic. I think we are all agreed that it is a profitable industry. The very slight increase in its overhead costs is something that the industry can afford to carry by way of decreased profits instead of passing on the increase to the consumer.

Now I come to the extraordinary argument about the effect of the 9d. increase upon the design of cars, as though, suddenly, since the Chancellor's announcement, the people down in Coventry had turned back to designing the little car. Can we not study the percentage of cars produced in this country which are of 12 horse-power? Three years ago—I know, because I was one of the intermediaries—the motor car makers came to the Government and said that they wanted to have the horse-power tax abolished so that they could concentrate the models. They did not want to have 8, 10, 12 and 14 horse-power cars. They wanted to "bunch up" their models—say only a 10 and a 12. That was the problem.

They also predicted to the Government that the medium horse-power car was the car of the future. Motor car makers are not infallible in their predictions. I do not blame them for being wrong, but they have found that they have sold overwhelmingly the small cars in the United States as well as elsewhere. We cannot compete with the United States in the manufacture of the medium or high horse-power car because they can do those things better. The one car we can sell there is the little car, the comic little car that one's wife can drive to the station. [An HON. MEMBER: "Comic?"] Yes, by standards of size. Why the Americans like the British car is because it is so small, so fascinatingly small and so ingeniously produced. It is a charming little thing compared with the huge American car.

Is the hon. Member seeking to deride, for instance, the 3½ litre M.G. as being a little car?

It is a very well known fact that the main charm of the British car for Americans is the ingenuity with which, in a very small volume of cubic capacity, an enormous amount of power has been secured. That is one of the attractions of the M.G. and Riley. The Americans are charmed by its size. The American has always believed in bigness, but there is sometimes virtue in smallness. Swiss watches have charms for the Americans. By our ingenuity and skill we have won a place in the American market.

We are beginning to get the Americans to understand that the British small class car is worth consideration. So anybody who tells me that the 9d. increase in petrol has had the slightest influence upon motor car design or who quotes the hon. Member for Edgbaston (Sir P. Bennett)—who did not say anything of the kind but merely that they were still planning small cars as of course they are—should remember that the small car accounted for 80 per cent. of the output before the increase of tax just as it does for 80 per cent. after the increase of tax. Let us have no more nonsense about that.

Where, outside America, is petrol economy not the main requisite of car travel? In Switzerland, petrol is more than 4s. per gallon, in France it is 3s. 7d. and in Germany it is 4s. 7d. Everywhere in Europe cars are largely produced for petrol economy. Even in countries like Belgium they like the small car which does not block up the street and is convenient for turning. The British car is beating the American car because it is better designed for Europe. British conditions are like European conditions, and British roads are more like European roads. We do not make American-type cars because we do not live in American conditions, and so our cars sell. Petrol economy is one of the conditions which is likely to remain in Europe for many years. Again, do not let us have this nonsense any more.

May I come back, as a challenge to the Opposition, to the first issue raised by the right hon. Member for Aldershot? It is not denied that the dollar content of petrol, whether from the sterling area or from Venezuela is still an important element. Does the right hon. Gentleman deny that once we abolish rationing by coupon, we need to restrict the volume of consumption by means of rationing by price? So we are to have rationing by price—or should the Government decide to leave the full margin of profit to the oil companies? After all let us be quite clear—if petrol were in a free market, it would sell for more than it is selling at now, because the oil companies could extract more than 3s. per gallon. But it is not a free market: it is a fixed-price market.

Therefore, the price has to be fixed in the public interests of this country. As it is a matter of public policy what the tax on petrol should be then, (a) for reasons of dollar economy, (b) for reasons of a fair balance between road and rail and (c) for the reason that, on the whole, the motorist should pay his share—if I smoke I have to pay a heavier price because of its dollar content—then why should not the motorist who drives his car also pay his share, if thereby we can achieve a reduction of Income Tax which benefits everybody, motorist or no?

The hon. Member for Coventry, East (Mr. Crossman) seeks to support this duty with two reasons neither of which appealed to his right hon. Friend the Minister of State for Economic Affairs. I can well understand his completely rejecting the argument which was put forward as the main argument of the right hon. Gentleman. I shall come to that in a moment, but I would first refer to the two reasons which the hon. Gentleman has advanced in support of the increased taxation. One is that if rationing is abolished it is nevertheless essential to keep down the consumption of petrol, and that the way to do that is to increase the price.

That is not an argument which appealed to the right hon. Gentleman today, and it was not one which was put forward by the Chancellor, although at the time when he introduced the duty petrol rationing was in existence, and only a few days ago we were told that it was not known at that time that rationing would not continue during the whole year. No wonder, therefore, that in defending the increased duty, the right hon. Gentleman never referred to that.

I am sorry if the right hon. and learned Gentleman missed it, but I certainly did refer to the position and to the way it had changed as a result of the abolition of rationing. I said that it was, nevertheless, also desirable to keep some curb on consumption and that that was one justification for the duty.

I shall come in a moment to the main points of the right hon. Gentleman. The other point made by the hon. Member for Coventry, East, was that the cost of railway transport had gone up so much that it was only right and proper that we should penalise the road in order to even things up. In defending this duty the right hon. Gentleman made reference to Debates which took place in 1928 and 1929 in this House. I would commend to hon. Gentlemen opposite that Budget and the speeches made by hon. Gentlemen who were then in Opposition and who were saying how iniquitous it was to put a duty on road transport merely in order to compel people to adopt a form of transport which did not suit them, namely, to make them go by rail rather than use what was, for their purposes, the more efficient road transport. It was a very strong argument which was put forward then by the financial and economic expert of the Socialist Party, Mr. Philip Snow-den, and it was supported by the whole of the Labour Party at that time.

What has happened that this change of attitude should now take place? Is it because the railway companies have been nationalised that it is now right and proper that they should be supported not only by any subsidies which might have to be paid but also by penalising road transport? That was not one of the reasons referred to by the Minister this afternoon.

Does it follow from what the right hon. and learned Gentleman is saying that the change of front on this issue on the part of the Opposition is also due to the fact that the railways have since been nationalised?

5.15 p.m.

It may be, indeed. I find myself rather in agreement with the hon. Member. As I said during the Budget Debate we, and we alone, have a clean sheet on the matter because when the duty was moved by the then Chancellor of the Exchequer now the right hon. Gentleman the Leader of the Opposition, we condemned it for the very same reasons that were advanced by the members of the Labour Party at that time and on grounds similar to the ones now advanced by hon. Gentlemen above the Gangway.

We now come to the main point—it is really an interesting one—put to the Committee in support of this by the right hon. Gentleman, namely, that the Revenue will be deprived of between £70 million and £72 million this year and about £80 million in a full year by the reduction in Income Tax, and that that has to be found in some way. Let us consider that. The Income Tax upon lower incomes has been reduced. The purpose which the Chancellor of the Exchequer had in mind was the very excellent one which so many of us have pressed upon him during these years, that it would not only relieve those people but tend to encourage increased production and especially overtime. According to the Chancellor, the whole point was that we should do our very utmost to increase production and at the same time keep down the cost of living. Very well. This change has been made but it has not affected all lower income groups because a vast number of people do not come within the Income Tax scales at all.

The purpose was to relieve people of taxation and help to boost production. Let us see how we are doing it. First of all, it is said that it is necessary to find that money I do not think for one moment that it is possible to get a Budget of £4,000 million so nicely and conveniently balanced that if we reduce our taxation by about £72 million in the current year, we must of necessity find that amount somewhere else. No Chancellor of the Exchequer at any time has balanced his Budget to such a degree that there can be no fluctuation in the amount of either expenditure or revenue.

However, let us assume that that is so. What happens? It is not denied by the right hon. Gentleman nor apparently by anybody on the other side of the Committee that the effect of this duty is to increase costs. It will increase the cost of transport, production, distribution and travel; it will generally increase costs all round. There is nothing which more quickly affects the price of any article than an increase in the cost of transport. Its effect is far quicker than any change in the price of raw material or even in wages because it affects the raw materials as they come in to be manufactured and it affects the finished article as it is being delivered, and, what is more, it affects the costs of the working people in coming to the factory to produce the goods. It is, therefore, admitted that general costs go up and that this is a general charge upon the whole community.

Now comes the interesting point. The defence of the right hon. Gentleman—is this a new Socialist doctrine?—is that it is right to put an extra penalty on the community as a whole in order to relieve or benefit a smaller number. According to the right hon. Gentleman, the whole justification for the tax is this, "We have relieved a smaller number of a certain amount of tax and in order to give that relief we must spread the burden round upon everybody." Already it is going to increase the cost of fares in London, and apparently everywhere else too. That, apparently, is the justification which is put forward by the right hon. Gentleman for bringing forward this tax.

I thought there were many reasons against this tax when it was first put forward by the Chancellor of the Exchequer, but the reasons now advanced by the right hon. Gentleman are the most convincing I have yet heard against it and I hope, therefore, that the Committee will accept this Amendment.

I welcome the opportunity to intervene for a few minutes in this discussion on the Petrol Duty. I, too, listened with astonishment to the speech of the Minister of State for Economic Affairs defending the measures put forward in this respect. I have no doubt it has happened before, but I cannot remember any right hon. Gentleman from the Treasury Bench seeking to balance parts of the Budget in the way that the right hon. Gentleman did. I was astonished to hear him say that this duty is allocated to the relief of the Income Tax and that they are about the same figure. But, since the argument has been advanced, may I have an assurance from the Minister that when we discuss other taxes later, such as a Purchase Tax of 33⅓ per cent. on commercial vehicles, this argument will be abandoned and there will be no suggestion of increasing revenue?

The right hon. Gentleman admitted that he was hoping for a windfall of some £23½ million from the de-rationing of petrol—his revenue would go up in a way which he had not anticipated at the time of the Budget. But he said we could not have any of that because it had already been spent. When was it spent? He said that some of it has to go back in the agricultural rebate, but did not the right hon. Gentleman know at the time of the Budget he would have an agricultural rebate. Was he just trusting to luck that something might turn up at some time?

It seems to me to be a most incredible argument to advance from the Government Front Bench. It shows a degree of financial irresponsibility which is a little terrifying—[HON. MEMBERS: "Oh!"] Yes, I think it does show a degree of financial irresponsibility which is a little terrifying when one is considering matters running into millions of pounds. Was not the double taxation considered by the right hon. Gentleman? How does he expect to pay the losses? We ought to be given some explanation. I will leave the matter there, but I hope that at an early stage somebody from the Front Bench will explain how these things were to be dealt with unless the right hon. Gentleman knew at the time of the Budget that he intended to de-ration petrol. If so, it would have been much more honest to say so.

The next argument of the right hon. Gentleman was one of the most astonishing of all. He said it was true that the total amount of revenue from petrol was the same before this increased duty as it was before the war, but before the war, he said, it was 6½ per cent. of the revenue, now it is only 1½ per cent., therefore we must put it up. That kind of argument frightens me because it means that the more money the Government are spending, the more they must go on spending in order to put up all the taxes. It does not hold out much hope for the future. Then he said that private motorists were not worrying at all about this tax. I do not know what private motorists he meets. Maybe Ministers are not worried about this tax. They can travel about quite comfortably in the large cars we see in Palace Yard, but I can assure the right hon. Gentleman that there are a lot of people in this country with incomes a good deal lower than ministerial salaries who are worrying a great deal about this petrol tax.

Then, he said that the increases in the costs of these commercial vehicles were much overstated and that there was not much in it really. He produced a lot of figures, the result of which he asked us to believe was 3 per cent., 3½ per cent., something of that kind, on the costs. Then why is it that the Road Haulage Executive have put up their rates by a minimum of 7½ per cent.? If there was anything whatever in the argument of the right hon. Gentleman about the real effect on commercial costs, which I doubt, the Road Haulage Executive, on his own evidence, are guilty of perpetrating an immense racket on the public.

Will the right hon. Gentleman explain, or will somebody explain, how, if the figures now used by the Government are the right figures, increased charges of 7½ per cent. can possibly be justified? That is the absolute minimum; many are going up much more. Might I suggest to the right hon. Gentleman that he sends for the Minister of Transport before we finish our discussion on this Clause and ask him what he is up to? There seems to me to be a grave discrepancy between Members on the Front Bench.

That is all I propose to say at the moment about the speech of the right hon. Gentleman. I will refer to one or two other points later, but now I will come to the speech of the hon. Member for Coventry, East (Mr. Crossman) who raised a vital point, namely, the railway side of all this business. The hon. Gentleman said it was suggested that the Government had the railway position in mind, and he went on to say that he hoped they did have it in mind. Might I ask the Front Bench whether they did have this in mind? I will willingly give way for an answer. We are entitled to know.

I hope the right hon. Gentleman is not feeling indisposed? It is a simple question, as to whether or not, in imposing this tax, the Government had in mind the position which had arisen in the railway industry. Are we to assume that they did not bear in mind the railway position at all? This may surprise the right hon. Gentleman, but I should have thought it would have been irresponsible not to bear in mind the railway position. I should have thought it was a matter which certainly ought to have been considered.

I appreciate that hon. Gentlemen opposite have buried a good deal of Socialism at Dorking, but I did not know they had gone back to regarding the Budget as a mere profit and loss account, just a matter of "raising the wind" and getting a bit more money to make a concession here or there. I thought the modern idea of a Budget was to design taxes with a careful eye on the effect they would have on the industries concerned. What effect did they expect this to have upon the transport industry? I really think that the right hon. Gentleman might say what, in his view, is likely to be the effect.

What the right hon. Gentleman has done has been what every hon. Member on this side of the Committee has always prophesied he would have to do—he has had to force up the costs on one side of the transport industry to keep pace with the rising costs on the other. We have always said they would have to do it. After all, if we accept the attitude and policy of right hon. and hon. Gentlemen opposite, that we have a great integrated State monopoly, there are only two ways it can be done: one is to do what the hon. Member for Perry Barr (Mr. C. Poole) is always suggesting, which is to direct the traffic on to the particular form of transport that one wants; the other is to work it through the costs and the prices. This time, of course, the Government have worked it through the costs and prices. I agree that it will not shock the hon. Member for Coventry, East, and I agree with him that obviously they had it in mind

Would the hon. Member go further and agree that the only alternative, if he disapproves of this step, would be to subsidise the nationalised railways in much the same way as we subsidise the private enterprise farmers? [HON. MEMBERS: "Oh."] If we do not do that, what are we to do?

5.30 p.m.

The hon. Member had better move a little further away from his Front Bench before he makes any further remarks of that kind. I was only going thus far with the hon. Member: I agree with him that the Government had the railways in mind.

They did have. If right hon. and hon. Gentlemen on the Front Bench opposite had come along and said, quite openly and plainly, "We have got into a muddle with our nationalised railway system, we have grossly misunderstood and under-estimated the amount of revenue that we would get; already the increased charges which we have got, the increased fares which we put up in October, 1947, have tended rather to drive traffic away rather than to bring it to us, and now we have put up the charges by another 16⅔ per cent."; had they said that the effect of this would be to drive even more traffic away unless they did something quickly about the railways, I do not say that we would have agreed with right hon. and hon. Gentlemen opposite, but their argument would have been a little more intelligible than it is as now presented. But of course, they did not say that.

For my part, I wish that we had been wrong in our forecast as to what was happening. I think that very few hon. Members opposite realise the damaging blow that taxation of this kind is to our transport system. Within a brief span of 10 days, the Chancellor increased charges upon the transport industry amounting to £120 million a year, of which this one item represents, I think, £68 million, which is quite a substantial part. The road haulage part of the transport industry is carrying £225 million in taxation. Every housewife, as she goes shopping and has to pay the extra 1d. in her bus fare, knows the effect of this kind of taxation. I agree with my hon. Friend who said that no tax could have been better designed to force up prices and to increase export costs.

I do not know whether the Minister of State for Economic Affairs has read what Mr. Arthur Deakin has said about this sort of thing. I would commend him to read Mr. Deakin's evidence before the Transport Tribunal. Mr. Deakin made it perfectly plain that if there was one thing above everything else which would tend to encourage demands for wage increases, it was increases in transport charges. Is the right hon. and learned Gentleman utterly indifferent to that sort of consideration when he is framing his Budget and imposing taxation of this character?

It is said that other countries have petrol taxes and the rest at a high level. I am not interested particularly in what taxes other countries have. I am much more concerned in what taxation is imposed in this country. After all, other countries have other sorts of advantages over us. Some of them are bigger in area or have more people in them or more raw materials or things of that kind. We have one special and particular advantage in that we have a short haul from our great centres of production to our export seaports. That cheap transport from our coal mines and centres of production to our exporting ports is one great commercial advantage which we possess, and anything that is done by a Budget to take that advantage away from us is an extraordinarily retrograde step.

The right hon. and learned Gentleman said that we should not have very much increase in charges as a result of the additional duty. He said, of passenger buses, that the increase
"should not lead to many additional applications for increases in fares."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 75.]
Does the right hon. and learned Gentleman really believe that? I do not believe that he does. I should have thought it was obvious that if the price of petrol was put up, there would be demands from the bus companies to put up their fares.

What is happening? My hon. and gallant Friend the Member for Gosport and Fareham (Surgeon Lieut.-Commander Bennett), in an admirable maiden speech, gave a typical example of a bus company, which for years and in the face of immense difficulties has been able to hold down its fares, which now finds that with this increase it has to put up its fares for the first time. That is being repeated all over the country, and the right hon. and learned Gentleman knows it.

The Road Haulage Executive have put up their charges by 7½ per cent. But let me tell hon. Members that they have put them up by a good deal more than that figure. Seven and a half per cent. was the minimum; they held themselves free to put up the rates even more where, in their own words,
"the basic rates recently charged have been unduly low and uneconomic in relation to the general level."
That gives them a fairly wide scope. I had a case sent to me by the Road Haulage Executive where the unit manager, who has just been taken over and nationalised, was told to put up the whole lot by 20 per cent. Of course, they are going to put these charges up; indeed, they are bound to do so.

I hope that some right hon. Gentleman opposite will tell us what the Government think the effect will be. Do they agree that it is going to cost £10 or £20 more per car? What is to be the price of coal distribution? We are entitled to know these things. It is important that people should be told in advance rather than find out bit by bit afterwards. What is the average increased cost on the building of a house, for example? Heaven knows, it is high enough already. The right hon. and learned Gentleman should tell us.

I suggest that the arguments which the Chancellor advanced in favour of this duty have been very much weakened. He is on record in his Budget speech as having put forward four arguments. One was that the extra petrol would cost dollars. How many dollars will it, in fact, cost now? Let us have an account in some detail of this arrangement that has been come to, because I should have thought it was perfectly plain that the dollar argument has been at any rate very seriously weakened—[An HON. MEMBER: "Not in Coventry."]—no, not in Coventry, but very seriously weakened outside Coventry from the time when it was put forward in the Budget.

The right hon. and learned Gentleman said he believed it was necessary to do some rationing by price. Rationing by price—I am very glad to see right hon. and hon. Gentlemen opposite studying these matters—does not mean putting up the price to the maximum possible extent. It means charging a price which bears some relation to the amount which is available. My own belief is that if petrol was charged at 2s. 3d. or 2s. 6d. a gallon, there would at present be adequate supplies in the world.

The Government are getting £23½ million which they did not anticipate when the Budget was drawn up. We say that that amount should go back to the motorist as a right. To refuse that to the motorists would be a very gross injustice. But our case, of course, goes a great deal further. We believe that the whole of this tax is unnecessary, is vicious, and is calculated to do all the things which the Chancellor, if he was a wise one, would not at present be attempting to do.

I confess at once that this tax is not popular. It costs people money, it renders their pleasure more expensive, it adds to the cost of industry, and it must eventually in some degree add to the costs of everything. In that, however, it is like every other tax in the world that has ever been imposed at any time. Not only this duty is unpopular, but all taxes are unpopular. If a Chancellor of the Exchequer, in meeting the nation's needs year by year, were to wait until he could find a popular tax, we would have to do without a great many of the things we like to have and for which most of us are prepared to pay. The real test of the duty is not whether it is popular, but whether the object intended to be served by it is an object which the House and the nation would like to see achieved, and secondly, whether the means chosen to finance that desired object are suitable means and do less harm than any other available method of raising the equivalent amount of money.

It seems to me when I look at this duty from that standpoint, using that yardstick or criterion, that the exhibition the Committee have had this afternoon is really quite lamentable. The opposition to this duty seems to be a classical example, a laboratory specimen, of the kind of fractious and factious criticism which we were told at the beginning of this Parliament the Opposition were trying to avoid.

The Chancellor made it perfectly clear in his Budget speech that he wanted to reduce the burden of Income Tax in respect of the lower classes of Income Tax payers. I take it that that objective has the unanimous support of the Committee. Is there anybody—I know of nobody and certainly I have heard of no speaker today—who says that is something the Chancellor ought not to have wanted to do, or ought not to have done? Everyone is in support of that. The only difference between the two sides of the Committee is that we on this side are prepared to pay for it, whereas the Opposition, characteristically enough and in accordance with long-standing tradition, are in favour of all the social services, all the amenities, all the advantages for the hardest hit sections of the community that cost them nothing.

They are prepared and very anxious to support all these advantages because it is not a very good way of being elected to Parliament if you oppose them; but when it comes to raising the money without which it is impossible to do that, they always find it is the wrong time, the wrong method and that everything is wrong about it but the objective. In exactly the same way they have always been in favour of every advance in the social services, but always at some other time and somewhere else. If they are in favour of these Income Tax reliefs, how else are they to be paid for?

I have listened with great care, as I always do, to the right hon. and learned Member for Montgomery (Mr. C. Davies), the Leader of the Liberal Party. I found his speech most disappointing. [Interruption.] I really did. I rather gathered from it that the Liberal Party were going to oppose this duty and support the Conservative Party in opposing it. I know there is no reason why, if a man makes a mistake once, he must go on repeating it. I had hoped the right hon. and learned Gentleman had thought better of it by now. He is in favour of Income Tax reliefs. He did not tell us how they were to be paid for otherwise than by this method. He made some general statement that in a Budget which amounts to so many millions, or thousands of millions, there ought to be some other way of saving money on something else in order to enable us to get these Income Tax reliefs without paying for them. But that is not good enough. It is all right for the official Opposition, but one expected better things from the right hon. and learned Gentleman.

May I ask the hon. Member whether it would have been in order for the right hon. and learned Member for Montgomery to discuss other methods of raising revenue when the Amendment before the Committee deals with the Petrol Duty, to which I suggest the hon. Member for Nelson and Colne (Mr. S. Silverman) should address himself?

I confess I had not thought of that one. It seems that the only reason which has prevented either of the Oppositions from telling us what were the actual specific savings that could have been effected elsewhere in order to enable us to have the Income Tax reliefs without raising this duty was that they were afraid that the Chair would have stopped them telling us. I am not sure whether that is so or not. I heard Major Milner say at the beginning of the discussion that on this Amendment the Debate could range over a wide field, bringing in everything, provided it was not repeated on the Motion that the Clause stand part. But supposing the right hon. Member for Aldershot (Mr. Lyttelton) were right and that it was out of order on this occasion to specify what were the savings out of which these Income Tax reliefs could be found, that was not out of order in the Budget Debate. If they know and will not tell us now because they are afraid the Chair might stop them letting us know, they could have done it then.

5.45 p.m.

In any case, I was not dealing with the right hon. Member but with the right hon. and learned Gentleman, from whom, as I said, I expected better things. I thought that at least he would be able to tell us where these savings could be effected and how it ought to be done. The Opposition have not done that, they have shirked it, they have dodged it and avoided it and go on shirking, dodging and avoiding it. Suppose it were even true that the Government might have found the means by saving money elsewhere and had failed to do so, on that basis does the right hon. and learned Gentleman still think that it would be right to withhold these Income Tax reliefs, or does he think we ought to go on with the Income Tax reliefs all the same, finding the money for it, if not in the way he would have preferred, then in the way we are proposing by this duty?

The main point I was making was that it rather surprised me that a relief was given to a smaller class—those who up till now were in a position to pay Income Tax and were now to get relief by an extra charge made on those who never were in the position to pay Income Tax—and that the extra charge is spread all over the country in order to give a privilege to a few. Does the hon. Member think that is right and good Socialism?

I should have thought it was very good Liberalism, and as such I support it. When has there ever been anything wrong in raising money from the whole community in order to relieve the hardest hit. What is wrong with that? The right hon. and learned Gentleman says that because they never paid Income Tax their income was not high enough, but he is forgetting that it was not more than two or three years ago that that was not true. [Laughter.] I am sure hon. Members of the Committee want to address themselves seriously to the argument. It is true, is it not, that several millions of people have been relieved of the liability to pay Income Tax by the successive Budgets of this Government in the last three or four years? Surely that is so. The Opposition always supported us in that. They would have liked us to relieve other people first, but they never went to the length of opposing our Income Tax reliefs.

Is the hon. Member in order on this Amendment in discussing Income Tax and the incidence of Income Tax on the population?

This Amendment deals with a very narrow point.

I was a little astonished that the right hon. Gentleman should have raised that point of order, because he devoted his whole speech to exactly the same point.

Oh, yes, certainly, and every speaker so far has related the Petrol Duty to the Income Tax reliefs. We have been invited from the beginning of this Debate right up to the last speech to relate the Income Tax reliefs to the Petrol Duty. That is the very argument with which I am dealing; that is the very argument with which the right hon. and learned Gentleman invited me to deal.

I say again to him that if a need has to be relieved there is nothing wrong in raising the means for relieving it from the whole community provided that the method of doing that is not inequitable, provided that the method of doing it does not do greater harm than some other method would have done. Even the assumption of the right hon. and learned Gentleman was that the money might have been saved elsewhere, an assumption which I do not make and which I refuse to make until someone points out something on which he would take the responsibility of saving if he thinks the money might have been saved otherwise. I still say to the right hon. and learned Gentleman that, the Government not having raised the money otherwise, he is faced today with the choice of allowing the Petrol Duty proposal to go through, as the Government propose, or of withdrawing the Income Tax reliefs which he deems to be necessary and would like to support.

The hon. Member has made play with the Income Tax relief given to a few million people. We are very glad that has been done, but is it not a fact that those same people did not pay Income Tax in 1939, and yet we did not have to raise the Petrol Duty then?

Most of the people affected had no incomes before the war, and if the hon. Gentleman had his way in this matter he would bring about again that state of affairs to which he referred. The Opposition are in a dilemma. They must either vote for the Petrol Duty increase as proposed by the Government or they must face the position that they will not permit the financing of the Income Tax reliefs which they have been prominent in demanding. That is their dilemma.

The second part of the criterion which I ask them to apply is whether the other effects were inequitable or wrong. The hon. Member for Monmouth (Mr. P. Thorneycroft) made great play with the effect of this proposal upon the railways. I did not gather from him whether he thinks that the Government have done this with the railways in mind or whether he thinks they ought to have had the railways in mind. I should like him to say, if he will, whether he thinks there would have been anything wrong with the proposal even if the Government had taken this step with some notion of equalising the burden of costs between road and rail. Would it be wrong, would it be a monstrous thing to do?

I can understand the hon. Member hesitating because it was the Leader of the Opposition who first advanced the principle that a Petrol Duty ought to be imposed in order to protect the railways from the roads. Perhaps one might read the quotation again. It was quoted in the Budget Debate by the Minister of State for Economic Affairs, but I think it will bear repetition. The Leader of the Opposition, who was then Chancellor of the Exchequer, said:
"We have only a limited fund of capital to employ every year in every direction, and it would not be in the public interest—and this is one of the foundations of my argument—to spend in the next few years several hundreds of millions of additional money upon our roads, apart from the present grants upon the roads, if the result were to render artificially and prematurely obsolete the splendid British Railway systems which represent a thousand million pounds of national capital, and afford employment to nearly 700,000 men."—[OFFICIAL REPORT, 24th April, 1928; Vol. 216, c. 856.]
Supposing the Government had had some kind of consideration of that sort in their mind—I do not know whether they had or not—the only difference between the situation when the Leader of the Opposition enunciated that principle and the situation today, is that today the railways really are national capital whereas in those days they were not. Hon. Gentlemen opposite are in the position of wishing to impose a Petrol Duty in order the relieve the burdens of the privately-owned railways but think it a monstrous thing that it should be done to alleviate the burdens of the nationally owned railways, which seems to me to be a rather difficult position to defend before any fair minded tribunal.

If some extra means had to be found of raising extra revenue in order to finance the Income Tax reliefs which have the unanimous support of the Committee, it seems to me that no place could have been found where the tax could be more equitably raised, imposing so little burden upon the community as a whole, other than this. I hope that the Committee will accept the Government's proposal.

When I listened to the Chancellor of the Exchequer's Budget speech and to the remarks which simply, logically and forcibly he adduced in favour of the increased Petrol Duty, I was left quite clearly with the conclusion that the considerations which had led him to propose this increase were that petrol was costing us more dollars than we could afford, that demand was outrunning supply, that the increased tax would produce needed economies, and lastly, that the duty had not been increased since before the war. Three of those four arguments have for the most part been blown away by the Government's own action in the complete de-rationing of petrol.

To my astonishment—and having heard some few speeches in this House, to be astonished at the speech of the Minister of State is perhaps not exceptional comment or unusual criticism—disregarding those arguments put forward by the Chancellor, the Minister today contrived to suggest that the deliberate purpose of the tax was to make possible the Income Tax relaxation which has been made. He seemed to suggest indeed that they had calculated the amount of Income Tax concession, that they had searched round for a tax which would yield approximately the same sum, and relating the one to the other had decided that in the interests of a section of Income Tax payers this increased duty should be imposed.

We have had a further suggestion today from the Member for Coventry, East (Mr. Crossman) that the Chancellor, knowing that de-rationing was to come, and determining by some superior omniscient planning to calculate the sum of money which would effect the deterrent which it was the Chancellor's wish to effect, arrived, by a process of calculation, and no doubt of democratic planning, a the sum of 9d. as the amount to add in the public interest to reduce the consumption of petrol. Not only does that presuppose that the Chancellor knew at the time of his Budget speech of the intention to de-ration petrol; it also presupposes a wisdom, a knowledge and a capacity to calculate which the hon. Member for Coventry, East, showed that he does not himself possess by his own calculation of the cost of motoring between Oxford and London.

6.0 p.m.

And then the second argument. It is a deliberate and very obvious electoral trap devised to ensure that whenever in any Budget there is to be a decrease of taxation accompanied by an increase of taxation, one is, so far as possible, to be related to the other; so that those who oppose increases of taxation can be held, when it is convenient, to be opposing this particular form of remission of taxation. And the underlying argument of it all is, of course, that the present high level of taxation must remain, that it is sinful to suggest that taxation should be reduced by economies. The whole thing seems to me to be a clumsy manoeuvre to manipulate the critics of increased taxation into a position of criticising any particular remission which may be alleged to be due to it.

I confess that, perhaps in my innocence, as a new Member of this House, I had assumed that the arguments which were designed and contained in the Budget speech were genuine arguments to a particular end. My innocence is fast going. Indeed, it seems that the effect of petrol on logic is to inflame it beyond all reasonable use. I remember that the Minister of Health dealt with this subject of petrol. I remember that when the Opposition argued that the cut in the housing programme should be restored, the Minister of Health replied by challenging them to say where other cuts should be made; and when in fact the Chancellor increased the housing programme to its former level, and the right hon. Gentleman was asked where in fact he had made the necessary cuts, he told the House they came in part from increased production.

Then, with a typical wag of the finger at the Opposition he said that we had to choose between importing timber and importing petrol for this pleasure-loving Opposition. He implied, with that air of perspiring virtue in which he finished the speech, that he, the virtuous, had chosen to import timber—though heaven knows where that is—rather than petrol. Within a few weeks the right hon. and learned Gentleman his colleague informed the House that petrol rationing in its entirety was to go. And so I became accustomed to that form of tortuous logic by that one example; but I think even that has been excelled today by the Minister of State.

I wish to refer briefly to one or two points which have not so far been covered. I will not go over the ground, obvious to everyone, that the one justification—if justification there is—that remains for this tax is that it is a money raiser. I will not repeat the argument, or the expression of astonishment, that at a time when this country needs above all lower costs, at a time when this country is above all bothered by a rising cost of living, there should have been selected for this particular piece of money raising an instrument which increases the cost of production and increases the cost of living to a much greater extent than right hon. Gentlemen on the other side of the Committee are prepared to admit.

I would refer to an aspect of this matter from the angle of the motor car industry, representing as I do a motor car town. I hope indeed that the residents of Coventry will regard the speech of the hon. Member for Coventry, East, as fairly representing the angle of a motor car town—but I very much doubt it. As I see it it is a piece of gross ingratitude to an industry which, by its zeal and success in the export field, has perhaps done more for this country than any other exporting industry. I agree with one thing that the hon. Member for Coventry. East, said, and that is that the amount of increased cost involved in the actual driving of motor cars from the factory to the ports is relatively small; in the case of my own town, practically every car is in fact driven to the port. There is an appreciable, if small, element of cost.

But what I have in mind is that at a time when the home field is receiving relatively few cars, it cannot be pretended that the increase in petrol cost can have a general or a widespread influence on the industry. Incidentally the argument of the Minister of State really amounts to the fact that because the Budget is four times what it was in 1938, then every other tax shall be four times what it was. If that sort of argument is in his mind, and if it is followed, I am fearful of the future.

When the motor car industry returns to satisfy the home market, it will no doubt seek to do what it rightly did before the war, and make the motor car available to the largest possible section of the community. It is a pity that the process has begun—for that is what it seems to be—of so raising the cost of motoring as to discourage members of the community who find it not too easy to buy small motor cars from so doing, because of the factor of running costs. I think in general that it is a poor return to the motor industry for all they have done for this country that that should be done.

No reference has been made to the fact that this increased duty is in some cases a reduction of remuneration. We hear a great deal about the freezing of remuneration, but in this case for some people there is an absolute reduction, which is something that would fill with horror hon. Members on the other side of the Committee if it came to their particular field or group. I give two examples of this. Members of the local government service who are on mileage allowances find their position is that for the first 3,600 miles they run on the old rates and they are being permitted increases only above that level. It is a relatively small amount but to some people it is a relatively important problem.

Again, there is the case of the general practitioners. A few weeks ago, before the Budget speech, the Minister of Health announced the sum to be available for their remuneration for the year beginning 1st April, 1950. The remuneration of general practitioners is a gross amount; 18s. is paid into a pool to cover all then-practice expenses as well as their remuneration. Those practice expenses were calculated on the old rate of motoring costs and the result of this is that general practitioners have a reduction of remuneration of between £15 and £30 a year. The part about it which I think no one would wish to happen is that this reduction of remuneration falls most heavily upon the rural practitioners who have the greatest distance to travel.

It is most unfortunate that in this and in other groups there should be not merely an increase in costs which can be passed on, but a reduction of remuneration by a way not easily understood. I say "not easily understood" because I notice that when the Parliamentary Secretary answered a Question put down by an hon. Member on this side of the Committee, he said in effect that the Government were not prepared to make increases or additions to remuneration. Nothing of the sort is involved.

Therefore, despite what we have heard about the relative quietness of the private motorists—I imagine that they think it more worth while to write to hon. Members on this side of the Committee than to hon. Gentlemen opposite about this—despite what we have heard about the varying arguments and the magnificent calculations that went to arrive at the sum of 9d., it still remains what it was at the beginning, a tax on the industrial and commercial costs of this country. It is a tax which will result in an increase in the cost of living. I hope that the country will recognise for what it is worth this thin device of saying that those who dare to oppose this particular form of increased taxation are aiming their criticism at a particular form of remission. That is a cheap and shabby trick which I hope the people will clearly recognise.

I hope it will not be thought in bad taste if on this occasion I give my entire support, for what it is worth, to the right hon. Gentlemen on the Government Front Bench. I do not want to follow the speech of the hon. Member for Luton (Dr. Hill) in detail. I cannot compete with his level of oratory, for one thing, and also the detail of some of his arguments escaped me. But I should like to take up his expression of surprise at something which my right hon. Friend the Minister of Health said some weeks ago. The Minister of Health is fully capable of looking after himself, but it might be said that there was no contradiction in saying four weeks ago, "If you want more timber, you cannot have more petrol as well" and not saying that now. In the interval we have had this new circumstance of the new offer by the American oil companies to supply a greater quantity of petrol.

It was on 22nd May that the Minister of Health said:

"In fact, in choosing between petrol and timber we are choosing houses for the people before luxury products."—[OFFICIAL REPORT, 22nd May, 1950; Vol. 475, c. 1787.]
I assume that he was better informed than hon. Members behind him of the progress and prospects of successful negotiation.

I do not know why I should constantly be in the position of defending someone who so little needs defence from a new back bencher, but I must point out that the decision to deration petrol was taken after that, on 26th May. It was taken on the basis of an offer from American companies which had only very recently been received and accepted.

The point about which I want to speak is one which arose during the speech of the hon. Member for Monmouth (Mr. P. Thorneycroft) when, right at the end, he made what I think is the most significant comment from hon. Gentlemen opposite during this Debate. We have constantly asked what they thought was the proper price for petrol. The hon. Member for Monmouth said that he thought 2s. 3d. was a perfectly reasonable price for petrol at which we would be able to afford all the supplies we needed. This is, I think, a very striking and rather revolutionary statement which can bear one of two interpretations. Either the hon. Gentleman thinks that at 2s. 3d. the consumption of petrol would be greatly increased over what it is at 3s. 0¾d.—he thinks that at 2s. 3d. there would be much greater consumption and, therefore, far higher imports and higher dollar expenditure, but he does not mind about the extra dollars—or he thinks that consumption at 2s. 3d. would not be significantly more than what it is at 3s. 0¾d.

If he accepts the second alternative, then the whole of his argument that we are using this tax to drive a great volume of traffic off the roads on to the railways falls completely to the ground. It would be rather interesting to know, either from him or from the right hon. Gentleman who will speak later from the Opposition Front Bench, which of those alternatives the party opposite accept. In fact, it seems perfectly clear that at the moment the free market price of petrol would certainly be very much higher than 2s. 3d. My opinion is that it would be considerably higher than 3s. It is higher than 3s. in every other European country.

6.15 p.m.

The fact that we have had to ration petrol when it was 2s. 3d. and that even at 3s. we cannot allow free imports, suggests that it is still below the market price. There is no doubt that if we left it to the free play of market forces, the price would be considerably higher. At any rate, it would be much higher than 2s. 3d. If 2s. 3d. was an artificially low price, we want a clear statement from the Opposition of their policy about prices. The right hon. Gentleman the Leader of the Opposition, in his Budget speech, said that he believed in the higgling of the market. The phrase, "the higgling of the market" has a very pleasantly nostalgic ring—shades of the great Victorian economists, and so on. But if we were to have prices determined by the higgling of the market, what would be the price of petrol?

Clearly, it would mean a much higher price than 2s. 3d. On this side of the Committee we do not believe that all prices should be settled by the higgling of the market. On the contrary, we believe that for food, housing and one or two other necessities it is the job of the Government to keep prices artificially below what the higgling of the market would suggest. Some Members of the Opposition are uneasy about doing that even with food. They do not like food subsidies. They say that there ought to be a market price even for food, but the Opposition, if they are unhappy even about food, presumably think that petrol falls into the genera] category of goods whose prices should be determined in a free market. It would be interesting—and it is important to get the issues clear—if we could have a statement from them whether they believe that the price of petrol should be determined by free market forces and if not, why not. And if they do believe in the market price, why do they object to a tax which brings us much nearer the market price?

I should like to discuss the relationship between the higher price of petrol and de-rationing. The hon. Member for Luton suggested that now that we had de-rationing, all the case for a higher price for petrol falls to the ground. I should not have thought that that was so. I should have thought it likely that the higher price of petrol was a necessary condition of de-rationing. It is clear that this increase in the price of petrol will choke off a considerable amount of consumption and it is clear that, although we have this new and extremely important offer from the American oil companies, we must still economise in the use of petrol. In other words, if the extra demand due to de-rationing were greatly to exceed the extra petrol which we have been offered by the American companies, then once again our dollar import bill would go up in a manner we cannot afford. I should have thought that it was clear that the higher price of petrol which we shall have as a result of this tax will choke off a considerable amount of demand which would otherwise have been there and that what would have been a very dangerous and hazardous gamble—to de-ration at the old price—becomes now a perfectly reasonable risk at the new price.

I should also like to comment on the question of the effect of this tax on the prices of our exports. There has been a great deal of discussion about that in this Debate. The new tax has been called a tax on exports, and so on. There has been a lot of argument from both sides of the Committee as to precisely what effect on our general level of export costs this tax will have. I do not think that the effect will be much The hon. Member for Monmouth spoke of the Road Haulage Executive having raised their charges generally by 7½ per cent., which he thought was a very high rate of increase indeed. That may be so in the case of the Transport Commission, but if it is generalised over the great bulk of our ordinary export commodities, surely the rise in price cannot be at all significant. Some one suggested that it would be an average of one per cent. It may be two per cent. I do not know.

My point is that if the threat of inflation is still a serious danger to our exports—personally I do not believe it is a very great danger—I do not think that it arises mainly from the possibility of a slight increase in our costs of this sort. I think that the danger of inflation comes mainly in a different form. If we have inflation, we have a great' pull on the home market, with too much money chasing too few goods. It is then much too easy to sell in the home market, and there is no pressure on the manufacturer to go into the export market, and particularly the dollar market. I am certain that that is a much more serious threat from inflation than any possibility of an increase of one or two per cent. in costs.

Will the hon. Gentleman allow me to ask him a question? Would he regard an increase of one or two per cent. in the prices of our export goods as insignificant?

I would regard it certainly as insignificant, after devaluation. The position regarding our exports as a whole after devaluation is that our prices are perfectly competitive in a great many lines. [Interruption.] Certainly, in a wide range of goods. If we take whisky, for example—if we had, an increase in price of 30 per cent., we should still sell as much as before. By and large, it is quite clear that our exports as a whole are competitive in price, and we are now selling in competition with the Americans in other markets, such as Canada, Brazil, etc. If our exports are not competitive in price, will someone explain the behaviour of the volume of our exports in the last few months? Over the last few months, there has been a greater inclination to export goods through the very fact that, owing to the state of the home market, there was an incentive to manufacturers to push their goods into the export trade.

Now, the petrol tax is a particularly good tax from this disinflationary point of view, because not only does it cut down the demand for petrol, but it also cuts down other demands on the home market by its secondary effects. If people spend less money on petrol for their cars, they will spend less money in hotels and holiday accommodation and many other things. [Interruption.] It is perfectly true, and it should be obvious that an important result of the duty is that if people drive about in their cars less than before they will spend less money in hotels and use existing holiday facilities less frequently. There will be important secondary effects entirely in the right direction. It will mean that resources in use in the home market will then become available for the export market generally.

If I may end up by a comment on the road and rail aspect of the matter, I would say that I have not the faintest idea what was in the mind of the Chancellor of the Exchequer. [HON. MEMBERS: "Nor have we."] I am not, unfortunately, on; of the confidential advisers of my right hon. and learned Friend the Chancellor; indeed, we should have had a much better Budget if I had been; but we have to face up to these things. What was in the mind of the Chancellor on this road and rail question I do not know, but I can see nothing immoral in taking account of the effect of the increased duty on petrol on the railways.

The hon. Member for Monmouth put forward an extremely eloquent argument, in which he said that it is nonsense to take a tax in isolation, and that it was the duty of a Government to consider the effect of that particular tax on all other industries and its possible effect on the country as a whole. I agree with the hon. Gentleman; it was a perfectly reasonable and sensible thing to do. I do not think that it is any more unreasonable now than it was 20 years ago when the then Chancellor of the Exchequer took the line which some of us are now taking, and, if it is true that some of my right hon. Friends on the Government Front Bench then criticised him for doing that, it only shows how far this party has progressed in the last 20 years.

I am entirely convinced by the argument, and I see nothing whatsoever that is immoral, undesirable or sinister in welcoming the effect of the increased Petrol Duty on the railway system of the country; after all, we have a great volume of the country's capital now invested in the railway industry, and it is such that no Government, whether the railways were public or privately owned, could be indifferent about it, and it is not at all immoral to take that fact into account. I therefore support the increased Petrol Duty because it will do something to bring the price of petrol nearer to its real market price, it will encourage economy in something which still has an important dollar content, it will help to even out the balance between road and rail, and my only complaint against it is that it was not imposed two years ago instead of today.

I should like to follow, if only for a few moments, the hon. Member for Gloucestershire, South (Mr. Crosland), because I cannot imagine that, following upon the remarks he made, he will receive any sudden request from commercial undertakings to favour them with his help and advice in the running of their businesses. I would only ask the hon. Gentleman to attempt to carry out this selling of our export goods in the easy way in which he thinks it can be done. I understand that he has experience in selling whisky overseas, but I suggest to him that there are a great many other things besides whisky in which we have to increase our export sales. I suggest to him that, if he had some practical experience in this direction, he would realise that much of what he has said is nothing but sheer nonsense.

I cannot compete with the hon. Gentleman in that particular matter, but I did say that the volume of our exports in the last few months suggested that our prices were really competitive, and I should like to know the answer to that.

I am quite happy to take on any hon. Member for a full discussion of the whole question of selling our goods overseas, but any suggestion of a tax which would make the task of our manufacturers and exporters more difficult is something that we should absolutely deplore.

Would the hon. Gentleman, with his commercial knowledge, be good enough to demonstrate to the House what the effect of this increase in the cost of petrol will be on his own export trade?

I am not going to make an individual point. I am going to demonstrate the effect of any increased taxation upon industry. I said the same thing during the Debate on the last Finance Bill. Any increase of taxation has to be borne by our home industry, and means, of course, a material change in costs and in the prices which we have to charge for our goods in the export market. The transport costs of any business undertaking have always been a small percentage of the total costs of the business, but in the last four or five years, under Socialism, transport costs have gone up by over 60 per cent. I say quite definitely that transport costs in manufacturing industry have risen from a very small percentage a few years ago to one of the highest single costs in manufacturing business today. [An HON. MEMBER: "Nonsense."] It is not nonsense, it is the fact. In the last few months, these transport costs have risen very drastically, and I appeal to the Government to realise that these additional burdens which they are placing upon industry throughout the country are acting as a wicked brake upon industry today.

It is a very serious matter, and hon. Members opposite should not think that a commercial country like ours can go forward and prosper with such a brake put upon it. The effect on the cost of living and on export prices will be inevitable. On that point, I mention straight away the increase in the price of paint. It has gone up by 9d. a gallon. Hon. Members opposite may desire to see this brake placed upon industry, but I know of car dealers in my own constituency who have had many cancellations of orders, and one dealer alone, as an immediate result of this extra burden, received cancellations to the value of £3,000. Therefore, I cannot believe that it is to the benefit of the country to place such additional burdens upon industry.

6.30 p.m.

With regard to the cost of living, I wish to make this one specific point. I do not know whether hon. Members opposite fully realise the effect of these additional burdens upon the workers. I believe they think that workers do not use cars very much, or do not have any need of petrol. I have here a letter from a company in my own constituency in which there appears the following paragraph:
"We hear murmurings amongst our employees as to the increase in the cost of living. Discontent is spreading as they realise that any increase at source must inevitably fall upon them and reduce the spending value of their wages. They feel that the effect is clearly in fundamental conflict with the Government's declared policy of (1) increased production, (2) the avoidance of an increase in the cost of living, and (3) the continued expansion of the national export efforts."
That is typical of the sort of letters which every hon. Member, at any rate on this side of the Committee, receives from industry generally.

Did that letter come from one of the supporters of the hon. Member's party or from one of our supporters?

What an extraordinary remark for an hon. Member to make. Is the hon. Gentleman suggesting that private enterprise is not supporting the whole of this country, and that it segregates itself as either a supporter of the Tories or the Socialists? Certainly, it does not.

I say quite distinctly that in the last few years the Government have had an extraordinary outlook concerning the support given to private enterprise in this country. To suggest that placing these extra burdens upon industry will benefit the country in the years to come is sheer nonsense. This is a wicked tax; it is a burden upon industry, and it is a burden upon the people who wish to spend a little time in relaxation. Irrespective of what the hon. Member for Gloucestershire, South, said, I say that indirectly, and eventually directly, this increase is going to prove a definite detriment to our export trade which all of us are trying to secure, and which we all know we must secure if this country is to survive.

I am not an economist, and my knowledge of the ways of finance is very slight. Therefore, it is with a good deal of diffidence that I enter this Debate. However, there are certain comments I wish to make upon the speeches delivered by hon. Members opposite. First, I draw attention to a remark made by the hon. Member for Monmouth (Mr. P. Thorneycroft), who, I regret, is not now in his place, about the irresponsibility of the Government Front Bench regarding financial matters. As I continued to listen to the speech of the hon. Member for Monmouth, I thought the denunciation of irresponsibility came very uncomfortably from his lips, because when one looks back over the last five years one realises that the most marked feature has been the extraordinary success of the financial planning which has taken place during that time. [Laughter.] When hon. Members opposite laugh at a statement like that, and when they remember how, from time to time during the last five years, they have prophesied woe and disaster for this country—

No, I am not going to give way—and when they have done so much to undermine the financial position of this country—

On a point of order. Is the hon. Member in order, Sir Charles, in discussing financial matters over such a wide field?

The hon. Gentleman ought really to restrict his remarks to the Amendment.

No, I do not think I will. I am prepared to give way when the right hon. Gentleman has given me an opportunity of making my point. My point is that right hon. and hon. Members opposite who now call the financial policy of this Government irresponsible have, during the last five years, been undermining the financial position of this country, and that it is time they recognised the very great service which the Government Front Bench have rendered on that matter.

I thank the hon. Gentleman for giving way at long last. Does he or does he not think it a financial disaster that we have had to devalue the pound.

I am placed in some difficulty now, Sir Charles, because the right hon. Gentleman who did not wish me to take a broad line in my speech is now inviting me to do so. I say to him straight away that the result of the devaluation of the pound has been proved to be justified by the success of British exports in the world, and should be defended by hon. Members.

My other point is in relation to the speech of the right hon. and learned Member for Montgomery (Mr. C. Davies) and particularly in relation to that of the hon. Member for Luton (Dr. Hill). If I may say so—and I say it quite humbly—I have been impressed by the speeches made by the hon. Member for Luton since he has been a Member of the House. They have rather surprised me after the radio broadcast which he made during the election, but, in my view he has today gone back and down to the level of that radio speech. He made the point that when we say now that the Petrol Duty balances the reduction in Income Tax, it is a new argument. Those of us who listened to the speech of the Chancellor of the Exchequer remember that, as he came to his conclusion, the greatest emphasis was placed upon the fact that the taxation of petrol was balanced by reduced Income Tax on the lower levels of Income Tax payers. No one who heard that speech could have doubted that that was in the Chancellor's mind at that time.

Those are the preliminary remarks I wanted to make. I shall have no hesitation at all in going into the Lobby to support this Petrol Duty. There are two aspects of this duty to which I should like to draw the attention of the Front Bench, and about neither of them have we heard anything in the Debate so far.

The first is the fact that this is a tax not so much on petrol used by motor cars as upon the industries themselves and their processes, and many of these industries are engaged in the export trade. In part of my constituency, Slough, we have a large number of light industries. Those light industries are heavily engaged in the export trade. This duty upon petroleum spirits and hydrocarbon oils-will have quite a serious effect upon those-industries. I have already approached, the Chancellor of the Exchequer on this matter. I urge that, even at this late-hour, something may be done about it.

The other point which I urge even more emphatically refers to a section of the community upon whom this tax will fall heavily. That section is the war-disabled men and women who are a pathetic and; yet a noble sight in our streets driving-their petrol-driven chairs.

Is it in order for the hon. Member to refer to this matter? Is it not the case that there is an Amendment on the paper dealing with this specific point? Would it be in order to discuss it now?

No, it would not be in order to discuss it now. I was going to stop the hon. Member. An Amendment will be called dealing with that point.

I will leave what I was. going to say upon that point until then. I hope very strongly indeed that the Chancellor of the Exchequer will be able to consider this matter.

I should like to support this Amendment because I think this tax does harm in a variety of ways. The way in which the increased cost of petrol affects the general practitioner has been mentioned from these benches. There is also the question of the commercial traveller who has to run a car out of his salary. Will not 9d. a gallon on his weekly running costs prove a very important financial loss to that man? There are thousands of such people up and down the country.

I want to mention two points. The Minister for Economic Affairs alarmed me by one of the most amazing speeches. I have heard in this House in 20 years. It raised the argument that no relief in taxation could be given unless some other form of tax was imposed. If that is the policy of the Chancellor of the Exchequer then I think he is a most dangerous man to have in charge of our finances. Surely, an entirely different proposition should be borne in mind in the preparation of the Budget. The Chancellor, in reviewing what reduction in taxes was possible, should have looked first at the expenditure of the Government. I am certain he could have found relief in taxation instead of putting an additional duty on petrol.

6.45 p.m.

It is just humbug to say this was done to give relief in taxation to a number of people. The true answer is that the Chancellor looked at his finances and he saw that every possible tax was put on this country, with the exception of a tax on fresh air. He cannot harness fresh air; that is why it is not taxed at so much a breath to the people of this country. So he said, "Right, I will go into petrol"—a most dangerous item so far as our export markets are concerned.

I am not going to suggest that in the great City of Sheffield this tax will put us out of the export market competitively; but this is only one of the variety of burdens which this Government has been responsible for adding to the cost of production. The costs of coal, gas, electricity, and so on, have been increased, and now the cost of petrol. Government spokesmen ask manufacturers to keep down the cost of production. The serious thing is the cumulative effect which the actions of this Government have on the cost of production. If hon. Members think that transport in a great steel works is of small moment, I can tell them of dozens of specially built wagons and trailers going in and out of steel works every day. The cost of transport is a very important item in the cost of production. Whether the relief is large or small it is the duty of the Government to relieve the cost of production, instead of adding to that cost.

There is great anxiety among all sections of the community today that the cost of living is more than the housewife can bear. Here is another addition to that cost of living, in transport charges, bus fares and so on, and there is an increase in the cost of distributing milk. Does not the Chancellor realise that this was a very dangerous duty to impose? It will inflict hardship on masses of our people. On behalf of the great industries in Sheffield I ask him to reconsider this imposition on petrol. It will affect the cost of production, if not to a large measure then to some measure; and it is the duty of the Government, as I have already said, to help reduce the cost of production.

It is just humbug to freeze wages and increase the cost of living. No wonder the trade unions are beginning to get unsettled. The cost of living is getting beyond the general public. It is no use the Government telling people they are going to bring it down, when here is a case in which they are increasing it. This is a very bad tax. The Government ought to have found the relief they have given in taxation by keeping down expenditure; and they could have found that relief a thousandfold. Taxes in this country will have to be looked at, and this Government will have to reduce its expenditure. There is no question that we are living beyond our income, and the sooner we realise that the better.

I must say that the scale of reductions in expenditure which the hon. Member for Sheffield, Hallam (Mr. Jennings) seems to have in mind must be very large indeed if he thinks we can find the amount of this Petrol Duty a thousand times over by cuts in our public expenditure.

Is the hon. Gentleman serious about this—£75 million multiplied a thousand times? I do not want to pursue that matter, because I do not think the hon. Member was being particularly serious about it.

I should like to say a few words about a subject which has already been discussed by my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) and the hon. Members for Croydon, North (Mr. Frederic Harris) and the Cities of London and Westminster (Sir H. Webbe), and that is the extent to which our export prices could bear a small increase of the order of perhaps 1 per cent. or 2 per cent. without their being made seriously uncompetitive. I should like to mention some figures which were given to the House a few weeks ago by the right hon. Member for Warwick and Leamington (Mr. Eden) during the Second Reading of the Finance Bill. He was saying that he was seriously worried about the fact that our prices had increased more than American prices. He said that our wholesale prices were 226, the index being 100 in 1937, whereas American wholesale prices were only 177.

Do the Committee realise what a striking proof this was of the fact that our prices must now be very competitive indeed? As two devaluations have taken place since 1937, one at the beginning of the war and one recently, the fact that our prices are now only 226 compared with the Americans' 177 means that we are far more competitive vis-à-vis the Americans today than we were in 1937. These figures, which the right hon. Member for Warwick and Leamington used as those most favourable to his case were, if interpreted properly, a most striking example of the strength of the case of hon. Members on this side of the Committee who say we are to-day perfectly competitive.

Do we understand that the exhortations about reducing the costs of our exports can be safely ignored?

Nobody could regard anything which puts up the cost of exports as other than a serious matter. That does not necessarily mean that we should have to accept the point of view put forward in this Debate that something which puts up export costs by perhaps 1 per cent. or 2 per cent., if it serves other important and worthwhile purposes, is a disastrous thing in itself. That is the proposition which I was putting forward.

Hon. Members opposite seem to have been suffering from the odd delusion that there must be only one reason for imposing a tax, and that if they can discover that the Chancellor seems to have been affected by more than one reason they think they have proved that there was something wrong about the whole tax. The hon. and learned Member for Wirral (Mr. Selwyn Lloyd) and the hon. Member for Luton (Dr. Hill) both fell into this most extraordinary error. The hon. and learned Member for Wirral practically went into a textual criticism of the Chancellor's Budget speech to try and show that what he first said when he was introducing the tax was not that it would make any tax concession possible but that it would save petrol. It seems to me perfectly reasonable that there should be more than one reason for introducing a tax, and that a tax is all the better if one can find a number of reasons which converge at the point of that tax, instead of only one reason to support it. That is the case with this tax at the moment.

There is, first of all, the question of petrol economy. I am amazed at hon. Members opposite speaking as though the need for any petrol economy disappeared automatically when the end of rationing was announced. Surely they now accept the fact that sterling oil does have a substantial dollar content—though it took them a very long time to accept it. Surely they are concerned about dollar expenditure, even marginal amounts of dollars. Surely the Opposition must be concerned about that. After all, they profess to see our present position as one which is much more dangerous than we on this side of the Committee see it.

If that is so, surely they must regard any marginal increase in dollar expenditure as an extremely serious matter. Surely, therefore, even though rationing has ended and even thought this agreement has been made with the American companies, the Opposition cannot believe that it does not matter how much petrol we consume. Surely, also, they must take the view that we would consume more petrol at the price of 2s. 3d. a gallon than at the price of 3s., and that therefore this tax serves a useful purpose in saving dollars in this way.

The second reason for the tax is, of course, the direct way in which it is linked with the Income Tax concession. The right hon. Member for Aldershot (Mr. Lyttelton) this afternoon seemed to be amazed that one should attempt in a Debate of this sort to introduce a direct relationship between one tax and a remission.

I thought the hon. Member devoted a large part of his argument to saying that it was wrong to suppose that one tax was related to another remission, and that, on the contrary, there ought to be a great number of reasons for introducing a tax.

I do not think that is a very good argument. Surely it is perfectly reasonable to say that if we collect money from a new tax then we can make a certain desirable remission; surely one can go on and say that this new tax will also serve certain other useful purposes. Surely there is nothing remotely illogical about that, even to the right hon. Member for Aldershot. I should have thought that it was perfectly reasonable to link these two points very closely together. As my right hon. Friend the Minister of State for Economic Affairs mentioned, this is exactly what the present Leader of the Opposition said when almost exactly the same Debate took place 22 years ago. Then the Labour benches were putting forward the arguments against the tax—and doing it much better than the other side has done this evening—and the Conservatives were putting forward some of the arguments which we have been putting this evening.

But the Labour leaders who put the arguments from the opposite benches in those days are no longer here, whereas the chief speaker from the Government benches is very much alive, although he is not in the Chamber at the moment; I refer to the right hon. Gentleman the Leader of the Opposition. On that occasion he brought forth all the arguments. He pooh-poohed the effect of the tax on public transport. He referred to road and rail transport, and he also linked the tax very directly with the de-rating concession which was being given to industry at the time. He attacked Mr. Philip Snowden, saying that if this tax was wrecked as the Opposition were trying to wreck it, they would destroy this great concession to productive industry. It is equally competent for us to say to the Opposition that if they wreck this tax as they are trying to do they are also wrecking the Income Tax concession.

The hon. Member talks about 22 years ago. Will he not agree that the economy of our country at that time was in a much more prosperous and healthy condition than it is in today?

I am extremely interested to hear that from the hon. Member. I should like to know if his Front Bench supports him in the view that in 1928 the economy of this country was in a much healthier and more prosperous condition that it is in 1950, when one compares the large-scale unemployment—

If the hon. Member wants to be proud of an unemployment figure of just over one million, he is entitled to be so.

7.0 p.m.

I am most interested to hear that it is the view of the Opposition that, judged by all the important criteria, the British economy in 1928 was in a far healthier state than it is in 1950, especially when we remember that in 1928 our exports were flagging, our production was still down to its pre-1914 level and in this respect we were lagging behind almost every other country in Europe.

One would indeed like to know what are the standards by which the Opposition judge the health of the economy if that is the conclusion which they reach. From the intervention of the hon. Member for Bury and Radcliffe (Mr. W. Fletcher) it would appear that the standing of the pound on the international money market is the only thing which counts to the Opposition.

I thank the hon. Member for giving way. I did not say the international market, but the value of the pound. I wanted to know what was the purchasing power of the pound inside this country and outside this country. If the hon. Member can invent a better criterion than that I should be very glad to hear what it is.

If the purchasing power of the pound is the only criterion, then we have been becoming worse and worse off for about the last eight centuries. We have all been getting poorer and more miserable and been having lower living standards, because the purchasing power of the pound has been going pretty steadily down during most of that time.

I hope the hon. Member will limit his discussion about the last eight centuries and devote his attention to the present.

I apologise, Colonel Ropner, but I was at least aided in my excursions. As I say, on the precedent of the speech of the right hon. Member for Woodford, in 1928, we are quite entitled to link these two matters directly—the Petol Duty and the Income Tax concessions; so that if hon. Members opposite do not want one of them, then they do not appear greatly to want the other.

I should have thought that the Income Tax concessions would have appeared very important to the Opposition because, after all, they had an important Amendment on this subject in last year's Budget, a declaration of war against Socialist finance they called it. They said that Income Tax was the heaviest burden and was the one they must fight hardest. That Amendment was a very bad Amendment in many ways. This is a better Amendment. [Laughter.] I mean, this is a better concession in connection with Income Tax because it affects all Income Tax payers and is not regressive in the degree of concession which it gives. I should have thought, therefore, that it would have recommended itself to the Opposition and that they would have been prepared to make this exchange, to have accepted the Petrol Duty in exchange for the Income Tax concession.

Of course the Petrol Duty, like any tax, has certain disadvantages, but it also has certain advantages and the great majority of people will most certainly gain more from the Income Tax concessions than they will lose through the increase in the Petrol Duty. Anyone who receives the full Income Tax concession—and one does not have to earn a very large sum to do that—receives, I think, £11 5s. a year.

To spend that amount of money a man would need to use petrol at the rate of more than 25 gallons a month, and I do not think many people will use more than that amount. [HON. MEMBERS: "Nonsense."] At any rate, not many private motorists will use more. Of course, there will be some people who spend the whole of their time in motor cars and who will use more, but the ordinary private motorist will not use anything like 25 gallons a month and will, therefore, be not worse off but better off as a result of this exchange. I think it is a very reasonable exchange, and one for which I shall certainly vote.

I had no intention of intervening in this discussion until I heard the extremely interesting speech of the hon. Member for Gloucestershire, South (Mr. Crosland). I listened to everything he said with the greatest interest and I thought he put forward a solid argument but perhaps the Committee did not quite realise in all quarters how very significant that argument was.

The hon. Member for Gloucestershire, South, did not dispute for one moment that this tax would increase the cost of living. He pointed out that in numerous ways it would increase the cost of living, although he thought that in some respects perhaps the increase had been exaggerated. The tax will increase the cost of raw materials in various industries and will increase the cost of transport, including public transport, and there are many hon. Members opposite who appear not to have noticed the very serious view taken by the Trades Union Congress and others of the effect of the proposed increase in transport costs in the London area. But the hon. Member for Gloucestershire, South, whose maiden speech, I regret to say, I did not hear, though I read it with great interest, did not dispute any of those facts. He said that this tax would increase the cost of living.

What I want to emphasise is that he is the first hon. Member I have heard from the opposite side of the House who has said that that is the Government's object—that it is the Government's object to increase the cost of living and to lower the standard of living. The hon. Member pointed out—and here I agree—the very great danger of inflation, and then he said that the value of this tax was that people will have to pay more for their transport and more for their raw materials, and as a result will have less to spend on other things, because it is the policy of the Government not to allow their incomes to increase.

I think that those are very significant admissions from one of the intellectuals of the party opposite, and it is very valuable that the country should know that the great object of this tax, which has been put in the very forefront of the Budget, is to combat inflation by compelling people to spend more money on something which is a necessity—transport—in order that they shall have less money to spend on other things, and that the result is to lower the standard of living and to increase its cost.

It is a great privilege to be flattered by the hon. and learned Member for Norwich, South (Mr. H. Strauss), but I do not want to claim undue credit for having put forward what he seems to think is a very revolutionary suggestion. I was only saying what I thought was now accepted on all sides of the House—that inflation is a bad thing and that one method of dealing with it was by taxation. I was not making anything more than those two propositions.

With one important addition—that I think the hon. Member intends to support the Government in the Division Lobby tonight. That is rather important. He intends to support the Government in the Division Lobby tonight because he realises the danger of inflation and because he says that this is a way of combating inflation, and combating it how?—by increasing the cost of living and decreasing the standard of living.

I give full credit to the hon. Member for the logic of his argument and I do not want the effect of his argument to be lost either on the Committee or on the country. He said that this is where we have been led by the policy of His Majesty's Government, who can now combat the inflation with which we are threatened only by lowering the standard of living and increasing its cost. On that admission, which I regard as a true admission, I think the Opposition are well content to go into the Division Lobby against this tax. I hope the hon. Member's speech will be widely read and that the honesty of his argument will be appreciated. It is far more honest than most of the arguments we have heard from that side of the Committee today.

I apologise for intervening once again, but I must insist that I am not putting forward any new argument which applies for the first time in the case of the Petrol Duty. After all, the idea that one can restrict the inflationary pressure by indirect taxation has been accepted, in effect, by both sides of the Committee for the past five years. I do not think hon. Members Opposite objected to the argument that the tobacco tax was being raised as a disinflationary measure. I do not think there was any objection to that argument three years ago.

The hon. Member constantly suggests that I am accusing him of having adduced a novel argument. The only thing which is novel about his argument is its complete honesty. He has said in so many words that this policy is necessary because in the state which we have now reached the Government have nothing to suggest for combating inflation except the lowering of the standard of living of the people of this country. And that is a most important argument.

Now I come to the only other point with which I wish to deal. One of the other great intellectuals of the party opposite—the hon. Member for Gloucestershire, South, will forgive me if I pass from him now—the hon. Member for Coventry, East (Mr. Crossman) likewise mentioned the example that the hon. Member for Gloucestershire, South, used in his last interruption—I do not say "interruption" in any offensive way: he intervened most justifiably because I was dealing with his speech—the example of tobacco. There is, at least, this difference between tobacco and petrol. I am not going to make light of the extremely heavy tax on tobacco, but, at least in comparison with petrol, tobacco is a luxury. One of the objects of the increased Tobacco Duty—I remember the present Minister of Town and Country Planning saying one of his objects in putting on the extra tobacco tax—was to decrease the consumption of tobacco. That was the object of putting it on.

Now, in the case of petrol, with the exception of one small sector, namely, what may possibly be described as pleasure motoring—with the exception of that one small section—the Government do not wish to decrease the consumption of petrol. On the contrary, in so far as they desire increased output, increased prosperity of industry and increased use of the numerous products of our industry in which petrol forms a part, the Government do not wish to decrease the consumption of petrol at all—with the exception of that one sector. Therefore, to put on this great new tax—because it is a great new tax—on petrol, however else it can be explained and justified, can really not be justified on any analogy with tobacco, because it is on quite a different footing.

I know how many other hon. Members on both sides of this Committee wish to speak, and therefore I confine myself to those points that I have made. I only repeat this, that I hope that the significance will not be lost on the Committee or the country of these admissions by two of the chief intellectuals of the party opposite. I am quite genuinely saying that. I am not making fun of the hon. Gentlemen. I have the greatest respect for the intelligence of each of them. Perhaps I should say the intellect rather than the intelligence—if the hon. Member for Coventry, East, will forgive that slight amendment.

Their admission is that what we are faced with is the real danger, or the actual presence, of inflation, and that to deal with inflation we must increase the cost of living with a corresponding decrease in the means of enjoyment of the people who will be taxed by this new impost. They have said, "We will go into the Lobby confidently in support of this new tax because we realise—and here we agree with the Opposition—that it will increase the burden on industry and the cost of living, and will diminish its standard."

7.15 p.m.

I thought that the hon. and learned Member for Norwich, South (Mr. H. Strauss), was a little less than scrupulously fair in his criticism of my hon. Friend the Member for Gloucestershire, South (Mr. Crosland), because it seemed to me that he did very little more than find an extremely effective vote-winning formula for stating the obvious truth that all methods which any Government take to combat inflation are always and invariably unpopular. It would, of course, always be pleasanter to the people concerned in paying a tax not to have to pay it. A tax, whatever it is, imposes a burden by leaving less money in the pockets of people after they have paid it, and it thereby reduces their real standards of living. Another way of saying that is to say it increases the cost of living, and the hon. and learned Gentleman simply found an ingenious way of saying that a Government which resolutely does its duty in combating inflation must take measures which are unpopular.

However, I am glad he brought this subject into contact with the question of inflation because some of the points I wish to make relate to the same theme. There are a great many Amendments on the Order Paper to be discussed before this Committee stage is concluded. I am not close-minded on any of them; but I do not absolutely promise not to seek to speak on some of the later ones. There are a good many arguments for voting against the proposed Amendments which are common to all or to almost all, and I should like to offer those arguments in relation to the particular Amendment which we are discussing so as to have a better chance of being able to vote silently against other Amendments to which the same arguments would, no doubt, be equally applicable.

The Committee stage of the Finance Bill is a happy hunting ground for the Opposition, no matter which party may be in Opposition. During the Committee stage the Opposition are in a position to propose reductions left, right and centre, each one of which is popular—or would be if it were passed—as, indeed, this proposal to reduce the Petrol Duty would, of course, be popular if it were carried. The Opposition are in the position of cashing in on the popularity of each of the separate proposals which they put forward. I think it is rather important, though, that the Opposition should at some time come face to face with what would be the consequences if all their proposals were carried.

The hon. and learned Gentleman the Member for Norwich, South, has reminded us that there is common agreement on all sides of the Committee about the need for combating inflation. I think there is also agreement that a sizeable Budget surplus is one of the most effective instruments against inflation, and that every proposed tax concession which, if carried, would whittle away the Budget surplus, has an inflationary tendency. So far as inflation is concerned, I cannot help feeling that this country is today in a much better position than we were six months ago, and I even suspect that we are in a rather better position today than our own Front Brench expected us to be three months ago.

I do not know, but it seems to me probable that, owing to the steadiness and diligence of the whole of our working population, whether working by hand or by brain, owing to the unexpectedly rapid increase in our productivity, which must surely be much more than the 2½ per cent. mentioned in the White Paper on which the Budget proposals were based, and owing to a number of other factors which I will not go into in detail, we have now got something in hand in the battle against inflation which we did not expect to have. During the next 12 months we shall be able to do certain things which we thought we should be unable to do when the Budget Speech was made, and in the months when it was being prepared.

Previous occupants of the Chair have allowed a very full discussion, but the hon. Gentleman must now relate his remarks, somehow or other, to the subsection under discussion.

I can indeed do that in saying, Colonel Ropner, that from the point of view of keeping up the battle against inflation a reduction of the Petrol Duty would be one of the things which we could do; and if we are considering it in isolation, without reference to anything else, it would be a very nice thing to do. We could carry out any one of the many proposals which will be made by the Opposition during the Committee stage. But if we carried out the whole lot I believe it would cost £400 million, and in our battle against inflation we should thus be £400 million worse off than we are at the moment, and we would therefore find it very much harder to do other things which, from the point of view—

The hon. Gentleman mentions the figure of £400 million as an estimation of the cost of accepting all the Amendments we have put down. Would he tell the Committee how he arrives at that figure?

I should be called to order if I went into detail on that; but I have reason to believe that my figure is about right. From the point of view of the battle against inflation, to give such concessions would be a giving away, a surrender so to speak. To give the concession involved in this Amendment would make us some £88 million worse off in the battle against inflation.

Would the hon. Gentleman not agree that the whole point of this Amendment is to try to save money for our taxpayers and thereby reduce the cost of living? What we are here asking is, not that this Petrol Duty should be reduced but that the present duty should not be increased, which is what the Government are doing.

Nobody denies for one moment that any tax concession is very popular, and very pleasant indeed for the people who benefit by it; it leaves more money in their pockets to spend, and from that point of view it is pleasant, but inflationary.

It will be a bit difficult to make my speech if I am interrupted by more than one Member at once.

The point I want to have clear is that the £88 million to which the hon. Gentleman refers is no concession at all to industry. This tax, which is now being imposed upon industry, did not exist before, and is a positive handicap to production at home and to exports abroad.

Any tax that anyone likes to mention is unpleasant to those who have to pay it. If we did not have to worry about inflation and a few other things the whole lot could be remitted and we could all have a gorgeous time. This Amendment will be extremely popular with the people who do not like paying this duty, but my point, which applies to this proposal and to all the other proposals which the Opposition intend to put forward—in relation to which I shall keep silent—is that this concession to those who would enjoy it must be weighed up against the other concessions which will be demanded of us in the course of the next 12 months by all sorts of people to whom I, for one, think it is much more important that we should give concessions.

I shall get called to order again if I go into detail, and I mention only one class of case—the need for giving a concession to schoolmasters in respect of their salaries. If we give all the concessions proposed by the Opposition on this Finance Bill it will be infinitely harder to afford concessions which are rightly being demanded by such people as schoolmasters, and by other underpaid workers. Therefore, as it is my intention to vote against this and many other Amendments, when doubtless I should be much more popular if I voted for them, I am grateful for being permitted to say that I shall do so in order that we may now resist the inflationary tendencies which this and all the other Opposition Amendments would have if passed. I vote against this Amendment so that we may keep in hand what is needed if we are later in this year to make concessions needed far more urgently by many different sections of the community than this concession on the price of petrol is needed by those who would like to see it granted.

In following the hon. Baronet the Member for Gravesend (Sir R. Acland), I should like to say that my real concern in this matter is the effect this duty will have on the cost of living rather than the enjoyment of motorists—although the latter is important, because we have fought a long and difficult war, our people have had trying times since, and I should like to see the British people enjoy themselves. I think they are entitled to do so.

What does annoy me is to hear hon. Members opposite, like the hon. Member for Coventry, East (Mr. Crossman), talk about the prosperity of this country. I think that is a very misleading and dangerous statement to make. [HON. MEMBERS: "Why?"] Because it misleads the public. In two years' time we shall not be able to live on the help of the United States. Hon. and even right hon. Members opposite have come to think that it will last for ever. I am not saying that we are not entitled to all the help we get from America. Of course we are; we fought perhaps a more difficult war than they did. But this country must stand on its own feet in two years' time—perhaps sooner.

The real question here is what effect this duty will have on our exports. The hon. Member for Gloucestershire, South (Mr. Crosland) said that 1 or 1½ per cent. increased costs was of no significance for British exports. That just shows the ignorance of hon. Members opposite—particularly the intellectuals—when speaking about matters relating to trade. If the hon. Gentleman had had any experience of trying to sell British goods abroad he would realise that sometimes it is a question of a half of 1 per cent. Firms in my own constituency export textiles quite successfully to North America, and are now getting down to very fine margins. Many of the textiles which come from Scotland to Macclesfield to be dyed or printed, and then sent back and eventually exported, are carried by road transport because it is quicker and cheaper.

There will be a most serious effect if this Petrol Duty is allowed to remain on British exports of high quality goods. At the moment, there is very little competition from Germany and Japan. I hope that the hon. Member for Gloucestershire, South will bear in mind from now on that we have to face competition from those two countries. Last week it was stated in the Press that India had signed a contract with Japan for two power stations. They got the contract at a very low figure. That has happened in Turkey and other countries all over the world. I hope that hon. Members opposite will appreciate the difficulties with which industry will be faced.

7.30 p.m.

The cost of living has steadily gone up. It is thought that this measure will increase the cost of living by one per cent. I do not think that it will stop at that; it is continuous. I know that in my constituency, which is an industrial constituency, the constituents whom I see are constantly complaining about the increased cost of living. Wages are pegged, and I think that people have behaved admirably in not pressing, in most cases, for increased wages. They cannot go on doing so. I am afraid that this duty is going to have a very bad effect in that respect.

In the rural areas, I do not think that delivery vans will go so far afield as they did previously in delivering goods. They may find that they are unable to do so in the Pennines, for example. I hope that all these points will be considered. The hon. Member for Luton (Dr. Hill) referred to medical practitioners. They, if anybody, have had a bad deal in recent years. They are under-paid, they work all hours of the day and night, and many of them have very old motor cars which are using a lot of petrol. That applies to everyone who has an old car. The petrol consumption is considerably higher in that case than if one is fortunate enough to have a new car. There is a waiting period of five years before one can get a new car, and in the case of a doctor with a 25 horsepower motor car it means another £30 a year, less the bit he gets back on Income Tax. I think that this whole thing is a ramp. The extra £20 million which the Government have acquired in the form of increased tax since petrol came off the ration should definitely be handed back to the motorist.

The Minister of State carefully balanced it up to show how the Government were proposing to spend the extra £20 million. He did not say how much would be saved by way of civil servants who dealt with food, the points system and petrol rationing. There must be many savings which could be made. I ask the Government to bring about a real saving. We have been taunted this afternoon because we have not given instances where money could be saved in Government expenditure. I look forward to the Debate when we can give instances—[Interruption.] If the Financial Secretary to the Treasury wants to interrupt, perhaps he will get up instead of mumbling to himself. We cannot hear a word that he is saying. I believe the Government should get down to this. Whenever they give something away in a Budget, we have to make up for it in another respect. Let the Government start giving things away and paying for it out of their own purse. I am sure that that could be done and will be done when this party comes into power.

It seems unfortunate for hon. Members opposite that the hon. Member for Gravesend (Sir R. Acland) should have chosen to lend his support to the Socialist economists opposite in a discussion on inflation. It seems to me that he did even more than my hon. and learned Friend the Member for Norwich, South (Mr. H. Strauss) in bringing out the quite extraordinary admission of the hon. Member for Gloucestershire, South (Mr. Crosland) who, when he was hunted and trapped was forced to come right out into the open with his submission, said that it was desirable to conquer inflation and that one of the best methods of conquering inflation was by high taxation. He then went a little further and said that, so far as he knew, there was no reason against conquering inflation by means of indirect taxation, of which he seemed to think that this tax was a good example. This illustrates precisely the fallacy in Socialist economics which we on this side of the Committee are always trying to demonstrate.

They can see no further than the immediate disinflationary effects of an increase in taxation. The secondary effects of an increase in indirect taxation, such as this, which are entirely inflationary, appear always to escape them. It cannot be claimed for a moment that to place an impost of this kind on virtually every manufactured product in this country and on the transport and distribution costs of every product in this country, will have any effect in the middle and long run except an inflationary one. Yet we are told—and the hon. Member for Graves-end expatiated at some length on this—that this is a magnificent method of keeping inflation in check. Let us wait until all the fares, freight charges and distribution costs have gone up, and then let us see whether the pressure for increased wages has an inflationary or a deflationary effect. I have very little doubt myself as to which it will be.

Even before the hon. Baronet rose, we were treated to speeches by a succession of Socialist economists making the most pathetic attempt to justify this duty, to find good reasons for this increase in tax, and, in the end, coming only to the conclusion that this tax was justified because it was the only one they could find to increase. I do not know whether the hon. Member for Nelson and Colne (Mr. S. Silverman) realised the extraordinary implications of what he was saying. What, in fact, he said was this, "We wanted to give concessions in Income Tax," and he added—and in this he was merely following, and he repeated it many times, the point which the Minister of State for Economic Affairs made—" the only tax we could find suitable to increase in order to make an Income Tax concession, was an increase in the Petrol Duty."

Does the hon. Member realise what that means? It means that the Chancellor of the Exchequer has got himself into a position where the rates of taxes and duties are in every case jammed so tight against the ceiling, that the yield begins to fall if he increases them further. Petrol was the only isolated thing he could increase without a reduction in yield. What shall we hear next year, when we know that virtually all the expenses of the social services are bound to go up? Are we then to be told that we cannot increase the duty on beer and tobacco and on this, that and the other, because they are already at penal levels, but that we may add another sixpence on petrol because that is still the only thing left that we can successfully increase? That is very much the position in which we seem to be left. That was, I think, one of the reasons which the Minister adduced, and, if I may say so, it seemed to me that most of the remainder of his statements were equally peculiar.

Several of my hon. Friends have already dealt with the suggestion that because the Petrol Duty represented a smaller proportion of the Revenue now than it did a few years ago, it was, therefore, a good thing to increase it now. I have not, since the right hon. Gentleman spoke, had time to look in detail at the revenue derived from various other duties, but I should be very surprised if that argument did not provide a first-class reason for increasing a number of other items. I should like to know whether it would not be a reason for increasing the tax on sugar or matches, and quite a number of other things.

Again, the right hon. Gentleman, in the course of what seemed to me and to most of my hon. Friends to be a singularly weak defence of a very vicious tax, quoted, as an illustration of the effect on industrial costs and the cost of living figure, a 10 cwt. delivery van. He said, just as the hon. Member for Gloucestershire, South, went on to say, that an increase of 3½ per cent. or 4 per cent. in running costs could not be considered very dangerous. It is very nice to be able to take such a light-hearted view of these things. The point is that we seem to have heard that sort of remark before. I seem to have heard it in the case of base metal prices at the time of devaluation, and we seem to have heard it in the case of rail freights and coal prices.

When we add a 1 per cent. to 2 per cent. increase to another 2 per cent. to 3 per cent., it does not take very long to get into the region of a 10 per cent. to 20 per cent. increase in costs at a time when our travellers are coming home with empty order books. How much longer are we to hear that another 1 per cent. or 2 per cent. does not matter? It seems to me to be a most extraordinary attitude to be taken by a party which has been busy in the last five years nationalising industries on the grounds that they were too inefficient to keep down their costs.

Finally, the Minister said that the Government could not be held to be distorting the pattern of demand for motor cars by increasing the price of petrol. He said that in any case we did not want to export only large cars, and that to increase the cost of petrol would not affect the home market for large cars very much, but that if it did, it would not have much effect on exports. The fact is that the demand for large cars must have some effect on export, because it is precisely for this reason that the Purchase Tax on large cars has been reduced in this Budget; it is because we cannot export large cars at competitive prices without their being a good home market. This was considered to be a sufficiently important export market to make it worth while making a special exception in the case of Purchase Tax. Yet, to increase the Petrol Duty to an extent which must inevitably distort the pattern of demand for cars, as my hon. Friend the Member for Edgbaston (Sir P. Bennett) has clearly shown, is considered something of no importance, whatsoever.

7.45 p.m.

The right hon. Gentleman finished by comparing the relative rates of tax on petrol in a number of European countries. He did not, however, as has already been pointed out, attempt to add in the rates of direct tax on horsepower to show a truly comparative rate of taxation on motorists and users of commercial transport in these various countries. He demonstrated, to his own satisfaction at least, that the petrol tax per gallon is far higher in most of the other countries in Western Europe than it is in the case of Great Britain, and he said that since it is so much higher elsewhere, this increase cannot be held to be prejudicing our competitive position in the export market. What an extraordinary argument. He is proposing to add to the tax borne by British firms by way of transport costs another 9d. a gallon. How can it conceivably be argued that that does not put British industry in a worse competitive position with other European countries than before the increase was imposed? The most elementary work with pencil and paper, such as the Parliamentary Secretary to the Ministry of Fuel and Power treated us to in the course of the Budget Debate, would show without the slightest doubt that it must prejudice our competitive powers as against the other countries of Europe, to say nothing of countries elsewhere in the world.

We are left, in the end, after this light-hearted rigmarole of mutually contradictory excuses, with the simple fact that this tax will put up the costs of industry and add to the cost of living just at the time when the lowest paid workers are beginning to get restive with the wage freeze, and when the Budget, on the admission of Members opposite, has given them no Income Tax concession. We are left with an increase whose only justification, as far as I can see, according to Members opposite, is that this is the only item they can find for an increase, and that this is a very good method of rationing petrol by price, which is what Members opposite accused us of wanting to do at the time of the General Election and said they would never do. We are left with this increase which is a rather dubious means of combating inflation and exactly corresponds in total to the Income Tax concessions Members opposite thought it would be of advantage electorally to grant. If that is the best case they can put up for this increase, I have no hesitation in urging the Committee to accept the Amendment we have proposed.

I am one of the last persons who would be accused of being an alleged intellectual, but perhaps it would be a good thing if one of the ordinary sons of the spade and hammer were to say what he thinks about this problem. I should be the last to suggest that anyone could argue logically, truthfully, or in fact that this increase of 9d. a gallon on petrol will not have an effect on the cost of living. Everyone who is prepared to face the truth knows that any increase in the cost of our raw materials will have some effect on the production and on-costs of industry.

I am one of those who will defend to his death the right of a Socialist Government to impose a tax on those who can best afford it and give relief to those who have already had to wait too long for that relief. The point is whether this is a tax that can be used to the advantage of the community or not. That is the test I apply. In other words, is this increase necessary, and can the amount collected be used to serve a useful purpose for the benefit of those whom the taxation should benefit?

No one on this side wants to impose an increase of 9d. a gallon because it is funny, or because there will be a medal for doing so. If hon. Members opposite are primarily concerned with big business, the best thing they could be doing would be to see how they can offset this 9d. increase. They would then be doing a better service than by moaning and groaning because this increase has been imposed. New benefits have come to our people and this money has got to be found somewhere. I make no bones about it; I shall support the Government in getting the money where they think best, in order that the standard of life of our people shall be uplifted.

One hon. Member complained that workpeople were murmuring in the presence of their managers because something had gone on to petrol. I can remember the days when none of the workpeople were in a position to murmur over such matters, for they had no job. I remember the days when 9d. on petrol would not have caused even one murmur among those people because they had not a car or a motor cycle in which to use the petrol. These people are fortunate today in being able to murmur in the presence of their managers about something which they look upon as an imposition.

I do not want to make a long speech, but if the Opposition, as I know very well, were to carry out what they propounded during the last election, they would have to find the extra money to give all the benefits about which they talked. I do not want to go too wide of the issue before the Committee or I shall be called to order, but the fact is that here we have a Government which has taken upon itself the responsibility of spending a certain amount of cash in the interest of the nation and they have to find it. They have made certain decisions to raise that money, and one of those decisions will be carried into effect and implemented in the Lobbies tonight.

What can the Opposition do to offset the effects of this extra duty of 9d. a gallon on petrol? I could go into factories which Members of the Opposition control and show them where by economies they could easily find the amount of money to offset the effects of this 9d. increase in the Petrol Duty.

Before the hon. Gentleman goes into our factories and finds the economies which he says we can make, will he not agree that he would find vastly greater economies in Government factories, as he did when he visited them a year ago?

The hon. Gentleman will not deny that I went round seeking financial economies in our factories, and it is because of that experience that I know these economies can be found in factories, even in the most efficient, which are controlled by private enterprise, and that those economies could offset the 9d. per gallon on petrol. The hon. Gentleman the Member for Louth (Mr. Osborne) made a fair point when he said that there are economies which can be effected in Government circles, and that is paying credit to one junior Minister who found such economies, as I think all Socialist Ministers should do. It is the duty of any Government, whether Socialist or otherwise, to see to it that every penny piece provided by the taxpayers of this country shall be debited or credited.

I want to close by saying that if the Opposition will take in hand this question of the slight increase in cost—for, after all, when worked out in percentages, it means that to big business—they will find it can be offset by efficient administration. If, instead of murmuring and groaning for electoral purposes, they concerned themselves in their factories with discovering economies, they would have no need to complain, but would support the Government in their endeavour to give our people the standard of life that they deserve.

I want to speak for a short time about the rural areas in this country. I do not think they have been mentioned so far tonight, and I wish to show how they will be affected by the increase in the price of petrol. It will undoubtedly affect the cost of distribution everywhere. The Government and their supporters have admitted this. Let us take the case of the rural areas as compared with the towns. In the town it is very often quite easy to walk to the shops or even, if one has to go a little further, to take a 2½d. ticket on tram or bus. We in the rural areas have got to come from the hills and from the outside countryside right down to the towns, and very often the fare is 1s. 6d. or 2s. 6d. If we do not go down to the towns or villages ourselves, our goods have got to come out by transport, and generally it is a long distance, which is bound to affect the cost of distribution.

The costs of distribution in the rural areas are going up, and that brings me to the next point I want to make—the fact that this duty on petrol is to be used to reduce Income Tax. That may be perfectly true, but first we must realise that the cost of living is going up and is bound to increase still further because of this increased duty. That will more than offset the actual relief in Income Tax that is to be given. Certainly in the rural areas that is so.

Other methods should have been employed to provide the necessary money for Income Tax concessions. It could have been done perfectly well by a reduction in Government expenditure. Will any hon. Member opposite deny that if the Government really got down to the job they could save, out of an annual expenditure of £4,000 million, something like £72 million? I should like to have a look at the Government books just as the hon. Member for Rotherham (Mr. Jack Jones) wanted to have a look at the books of private enterprise companies. If we put our specialists on to them, we could effect the necessary economies.

I should like to mention one or two other small points of concern to the rural areas. The cost of house building is going to be increased. I had a case only last Saturday where the builders have to travel 25 miles daily to where the houses are to be built. That has got to be done five days a week. Do not tell me that the increase of 9d. a gallon will not increase the cost of building houses in the rural areas. I am certain that it will. I have also had a letter from the Milk Marketing Board, who say that the cost of the distribution of milk has got to go up in the rural areas, because the margin at present on such work is too small to enable them to carry this extra 9d. duty.

The rural doctors will be hit very hard on their mileage. I wish that hon. Members opposite would come round with my local doctors some time. They cannot use their cars in many cases on the hills but have to walk, but even allowing for that they have a big mileage. Their loss in total income may be anything up to £30 or £40 a year because of the increase in the cost of petrol. In conclusion, I emphasise that those in the rural areas will be affected much more seriously than those who live in the towns. This increased duty ought not to be imposed, and the Committee should vote against it tonight.

8.0 p.m.

I should like to call the attention of the Committee to the fact that in many parts of Northern Ireland we are entirely dependent upon sea transport and motor transport. I would thank the Minister of State for Economic Affairs, or the Chancellor of the Exchequer, for having at long last abolished petrol rationing. Of all the restrictions to which we were subject, I received more complaints about that regulation than any other. I believe it cost us nearly £1 million per annum to administer it and it was certainly an economy well made by the Government when it came to an end. Most of my friends who do pleasure motoring, or business motoring for that matter, prefer to pay a little more—I do not say 9d. a gallon—for their petrol and to get rid of the horde of civil servants who, one could not help imagining, had a sadistic pleasure in frustrating the motorist.

An hon. Gentleman opposite mentioned exports, and suggested that another 30 per cent. increase in the price of whisky would not affect the exports of whisky at all. Curiously enough, this morning I was discussing with a man the cost of living overseas. He said: "It's very high indeed. We pay 26 rupees for a bottle of whisky." I am sure that if that price were increased by 30 per cent., probably the imports of whisky into that particular country would tend to go down. We had a speech by an hon. Member whom I have heard called an intellectual, the hon. Member for Coventry, East (Mr. Crossman). He was talking about the ingenuity of motor car designers in producing a small car. I can tell this Committee that that ingenuity is nothing to the ingenuity that is required on the part of a large man to get into a small car nowadays. When the hon. Member meets his friends in Coventry I hope he will put that point before them.

In Northern Ireland the question of transport is of vital importance. This week I was discussing the establishment of a new industry in Northern Ireland. The interested director said that the establishment of that industry was entirely a matter of the cost of transport. In Northern Ireland at one time our railways paid the highest dividends of any in the United Kingdom. That was from 1890 until 1900. They had very short hauls and large numbers of passengers, and they seemed to make very good dividends out of them. Now that these short hauls make the worst dividends and a lot of losses instead of profits, these railways have been abandoned. More will be abandoned in the future, I think. The director who was interested in Northern Ireland said: "Our market is largely in the Midlands and in London, and although there are lorries carried across the sea from Lame to Preston without being unloaded, the cost of transport may be prohibitive. It may be as much as £20,000 a year." There are a lot of advantages in Northern Ireland, but it is difficult to get £20,000 back again.

At a lot of places along our coast the small coal boats go into our little harbours. The coal is taken away from these harbours and distributed to farmers by lorry. There is no question of railways, so they have to use oil and the cost of oil affects exports. One of the greatest of our exports is seed potatoes, which come right down to East Anglia and into the South of England. Here is another case of using lorries from the farm to the steamer. For our fish, there is a haul from Northern Ireland right to Billigsgate Market. In all those matters we shall be affected very much indeed by the increase in the Petrol Duty, which will increase the cost of living to everybody in the country. I believe that the cheapest form of locomotion in the world is still the motor bicycle with one man driving, one man on the dicky seat and another fellow in the sidecar. That is what one of my constituents said when he was complaining about the cost of petrol.

All our bus fares in Northern Ireland have gone up. I see that the price of our coal is to be increased. Those will be hit again by the increase in the Petrol Duty. It is all right for the very fortunate few who live beside their work but most people, even some of those who work at Harland and Wolff's, sometimes live as much as 20 miles away from work. The increase in the Petrol Duty will hit all our export industries. Sir Frederick Rebbeck, who is the chairman of Harland and Wolff's, has said lately that it is very difficult to get orders for more passenger liners—and passenger liners mean dollars. Our linen industry is doing splendidly and is another export which provides dollars for the Chancellor of the Exchequer, although before the right hon. and learned Gentleman devalued the £ many looms were not running. The Petrol Duty increase will affect the price of linen and of shipping. It is all very well to say that if a man lives beside his work he will not spend anything on petrol. The hon. Member for Hallam (Mr. Jennings) mentioned that the cost of fresh air was the only thing not increased in price. If the workman wants to take a trip to the seaside, and buys a bus ticket, he will find that the cost of fresh air has been put up for him. For these reasons and others, I shall go into the Lobby tonight to vote against this increase.

If anybody were so bold as to read the OFFICIAL REPORT of this Debate in five years' time he might be staggered at the paucity of argument put up from the Socialist benches in support of this increase in Petrol Duty. We have listened attentively and with interest to such speeches as have been made from the other side and it is surprising that almost entirely they have been made by theoretic economists. I was glad once more to hear the hon. Member for Gloucestershire, South (Mr. Crosland), as he comes from the same college which I attended. I should have enjoyed the opportunity, had it happened to be mine, of congratulating him on his maiden speech the other day. Not having been able to do so then, perhaps I may do so now. On that occasion, as no doubt the Chancellor of the Exchequer will recall, the hon. Member warned the Chancellor that he was going to drop a few small pebbles on his head.

I must say that the hon. Member's aim was very accurate indeed. He has flung some bricks through the whole of the Treasury case and I would say to the hon. Member for Gloucestershire, South that I am sure we on this side of the Committee shall welcome his further interventions in our Debates with great interest so long as he maintains his early form. We are quite sure that we shall enjoy them continuously.

I was glad also to hear, in addition to the economists and others who have spoken, the hon. Member for Rotherham (Mr. Jack Jones), who began to put what I hoped was going to be the practical point of view from the Socialist benches. I was disappointed. The hon. Gentleman did not seem to be able to make out a case, despite the strength with which he sought to wade his way through very heavy seas indeed. He urged that this increase was a proper measure which he was prepared to support, on the understanding that we gave an equal benefit or return to those members of the community in the lowest Income Tax category. If the hon. Gentleman had gone into the matter with any great degree of detail I am certain that he would have assured himself that the argument which he produced was the very argument which should have induced him to vote against the increase of duty. This increased duty will not give Income Tax benefits to the lowest Income Tax paying members of the community. It will not offset the cost of living which the Petrol Duty will impose upon them.

The hon. Member for Birmingham, Stechford (Mr. Jenkins) put before the Committee the fact that at its maximum the Income Tax benefit to an individual would be limited to about 4s. 6d. per week or about 11s. 5d. per annum.

I am sorry. I think it was £11 5s. per annum. As to the effect of the Petrol Duty, upon that is built not only the direct effect but the indirect effect of the increased costs which will flow from it. The increase in the budget of a family in the lowest Income Tax groups is likely to exceed the limit of 4s. 6d. per week.

I listened with eagerness to the Minister of State for Economic Affairs to hear what arguments he would adduce in favour of the duty. So far as I could understand it, it boiled down to the novel proposal that petrol was a good thing upon which to increase the duty because it had not been raised as much as other duties had. If that is the way in which this country is to suffer the heavy increases in taxation which are introduced from time to time by the Socialist Government, it is a vicious circle; there will be no end to it. It simply means that they go through the list of taxes until they find one which has not been raised as much as others and say, "Here is an opportunity to increase taxation. We will therefore do so." There really seems to be no end to it.

Even if it were to be admitted—I do not admit it—that the object of increasing the Petrol Duty is to enable the Income Tax rebate to be given, the rebate could well be met from other sources. Already, there is the £23 million which has fallen into the Treasury coffers unexpectedly. In addition to that, there are the economies which the Government tell us they will effect as the result of the relaxation of controls which have been announced. Also, the Government showed us at the time of devaluation that when the need is there economies can be effected. I wish the Government would accept an offer which I am sure that the hon. Member for Rotherham (Mr. Jack Jones) would be prepared to make, and that is to go through the Government Departments, not only the Government supply Departments, to see where and how economies can be effected.

I did not say that at all. I said that I would go into the factories owned and controlled by hon. Gentlemen opposite and—very easily in my opinion—find where this small additional cost could be offset by efficiency. I have been accused of having gone into factories of the Department with which I was associated, and found where money could be saved.

8.15 p.m.

I fully appreciate that that was what the hon. Gentleman said, but I said that I was sure that he would be willing to make the offer to the Government, and I hope he will consider that. This duty will fall exceedingly heavily upon industry as a whole, and particularly upon the heavy transport side of industry. The right hon. Gentleman called attention to Continental rates of tax, but they are no parallel whatsoever. We cannot compare Continental rates of petrol duty and our own rate of Petrol Duty in relation to the effect upon industry unless we also compare other taxation rates affecting industry such as the Purchase Tax on motor lorries in this country, the Excise Duty and all the other taxes which affect the transport industry. We ought also to take into account the completely different transport system, because unless we do so, we are not comparing like with like.

The effect upon our motor production industry will be exceedingly serious. I wonder whether the Government really intend to preserve the policy which was put into operation two years ago to encourage the building of the larger engined motor cars, because this duty is calculated to reverse that policy. When his attention was called to that, the Minister appeared to be inclined to approve the proposal for a change in design in order to meet the Continental market demand, but surely that cannot be the Government's intention. They cannot intend to levy taxation with a view to encouraging industry to switch from the dollar market to the Continental market, but that is, in effect, the line of argument which follows as the result of the nature of the duty they are imposing.

I hope that the Chancellor will consider the effect on the costs of rural industry. I go even further than did my hon. and gallant Friend the Member for Berwick-upon-Tweed (Brigadier Thorp) in that connection, particularly with regard to the agricultural industry. There is practically nothing which goes on or is taken off a farm which is not conveyed by a petrol driven engine. The increased price of petrol will raise the costs of transport for all agricultural products and for the raw materials of agricultural production to a very great degree, which is bound to be reflected in the ultimate costs of production which, as the Committee know, are taken into account in the February price review. The result is bound to be a direct increase in the cost of living as a result of the increase in the cost of food production.

The immediate effect on the private motorist of the increase in Petrol Duty is offset by his joy at the freedom to buy petrol which is not rationed, but that is a transitory situation and will not last beyond the summer holidays. Private motorists are taking advantage of their freedom and are spending the money which they have available, regardless of the increased cost of petrol. But once the summer holidays are over the Chancellor of the Exchequer may well consider it necessary to revise his estimates about what the duty is likely to bring to the Treasury. The duty is a vicious one, because petrol is essential every minute in the life of every person in the country. It is bound to increase the costs of every commodity in the country which is produced, transported or distributed. The cumulative direct and indirect effect of the increase will not be felt immediately, but will be felt continuously and increasingly as the months go by.

My hon. and gallant Friend the Member for Down, North (Sir W. Smiles) gave the Committee details of the effect of the increased cost of petrol in Northern Ireland, showing, in many and varied directions, how the cost of living would increase. About a quarter of a century ago ex-President Hoover set up a Senate Committee to go into the question of transport costs in relation to the final price of the finished article. That Committee found that approximately 75 per cent. of the price of the finished article was represented by transport costs. That is an astounding figure, and I do not think that the right hon. and learned Gentleman, in imposing this increased tax on petrol, can realise how important a part is played in industry generally in assessing costs and, in particular, the additional cost of transport.

Hon. Members opposite have been commending this tax as highly desirable and useful, but I cannot see that it can do anything but help unemployment because it is bound to have an adverse effect on our production and our exports. What concerned me, and, I believe, will greatly concern the Committee, was the speech made by the Minister of State for Economic Affairs and his general attitude towards costs. Again and again the hon. Gentleman said that it would mean only a 4 per cent. increase in cost. Hon. Members opposite made reference to the fact that 1 per cent. or 2 per cent. did not matter, and the Minister said again and again that the rise in costs because of this tax would be negligible.

Once again we have an example of a Socialist Government doing exactly the opposite of what they say. The Chancellor of the Exchequer and other occupants of the Front Bench have said repeatedly how vital it is to increase exports and to reduce costs, and yet this action is the thing above all else that will raise costs in every home and factory. I have here a letter from the National Union of Manufacturers, giving two examples of the effect of this tax. To illustrate what I have been saying I will read what one manufacturer says about the effect of this rise in tax on his export trade:
"One of our main products is dress shields, and we are exporting 66⅔ per cent. of our production. We are informed by our suppliers in the rubber industry that the increased tax on petrol will apply to spirit used by them for commercial purposes. … The previous rate of taxation on petrol has been, we believe, 6d per gallon and will involve tax at 1s. 3d. per gallon. The approximate cost of duty to our overseas buyers on this figure is 1s. 6d. per gross pairs on dress shields."
Another manufacturer, this time of canvas goods, writes:
"We are already finding that in many markets our prices for made up canvas goods are on the high side and with the increase in proofing resulting from this new tax it will, we are afraid, seriously reduce the export of these articles."
That is what is happening up and down the country to many of the smaller and medium-sized manufacturers who are faced with this tax, not only in regard to transport but also in regard to use in their productions. I can only think it is a most desperate step that the Government are taking in introducing this tax.

The hon. Member for Nelson and Colne (Mr. S. Silverman) and other hon. Members opposite have suggested that we on this side are in a difficulty; that, on the one hand, we want to reduce taxation and, on the other, to maintain or increase benefits, and that these two things cannot be done together. As everybody knows, if a business is badly directed and badly managed there are no bonuses for the workers, no dividends for the shareholders and the cost of goods to the consumer is too high. If, however, there is a change of direction and a different policy adopted by better management, workers get more money, shareholders get dividends and the price to the consumer is reduced. That is exactly what ought to happen to this country. Given a change of policy and better management there is no reason why reduction in taxation should not have been given in exactly the way the Chancellor has done it without, at the same time, an increase in petrol tax.

Hon. Members opposite are always taunting us about what we would do. We certainly would not have wasted £30 million to £40 million on groundnuts or £11 million on potatoes or £200 million on fuel shortage and the like. Hundreds and millions of pounds are squandered by wrong policy and management. That is where saving can take place. Many examples have been given and, as the months go by, many more will become evident. One example is that of taxicabs. Before the increased tax on petrol was imposed, owing to increased cost's everywhere, the taxicabs were running at a loss. Now because of this increased tax the men driving the cabs are deeply concerned that they will not be able to earn enough money while the taxicab proprietors are concerned that they will not be able to operate the taxicabs. That is an example of what is happening everywhere.

Hon. Members opposite have suggested that this is an anti-inflationary tax, but I cannot conceive of any tax being more likely to bring about inflation. After all, Mr. Arthur Deakin and the T.U.C. have said that the result of a tax of this kind is that the cost of living is bound to rise, and that means that wage increases are bound to follow. We cannot expect people week by week to have to pay more for fares and various commodities without desiring, and rightly so, an increase in wages which results immediately in the vicious spiral which the Chancellor has warned us against and which his policy was designed to avoid. The one thing that would have been anti-inflationary would have been to help industry to reduce costs by not imposing this increased tax on petrol. Hon. Members opposite seem to think that people in industry use petrol for the sake of using it. In a well-managed business the industrialist uses as little petrol as possible and watches economies in every possible way, so to suggest that a lot of petrol is squandered for the sake of squandering it is nonsense.

I ask the Chancellor to look again at this tax and, if he is determined to put some tax on petrol, to make it only 3d. instead of 9d. Perhaps that would prevent some of the loss in production and export trade which is bound to follow if he persists in maintaining this tax in the way he is proposing.

8.30 p.m.

First, I should like to congratulate my hon. and gallant Friend the Member for Gosport and Fareham (Surgeon Lieut.-Commander Bennett) on his excellent maiden speech. He concentrated on the theme of the rise in the cost of living which must result from the imposition of this tax, and he gave a peculiarly apt illustration by quoting the instance of a transport and bus company in his constituency which for 10 years had succeeded in avoiding a rise in the price of fares but which, as a result of this tax, had at last been forced to do so.

This argument that the tax will lead to a rise in the cost of living has been pressed by very many of my hon. Friends, including my right hon. Friend the Member for Aldershot (Mr. Lyttelton). Even while we have been debating, I see that a report has come through that the chairman of the Southern Gas Board has attributed an increase of Id. a therm in the price of gas in the Southern Area to the increase in freight charges, Purchase Tax on commercial vehicles and the Petrol Duty. I do not know whether the Chancellor of the Exchequer can give any information tonight about whether this increase, which has apparently already taken place in the southern area, is likely to be followed by similar increases in other parts of the country.

The Government must face the fact that they start off under a handicap with public opinion when they introduce an increase in this tax because of their record with regard to petrol generally for some time past. Whatever hon. Gentlemen opposite may say, there is a widespread impression among motorists that the Government have been, and are, pursuing an anti-motoring policy. The instance which comes most clearly to mind is that of petrol rationing where the Government were pushed and prodded by us and where, in the end, they have really been washed away by the flood of the petrol surplus.

That, I think, much increased the difficulty of the task of the Minister of State for Economic Affairs this afternoon. He had to make a kind of transposition of the arguments in support of this tax, placing a completely different emphasis upon them from that which had been placed by the Chancellor when he introduced his Budget. It is rather like those acts one occasionally sees on the music hall stage in which an acrobat is engaged in poising a great weight, very often of other acrobats, upon one arm and then upon the other. Much to the delight of the audience the acrobat succeeds in transferring the weight from one arm to the other. But, of course, in that case the audience see what is done and they applaud the extraordinary virtuosity of the performer.

The difference today has been that the Minister of State has been endeavouring to make this transposition without the Committee and public opinion becoming fully aware of it. In his Budget statement the Chancellor justified this tax primarily as the restriction of a commodity with a high dollar component. What is more, with great delicacy he calculated the effect of the restriction. It was to be just that additional amount of mileage during the year. When cross-examined by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler) later in the Debates, he indicated that in a way it was merely a reallocation of consumption from one type of consumer to another, and that there would be just a marginal increase.

In his original statement he could not conceal his enthusiasm for the tax. It was a wonderful tax. It was the best possible case he could think of. Indeed, it was a kind of planner's masterpiece to fit the exact circumstances with which he was confronted at that time. Since then, the circumstances have been entirely changed by the de-rationing of petrol. I should like to know how it is that, if it was a planner's masterpiece in the first circumstances, it can possibly remain so without any change whatever in the circumstances with which we are now faced. Indeed, in concluding his revenue argument in the Budget, he used these words:
"In the circumstances which I have already explained to the Committee I believe that that is a rather larger surplus than we need budget for this year, and so I have looked round to see what modest adjustment in taxation could best be used to take up the slack."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 77.]
Those are not exactly the words of a man who was desperately keen to reduce the Income Tax and who had looked round to find out which was the best means by which to raise money. They are the words of a man who was best described by one of my hon. Friends earlier in the day as one who, having made his general revenue calculations, decided later on to make this concession with regard to Income Tax.

If the Minister of State for Economic Affairs presses that point, I must say to him that we are very little impressed by his argument that the Government have looked round to find out on which tax there had been the least increase since before the war. Our position is that the Government should rather have looked round to see which was the field of expenditure which had been increased most since the war and in which there was the greatest possibility of economy at the present time.

Although the Minister of State entirely changed the weight of the argument for this tax from the argument of restricting a dollar commodity, which was the argument which the Chancellor used, to that of the necessity of finding revenue, he did, nevertheless, still adduce the dollar argument. I admit that he did it in a rather half-hearted way, but still he used it, and I must tell him again that on that point we are not very much impressed with his argument. I fear that the Government will never carry conviction on this matter until they give the House and the country far more figures than they have done so far in regard to this most complicated field of finance. While I would be prepared to enter into an argument in detail, I think we can deal with this matter on a more or less simple basis, because we know that both the Minister of Fuel and Power and the Lord President, in his peregrinations in Scotland, have told us that de-rationing can be effected, according to the Lord President, with very few dollars being involved, and, in the case of the Minister of Fuel and Power, at the cost of an amount which was not appreciable. I think that was the phrase he used.

We know that the Government's estimate of the increased consumption as the result of the de-rationing of petrol was one million tons a year. Therefore, we have it on record from the Government that the dollar expenditure necessary to finance the increased sum of one million tons of petrol per year is not appreciable. Nobody concerned with these petroleum matters would expect, at the wildest estimate, that there would be an increase of 500,000 or one million tons as the result, for example, of the lower price of petrol. Even if there were a considerable further increase in petrol consumption, it would not really amount to any appreciable figure in dollars. I do not think that the Government would be wise to press that argument too far.

Then we have heard from the other side of the Committee, and particularly from the hon. Member for Coventry, East (Mr. Crossman), this idea that, if the Government did not increase the Petrol Duty in some way, the petrol companies would have increased the price of petrol and would have profiteered to the extent of many millions of pounds. That is a favourite argument, but in fact nobody has yet proposed to do away with the control of prices. I had the duty of introducing the control of prices myself in 1939, and it is still in operation. The margins are worked out by the Government, and although I fear that they may be worked out with regard to the least efficient and least well-placed producers, the control is still in operation, so that the Government would be capable of stopping any profiteering or any undue increase in the price of petrol. Therefore, I hope the Committee will recognise that as a completely fallacious argument.

I say to the Chancellor at this stage that I hope, after he has heard the arguments from this side of the Committee, he will think this a rather delicately balanced matter, not one entirely of black and white, but one on which people can change their opinion and can easily take different points of view.

The right hon. and learned Gentleman says it is obvious. I was just going to ask him if he could tell us whether he had had very great difficulty in converting the Financial Secretary to the support of this tax, because the Financial Secretary is one of the great economists of the party opposite. That being so, we naturally pay special attention to what he says, but it was not so long ago when he said, with regard to the Petrol Duty, that he thought we would all agree that an increased Petrol Duty would do very serious damage to industry and to trade as a whole. As I say, I do not know whether the Chancellor had great difficulty in converting him, or whether it is just one of those cases where the gentleman really does know better when he actually arrives in Whitehall. Perhaps the hon. Gentleman may have an opportunity of explaining later on.

The Minister of State for Economic Affairs made a most extraordinary statement later in his speech when he said that he did not believe that many private motorists were worrying seriously about this tax. He added that he thought they were pretty well satisfied with de-rationing combined with the new tax. I think the right hon. Gentleman will agree that was what he said, and I am sure he was sincere in saying it. He explained that he had been Minister of Fuel and Power, and had therefore been brought into contact with the motoring organisations. Of course, he would agree that I had the same opportunity of being in touch with the motoring organisations, arid indeed, now that rationing is abolished—I hope for ever—I hold the melancholy record of doing so for longer than all the other Ministers combined.

The thing that impressed me as a result of that work was that motoring was far more widespread in the country than most people realise. I agree that there are quite a number of motorists who are not seriously concerned about this tax. It has already been mentioned that it does not have any direct impact on the Ministers in their official capacity. It is also the case that Ministers are allowed, very properly, to have the private use of their official cars if they pay for it, and the Financial Secretary has told us that there is an economic charge made for this facility. Of course, the Government do not pay Purchase Tax on their cars, and I do not know whether they have included any factor of depreciation. I have no doubt that the Chancellor has probably issued fresh regulations and increased the charge to Ministers as a result of the increase in the Petrol Duty.

That, of course, is quite proper, because we must have fair shares all round. But there is quite a different class of motorist—and this is the point I want to make—the motorist with whom, I must admit, I first became thoroughly acquainted when I was in the Petroleum Department, and with whom I have endeavoured to keep in contact ever since. He is the working-class motorist, the small motorist. [HON. MEMBERS: "Hear, hear."] Hon. Members may jeer, but this is a really serious problem. The kind of motorist I am thinking of is the small man who, very often, has a tin on the mantelpiece to which he and his wife, and sometimes his sons living in the house, subscribe for the running repairs of the car. [Laughter.] Hon. Gentlemen may laugh, but, believe me, their laughter will be received in the industrial districts in quite a different spirit. In some of the cases I was investigating in the Midlands, during the Recess, the Chancellor has actually caused some domestic difficulty. In one case, both wife and husband subscribed 2s. a week, not for the petrol but for the running repairs to the car. Since the new Petrol Duty the wife has refused to subscribe because she thinks her husband is taking the money, to pay for the increased price of petrol.

8.45 p.m.

Would the right hon. Gentleman, for the information of the House, indicate—if it is correct that the husband and wife saved 2s. a week for the running and maintenance of the car—how much a week they saved for the purchase of the car originally?

If he had gone into this matter at all, the hon. Gentleman would realise that the way a working man buys a car is nearly always out of savings accumulated, for example, during wartime. That is the way I found it. This particular man—the Committee may as well have it—[An HON. MEMBER: "Can we have his name and address? "]—said: "Since the Government have increased the price of petrol, and are keeping the tax at 25s. per horse power, I am sure the Government do not want a working man to show off in a car of any kind."

Mr. Chetwynd