I think it will be for the convenience of the Committee if in discussing the first Amendment on the Order Paper we also discuss the Amendments in page 9, line 42, to leave out from "if," to the end of the subsection, and to insert:

"a reference to the first rate were substituted for the reference to the second rate in the second column in Group 35 in Part I of the Eighth Schedule to the Finance Act, 1948,"

and in page 10, line 1, to leave out subsection (2).

I beg to move, in page 9, line 40, to leave out "first day of May," and to insert, "nineteenth day of April."

I think it would be convenient to take these Amendments together as you suggest, Major Milner, and then to have a Division on one of them, unless, as I hope, the Chancellor can see his way to concede what we are asking. The purpose of these Amendments is, quite simply, to abolish the 33⅓ per cent. Purchase Tax imposed by the Budget on commercial vehicles. The Clause does two things. Firstly, it imposes this tax on commercial vehicles, and, secondly, it reduces from 66⅔ per cent. to 33⅓ per cent. Purchase Tax on cars over £1,000 in value. The effect of these Amendments is to leave untouched the Government's intention to give this benefit to the higher priced cars. It may be that some will see a certain inconsistency or startling change in Socialist policy by the Government imposing an added tax on invalid carriages and removing taxation from Rolls Royces. However, that is a matter for Members opposite to sort out between themselves and their consciences.

As the Lord President of the Council has said, this tax on commercial vehicles is a big issue. It is a tax very widespread in its effect, and it is, we think, a very damaging tax for the industry of this country. We propose to deploy the arguments against the tax, and I hope we shall be successful in persuading the Chancellor that he can well do without it. This is the second of the two major taxes imposed by the Budget. The first is the increase in Petrol Duty, which also falls heavily upon the road transport industry.

The Chancellor would have us believe that it is a mere coincidence that the two substantial taxes he is imposing by the Budget happen by some freak of fortune to fall on the same section of the same industry. No one else believes that it is a coincidence, and I do not think Members opposite really believe that is so. I have listened to many speeches from Members opposite in which they have made savage attacks upon "C" Licence holders. Time after time they have said in transport Debates that there are too many "C" Licence vehicles, particularly the hon. Member for Perry Barr (Mr. C. Poole). They have attacked the right of a man to transport his goods in his own vehicle. I do not think it is a coincidence, therefore, when the Chancellor of the Exchequer comes along with a tax specifically directed against this type of transport. We think it is done deliberately.

I studied rather carefully the Press reports of the Budget Speech of the Chancellor, and almost every section of opinion in the Press was united on one thing, and that was that the Chancellor had not given the true reasons, or the whole reasons, why this tax was being imposed. "The Times" said:

"The argument is so thin that it is impossible not to look for a deeper motive in the Government's desire to protect the nationalised railways. The suspicion is strengthened by the large increase in Petroleum Duty."

This is what the "Financial Times" had to say the day after:

"His own explanation, other than the hard need for revenue, cuts little ice. This has led to the suspicion that the Chancellor of the Exchequer has more in his mind than he disclosed to the Commons. The plight of the railways is well known."

The "Manchester Guardian," which is not wholly a Tory newspaper, stated:

"No doubt it is hoped that this will help to keep the traffic on the railways, or at least to check the growth of their losses."

It is a fact that hardly anyone believes the reasons that were put forward by the Chancellor as representing the actual reasons which actuated him in imposing this tax.

What we are proposing to do on these Amendments is to deal with the main issue of whether Purchase Tax ought to be imposed on commercial vehicles or not. Later on in our discussions, when we reach the Third Schedule, we shall produce specific arguments directed to specific types of vehicles, such as shopkeeper delivery vans and special type vehicles, which we shall seek to exempt. I think it would be for the convenience of the Committee if at this stage we considered whether this tax on commercial vehicles is a good thing or a bad thing. We think that it is a very bad thing. We think it is a most extraordinary thing to impose Purchase Tax upon capital goods of industry, such as these vehicles are.

Last night, arguments were brought to bear on the question of taxing raw materials for industry. The Chancellor apologised to the Committee and said that he did not really want to tax the raw materials of industry. In that case, however, it was inevitable, because it is impossible to distinguish between the petrol that is put into cars and the petrol which is used as raw material for industry. Whatever the merits of that excuse might be in that case, this tax is not accidental. It is not due to administrative inconvenience, but is a coldly calculated tax. The Chancellor has chosen these capital goods and decided to impose a tax upon them.

Suppose that such a tax were put on railway engines. I think that most people would regard that as an astonishing proposal. But this is just the same thing. It just happens to be another form of transport. This is a tax that is calculated to force up the general level of transport costs throughout the country. I should have thought that the Chancellor would have had to produce very formidable arguments indeed before he could justify a tax which can hardly be calculated to injure more our industrial economy.

I want to take the arguments which the right hon. and learned Gentleman has so far adduced in favour of the tax. Let me dismiss one altogether. It can no longer be said that this tax is necessary to alleviate Income Tax. That argument was expounded yesterday. The Government said that the Petrol Duty was neces- sary in order that particular sections of the community could benefit in the Budget. I hope the Financial Secretary to the Treasury will not say tonight that the Purchase Tax on commercial vehicles, in effect, is a way of providing tax relief somewhere else. If he does we can well believe that the same argument is being produced all the time.

The only argument put forward by the right hon. and learned Gentleman is that in the last two years he has been seriously troubled by the excessive investment in commercial vehicles in the home market. It is a pathetic picture of the right hon. and learned Gentleman bothering his head in case more grocers managed to get delivery vans. At no stage in the proceedings has he given to this Committee any clue whatever as to what he judges to be excessive or not excessive in the rate of replacement of vehicles of this character. How would he judge it? How often are Ministerial cars replaced? We always hear about the big sales of second-hand Ministerial cars, but Ministers are not always anxious to answer questions about that.

It is equally important that commercial fleets should have the same rate of priority as Ministerial cars. The arguments which the right hon. and learned Gentleman has adduced in these matters throw a remarkable searchlight upon what he is pleased to call democratic planning. Let us consider the kind of factors one can sensibly bear in mind in deciding whether too many commercial vehicles are sold upon the home market or not. One is, how many cars are being sold on the home market in other countries? We would not put this country at a particular disadvantage in a matter of this kind. One hopes that one of the things that would be borne in mind is what people want, unless, indeed, the man in Whitehall must always be the judge of what is better. The public demand is something which cannot be dismissed from one's mind in matters of this kind.

Another issue is whether the export hopes or targets are being fully met or not. I will say a word about that in a few moments. None of these seems to have borne with the right hon. and learned Gentleman for one moment. All he has done is to take the number of commercial vehicles used at home before the war, say that there are more used now, that that is a quite impossible situation, and that we cannot have that sort of thing going on. It is the most extraordinary way to conduct any planning.

Let me take the figures of what has been going on, of what has been happening in other countries. Last night the right hon. and learned Gentleman was using what happened in other countries to justify the putting up of the Petrol Duty here. I dare say that Members of the Committee will remember his arguments under that head. He was saying, "Look at Switzerland, it is higher there. In Italy they have a much greater Petrol Duty. All over Europe the Petrol Duty is greater." He was wondering why it was he could not have it here, just like a confirmed alcoholic gazing wistfully through the windows of a pub. If one is going to use that kind of an argument one must be consistent.

Of course, we have got more commercial vehicles in this country than before the war. That has been the tendency all over the world. People are moving over to more transport. We have, in fact, got a 77 per cent. increase on 1938, but what about America? After all, the right hon. and learned Gentleman and his friends are quite indebted to what is going on in America. The Americans have been very helpful not only to them but to this country as well. They have increased their commercial vehicles by 90 per cent. Europe as a whole has increased by 97 per cent. Wherever one looks, South America, South Africa, Canada, and India, the rate of increase in the sale of commercial vehicles on the home market is substantially greater than in this country. I ask the right hon. and learned Gentleman to ponder those facts.

4.15 p.m.

Is it possible that what the business men and transport operators in all these countries in the world are doing might be right and the man in Whitehall might be wrong? It is an impertinent suggestion to say that such might be a possibility? Certainly, if the right hon. and learned Gentleman is going on as he has started in these matters, we are going to be under a very serious handicap compared with other countries. In regard to exports, is it possible to say that such commercial vehicles as have been sold here have seriously hampered achieve- ments in the export market? I hope to carry the whole Committee with me when I say that the achievement of the motor manufacturers in this country has been magnificent. Everybody in that industry deserves tribute from all sides of this Committee.

Despite all the difficulties and disadvantages which confronted them—shortages of steel and if I may say so, although I do not want to be too controversial, some of the difficulties of having a Socialist Government as well—they have pushed production up and up and up. In 1949 in the export of commercial vehicles they were second only to the great United States of America, and, after all, the United States of America were leaders in this field. They really were building up the export and production of commercial vehicles in numerous instances. In the first three months of this year our producers actually beat them and took the lead. That is a matter of which we can be reasonably proud.

What is the right hon. and learned Gentleman saying? He says he has published an economic survey, in which the home market has got a few more commercial vehicles than it ought to have had according to the figures which he has worked out. Since when were the figures in an economic survey sacrosanct in this country? Most people have regarded "Old Moore's Almanac" as a better forecast. It is more accurate, and I understand is published six months earlier. Since when has it been a crime for free enterprise in this country to move a little faster than our wonderful planners allowed for? What would the right hon. and learned Gentleman have said if the production of motor cars had been kept back to the level which he was, in fact, forecasting as the production of this country? What we ought to try to do is to push it a little faster.

I do not know what attitude the right hon. and learned Gentleman takes about these matters, but if there have been these great achievements in production, and if, in fact, more commercial vehicles are being produced than the planners had expected, is he suggesting that the home market ought not to share a little bit in that? Is there anything harmful in the home market sharing in all these things? The home market has not shared in them to anything like the extent the export market has, nor would we expect it to be the case.

May I give the Committee some figures on that, because they are revealing? These figures are the average monthly production of these vehicles. In 1938 the total average production was 8,600; by 1949–50 it had risen to 20,700. That is a substantial increase. The figures for the home market went up only from 7,400 to 8,900. In other words, out of the total increase over 1938, the home market had only participated as to 12 per cent. and the export market as to 88 per cent. I am not quarrelling with that and saying that it is wrong that the export market should have had a full 88 per cent. but it is a little hard for hon. Gentlemen opposite to say that there has been something grossly excessive on the home market side. I should say that the home market has not as much as it needs, and that it certainly has not had too much.

I do not know what the effect of this tax will be. The right hon. and learned Gentleman apparently hopes that it will dissuade people from buying new vehicles on the home market and that it will force the vehicles into the export market. I very much doubt whether that is likely to happen. I do not think that the export of commercial vehicles is quite as simple as that. It is a matter of going out and finding the markets to start with. Only the most naive planner thinks that you have only to deny a vehicle to the milkman and it is translated almost automatically into a sale in Canada. I know that the costs falling upon industry will be substantially increased by the tax.

I know what the argument from the Government is going to be. I can tell the Committee what it is before we start. It is that the effect of the tax is only one half of 1 per cent.; how can the Committee take up the time of the Chancellor by sitting late at night arguing about one half of 1 per cent.? The Chancellor never seems to remember, or he does not like to be reminded, that almost day after day we are dealing with matters involving one half of 1 per cent., like the coal charges and the freight rates. Gradually all these halves of 1 per cent. pile up. The people who really recognise what is going on are the British housewives who have to go into the shops. In the small hours of last night I was reading a newspaper, and I will quote as an example what I saw announced there:

"Gas Prices Up by One Penny per Therm. The price of gas in the Southern Area is going up by one penny per therm. It is necessary because of increased freight charges, Purchase Tax on commercial vehicles, the petrol duty increase, and adjustments in the wage scales."

When all those matters were discussed by us they were treated from the other side as almost trivial. The increases in freight rates were nothing, only about 1 per cent. Today we are talking about the Purchase Tax on commercial vehicles. I agree with the "Economist" in this matter. It said:

"A heavy and damaging fiscal bludgeon is brought into play which, it is hoped, will reestablish the Divine Tightness of planned guesswork at the mere incidental cost of making transport of goods more expensive."

The tax is certainly clumsy. It is an utterly indiscriminate tax. It includes every type of commercial vehicle, broadly speaking, and it makes no distinction between those which are essential and those which are less essential, those which have an export market and those which have not an export market. It taxes the little milk trolley. Why we should want to tax a thing of that kind I do not know. It taxes it just as much as the £10,000 special type of vehicle for carrying frightfully-needed export goods to the docks.

It is a vicious and vindictive tax which is calculated to hit at the small man particularly. The monopolies will manage all right, but they are busily engaged in squeezing out the small man. The tax will help to smash competition, and it will be passed on to the consumer in higher charges. It is a tax on capital goods. We say that a tax on capital goods in this country at the present time is thoroughly evil. It imposes a special and distinctive burden upon the industry of this country rather than upon the industries of other countries.

The tax is designed to increase the cost of distribution at a time when Ministers of the Crown have the hypocrisy to talk about the importance of bringing down the cost of distribution. The tax has been roundly condemned by all sections of political opinion. We ask the right hon. and learned Gentleman and hon. Gentlemen opposite to stop talking about the importance of bringing prices down and to start taking action to bring them down. The most effective way to do that would be to vote in favour of the Amendment tonight.

On a point of order. I hope that I am not wrong in supposing that we are not to deal with specific cases on this matter. We are reserving them for the Schedule. I want to get that clear.

I am still feeling the effects of the long sitting last night, and I am not anxious to take up the time of the Committee unduly, but I cannot help marvelling at the hon. Member for Monmouth (Mr. P. Thorneycroft) every time he gets up to make a contribution, and I cannot help thinking that if we could harness some of his vim and vigour to the productivity drive, we might be able to make some good use of his efforts in this House. I also cannot help feeling that he must be a little concerned about what will happen when old age deprives him of that vim and vigour. He has used it to such a great extent upon a tired Committee like this, that he does not get all the praise that he might otherwise get if he were to put his facts in more ordinary fashion.

I have said I will not weary the Committee, but I would recall that I said upon the Second Reading of the Bill that it might be useful in the present Debate to deal with the tax as it affects electrically-propelled vehicles. I well remember that during our Budget debates my hon. Friend the Member for Leeds, West (Mr. Pannell) in a remarkable speech, raised this question and that the Chancellor of the Exchequer got up and made the important and unusual admission that he had not given to the matter all the consideration that he might have given it. He added that he would do so. It was hoped that at a later stage we might hear something of advantage.

On Second Reading I put a case which I believe should receive sympathetic consideration. I do not want to go over all the points which I then brought forward, but I think there is in the Budget a most glaring anomaly which affects the electrically-propelled vehicle. We have heard much about the need for conserving dollars, but it seems to have been over- looked that the electrically-propelled vehicles, of which there are about 15,000 in use, are used for door-to-door deliveries, particularly of bread and milk, and that they cannot be used for long hauls.

4.30 p.m.

Secondly, not so very long ago labour was very badly used in pushing bread and milk vans on their various rounds. It cannot be contested that remarkable progress has been made in saving labour and, at the same time, in getting rid of the irritating noises which were made in the early hours of the morning. From the point of view of hygiene, no one can deny that the use of electrically-propelled vehicles represents great progress.

Thirdly, it is estimated that the use of the 15,000 vehicles meant a saving last year of 14,500,000 gallons of petrol or roughly 2,500,000 dollars. That in itself is a very important factor. Fourthly, we were told during the Budget Debate that there was a need to ensure that more vehicles were sent abroad and that that was one of the reasons for applying the tax. There can be no fear of that sort in regard to electrically-propelled vehicles because every attempt which has been made to sell them abroad has failed. Thus the same reason cannot be used for taxing these vehicles.

One of the most important factors in asking for sympathetic consideration is that an electrically-propelled vehicle of the same size as a petrol vehicle costs anything from £200 to £400 more. The batteries, which cost roughly £200 per vehicle and the wear and tear of which is very heavy, are also subject to a 33⅓ per cent. tax. In addition, an essential component called a charger costs £100. A very strong case can be made out for sympathetic consideration at least in connection with the batteries and the chargers.

I hope that my right hon. and learned Friend will give us some good news about relief in the tax on these vehicles, for in every possible way they represent progress with a capital "P," and it is in the best interests of the people that their use should be encouraged. I have a point to put to hon. Members who are interested in safety measures. The maximum speed of these vehicles is 16–18 miles an hour. From every aspect, therefore, there is an excellent case for special consideration on behalf of these vehicles. I hope that hon. Members will feel that the tax is unfair and undesirable and that this matter should receive sympathetic consideration in the best interests of many sections of the community.

It is very seldom that I can say that I am 100 per cent. in agreement with an hon. Member opposite. An Amendment to give effect to the desire of the hon. Member for Dartford (Mr. Dodds) appears later on the Order Paper and I hope that when we deal with it we shall have his support.

It is not inappropriate that I should intervene for a very short time in this Debate to speak on this matter from the point of view of the user and purchaser, or would-be purchaser of commercial vehicles. I do not know what is the experience of others who are engaged in industry, but I have been waiting for months for the delivery of commercial vehicles which I have had on order, and even today it is quite impossible to get any news about when delivery is likely to take place. In such conditions as these it is proposed to reduce the number of vehicles which may be supplied to the home market. How can we possibly carry on our industries properly if we are to be handicapped by being told that a delivery which we had hoped for in six months' time, may not take place for a year?

There is very little variety in the design of commercial vehicles, but there are a great many varieties of cars. The effort to get into overseas markets depends upon how the taste of the prospective buyer can be met. There is very little difference between one type of commercial vehicle and another and consequently it is much more difficult to get into the overseas market for commercial vehicles in competition with American producers than it is in the case of the market for cars. Those of us who are engaged in the industry know only too well that if we are to be helped to expand our exports, we must be assured of a substantial home demand. That will be jeopardised by this tax. That is recognised by the Government, but the Government are very illogical. They recognise the importance of expanding the overseas market in the case of cars by reducing the Purchase Tax on the highest-priced cars, and yet in regard to commercial vehicles, the numbers of which we desire to increase so that we may earn more dollars in the American and Canadian markets, the Government will, by the imposition of the tax, make the cost greater than it is at present.

There is another special point about commercial vehicles which cost many thousands of pounds, such as the big petrol and milk lorries, and a range, which has particularly interested me for many years, composed of the extremely heavy and costly vehicles which are essential for the transport of very heavy lumps of machinery, electrical machinery in particular—large generators, large transformers, condensing plant and the like, which cannot be transported on our railways because they are too large to go through our tunnels and must, therefore, be carried by road. The cost of these vehicles will increase enormously as a result of the 33⅓ per cent. tax. That will increase the cost of the plant going into our power stations and increase the cost of the current supplied to our industries, and so the vicious movement goes on.

There is another point to which I ask the Chancellor of the Exchequer to give thought. Those of us who use commercial vehicles know only too well that we have to write them off over a short period of years, usually three or five years. If the vehicle costs £500 at present—I take this as an illustration only because £500 is a cheap price for a commercial vehicle —that means £100 a year written off and added to the costs of production. If they are to be increased by another 33⅓ per cent. by virtue of the increased tax, we have to add another one-fifth to our working expenses to write off the cost of the more expensive vehicle in the same period.

I am getting absolutely sick and tired of being asked to reduce my costs of production and to compete with the increasing competition of overseas countries at a time when our power is costing more, our gas is costing more, our railway transport is costing more and now our road transport has to go up. I say to hon. Members opposite that it is heartbreaking when we are exhorted to do these things. What are the Government doing to help us? Not one iota. Piling up our costs month after month until one often feels desperate in trying to help the Government to increase the income of dollars by exporting in competition with our European and other competitors, all of whom are seeking, as we are, to get into the dollar markets.

I ask the Chancellor of the Exchequer to listen to some of us who at least know something about the conduct of business, having been in it all our lives, and to realise that we do not put forward these points in argument from ignorance but from solid and lengthy experience. I shall certainly vote without any hesitation against the imposition of a tax which will add yet one additional burden more to the dozens of burdens that we are at present being compelled to carry.

I think the hon. Member for Stockport, South (Sir A. Gridley) was a little ungrateful in saying that the Government had not done one iota to help industry in these matters. Quite apart from many other things, we are this year giving a relief by way of the initial allowance on depreciation which is costing £40 million this year in revenue and £75 million in a subsequent year.

It is only deferred.

They get it all back later on.

The hon. Member for Monmouth (Mr. P. Thorneycroft), who obviously had not suffered either mentally or physically by last night's sitting, included in his speech what has become a rather habitual but cheap sneer on the part of Opposition speakers about democratic planning. Of course it is easy to sneer at anything. Dr. Goebbels used to sneer at democracy itself, probably rather more skilfully than the hon. Gentleman, but before Opposition speakers continue with this particular sneer, I ask them to tell us what alternative they propose to democratic planning. There are, in fact, only two alternatives. One is the totalitarian system which we all detest, and the other is the old system of unbridled laissez faire. If they want to go back to the latter, I wish they would tell us so clearly; if they do not, they would be more honest to give up these sneers at democratic planning.

After listening to the hon. Member for Monmouth, I felt that Opposition policy on the level of our national investment programme is getting harder and harder to follow. At present that programme, under the guidance of the Government, is high and represents about 20 per cent. of our national income. The attitude of the Government on this is perfectly clear. We say, first, that the programme cannot be allowed to go higher without exerting an inflationary pressure on the cost of living and an adverse effect on our balance of payments. We say, secondly, that of all sections of that programme the excess investment in commercial vehicles is the one which, though no doubt desirable in itself, can more easily be spared for the time being than anything else—by excess is meant excess over the figure in the Economic Survey. Thirdly, we say that this is a case where fiscal as well as physical controls can usefully be employed to achieve some diversion of vehicles from the home to the export market.

4.45 p.m.

That is our policy, but what is the policy of the Opposition in this matter? Both the Leader of the Opposition—who I believe, is engaged somewhere else today—and the Deputy-Leader, told us last autumn that the investment programme was much too large. So both the Leader and Deputy-Leader of the Opposition believe that there is an excess somewhere. Indeed, Opposition speakers constantly tell us that there is still a present threat of inflation and of a rise in the cost of living, and Lord Woolton informed us not so long ago that we are suffering from over-full employment. From the point of view of investment policy, I was particularly interested to see that the hon. Member for Chippenham (Mr. Eccles), who is also not with us today, in a letter to "The Times" as recently as 6th June, told us he believes that we are still suffering from over-full employment in this country and, a day later, "The Daily Telegraph," which I believe has some association with the party opposite, said the same thing in a leading article.

If we are, in fact, thus threatened by inflation and if the Opposition want to diminish that inflationary pressure, even at the cost apparently of some increase in unemployment—since they talk of overfull employment—why do they object to this rather modest measure for restraining the least essential section of the investment programme? For it is really a strange doctrine that all other sections of the programme—houses, factories, schools, electric power, oil refineries, etc. —on which our recovery of the last two years has been so largely based, should all be cut down, as we were told by the Leaders of the Opposition last autumn, but that investment in commercial vehicles, essential or otherwise, should alone be allowed to go unchecked. Why should this be sacrosanct—to use the word which the hon. Gentleman used today— and if, as the Opposition so often tell us, particularly the hon. Member for Chippenham, we need more flexibility in our economy, why do they so violently object to a little flexibility in the shift of the sales of this industry from the home to the export markets?

In our view a moderate shift to the export market is both thoroughly desirable and quite practicable at present. Indeed, this is perhaps our moment of greatest opportunity in the export markets in these post-war years. We have today the price advantage of devaluation still with us and we have so far largely successfully checked any consequential rises in internal costs which might have been expected to follow devaluation. On the other hand we know, and we have long said, that the full force of German and Japanese competition is yet to come. Therefore, if ever a major effort in the export market by a new and growing industry like this one is to be made, which, as the hon. Gentleman rightly said, and as we have said frequently in these Debates, has such a magnificent export record since the war, surely the time is now.

One hon. Gentleman yesterday suggested that we had been pessimistic about the export prospects of the motor industry in these last five years but, as my right hon. and learned Friend said, it was he who publicly expressed the view that the industry could reach a level of exports much higher than it had reached, and it was the motor manufacturers who replied, with some opprobious language, that it was quite out of the question. On that occasion my right hon. and learned Friend proved right, and we remain more optimistic on this point to- day than the rather gloomy forecasts of the hon. Member for Monmouth.

It is even stranger that the Opposition should suddenly object to the use of a fiscal rather than a physical control to encourage this diversion. They have been telling us for the last five years that physical controls were clumsy and expensive and that we ought to try financial ones instead, but as soon as we do that the right hon. Member for Bristol, West (Mr. Stanley) and, again, the hon. Member for Monmouth today complain that this tax will fall on all commercial vehicles, both on those in the programme and on those outside it. But that is simply to argue that fiscal weapons are in their nature rather clumsy, which is precisely why we have preferred to use physical controls wherever the circumstances of the case showed them to be practical and effective in the last few years.

Here, however, we think there is some force in the general argument of the Opposition in favour of fiscal weapons, even though they abandon that argument the moment they see it put into force. The truth is that the Opposition do not really know whether they want more investment or less. When they say that they want less, they do not know what part of the programme should be cut nor do they know whether it should be cut by fiscal or by physical measures. The Opposition have no economic policy on these matters at all, except to advocate cuts in revenue adding up to £400 million and then to tell us next day that those cuts and the Amendments are not, of course, meant seriously, but are merely a parade for purposes of Parliamentary Debate, as the hon. and gallant Member for Bristol, North-West (Lieut.-Commander Braithwaite) told us yesterday. If that is not financial irresponsibility, to quote another phrase of the hon. Member for Monmouth, I do not know what is.

Hon. Members opposite have also vastly exaggerated the argument that this tax will add to the cost of transport. The hon. Member for Monmouth said that it would be widespread and very damaging. Those are merely words, and anyone who looks at the facts and figures will see that it will be nothing of the kind. The hon. Gentleman really showed by his speech that he knew that quite well, be- cause he threatened me by saying that whatever I did I must not use the argument that this would not really have a very large effect and that it was quite trivial and did not much matter. By saying that, of course, he showed quite well that he knew that that was the case, as, in fact, it is.

This tax, after all, will fall only on the annual addition of something between 50,000 and 100,000 vehicles to a stock of vehicles in this country which already exceeds 800,000. That is to say, after it has been in force for a year something less than one-eighth of the vehicles on the road, which are themselves only one form of transport, will have paid a tax amounting to something less than one-third on their total retail value. That may have some effect in restraining the flow of investment in the home market in this industry, but—

Are we to understand that it is Government policy for manufacturers, who are always being exhorted to be efficient, to retain lorries for eight years before replacing them?

I was merely mentioning the existing stock of lorries in the country. That is not a material increase in our industrial costs as a whole, particularly when it is remembered that this tax is not intended to be permanent—[Laughter.]— but is needed only as long as the necessity for restraint on our investment programme and the maximum of exports are paramount.

Nevertheless, for all the reasons which the hon. Member mentioned, amongst others, we are exceedingly anxious that this tax should cause the minimum of administrative difficulty and extra work or disturbance to the vehicle and other industries. We have, therefore, been considering, in consultation with the industry, since the Budget speech, whether we can simplify the practical application of this tax and somewhat lighten its impact at the same time. Of course, in order to preserve proper Budget secrecy, we could not have as full consultations as one would have wished before the Budget, but in the light of these subsequent consultations and of what we have heard here today and in the earlier Debates, we have come to the conclusion that it would be better to impose the tax simply on the chassis of the vehicles in question and to exempt all the subsequent operations. [HON. MEMBERS: "Hear, hear."].

That will, in the first place, greatly simplify its application since the very large number of firms, with whose representatives we have been discussing this, who are involved in the later operations of coach building, painting, and so on, will now be relieved of all obligation to ensure the collection of the tax. The change will also greatly benefit certain particular types of vehicle which have been mentioned today, such as those carrying petrol and milk, where the cost of the superstructure is proportionately high. It will further, naturally, lighten the total amount of the tax and so help in particular the heavier and more expensive vehicles, where its weight has naturally tended to be higher, including the electrical vehicles which were mentioned by my hon. Friend the Member for Dartford (Mr. Dodds). For instance, in the case of the electrically-controlled vehicles the batteries, of which I think he spoke, will now be outside the range of the tax.

We shall therefore propose, in order to carry out this change, the deletion of the provisions at present in the Bill and the substitution of fresh ones imposing a tax on chassis as from 1st July at the same rate—that is to say, 33⅓ per cent.— with arrangements for collecting tax only on the chassis when a goods vehicle is delivered completed by the chassis manufacturer.

Will my hon. Friend allow me to intervene for a moment?

I think I had better continue. The consequence will be that commercial vehicles supplied since 1st May will be free of tax and provision will be made in the Bill for adjustment of contract prices which were affected by the prospective tax liability from 1st May on the completed vehicle. We believe from our consultations with the industries concerned that it will not be insuperably difficult to arrange for these payments to be refunded. The necessary Ways and Means Resolutions and the Amendment to the Bill will be tabled immediately.

rose—

I should like to finish on this subject first. We shall at the same time, in order to facilitate these changes, ask the Committee not to pass the existing Clause 13 since it will be replaced by another Clause. The result of the alteration of the date and the reduced incidence of the tax on commercial vehicles will be to bring in about £3 million less than we originally budgeted for this year. This, incidentally, will be another figure to charge against the additional £23 million which we shall have from the Petrol Duty and car licences.

The figures are wrong.

Those vehicles which were to be exempt from the original proposals will also be exempted from the chassis tax and we are at the same time including two new exemptions. The first is for pedestrian-controlled vehicles, which my hon. Friend described as "prams," although they are not what we should normally describe as "prams." They are light vehicles used for retail distribution which are controlled by somebody who walks on the road or on the pavement and who does not ride in the vehicle. I think that in the great majority of cases they are electrically- and not petrol-driven. That will go some way I think, to meet the arguments, particularly about the physical strain on those engaged in retail distribution, which have been advanced about electrical vehicles. In fairness to the petrol-driven vehicles generally, I think the Committee will agree that it would be impossible to exempt all electrical vehicles and retain the tax on petrol vehicles, but the pedestrian-controlled vehicle, I think, falls into a separate category. In some ways it is analogous to hand-drawn barrows, which are outside the scope of the tax.

5.0 p.m.

The second additional exemption we propose is for the class of vehicle known as the "Land Rover" type. Those are light vehicles but are designed mainly not for use on the road, but on rough ground on farms, woodlands and so on. We think they can reasonably be distinguished from ordinary road vehicles for the purposes of this tax. That exemption will, of course, benefit both agricultural and forestry operations although, of course, the passenger form of this type of vehicle will continue to bear the tax.

Finally, may I say that we believe that the tax in this improved form will, first of all, give some relief where a strong case has been made out. Secondly, it will be much simpler both for industry and for the Customs and Excise to operate and, thirdly, it will still secure our essential purpose of somewhat increasing the export of commercial vehicles at the expense of the home market.

Before the Financial Secretary sits down, I want to elucidate the figures on which I am a little concerned. I think he said he estimated that the loss in revenue would be £3 million.

This year.

This year. That is to say one-third of the revenue originally estimated?

One-quarter.

I thought the figure was £9 million, and if we take £3 million that would seem to us to be 33⅓ per cent. of £9 million.

The date has been altered from May. It would have been from 1st May and now it would be from 1st July, and there will be no tax collected for May and June, which makes a difference in this year.

The point about which I want to be clear is that it would not be correct to say that if we estimated for a full year at £14 million, one-third of that sum would represent the deduction.

No.

May I say to the Committee that whilst I do not know how far what has been said by the Financial Secretary is acceptable, if it were proposed to consider the matter further it might be that the Committee would wish to await the new Clause. If that were so, the appropriate way to deal with it would be for the Amendment to be withdrawn and the present Clause negatived and then we could later discuss the proposed new Clause. I am in the hands of the Committee.

May I say that would not be agreeable to us, because at the beginning of this Debate I think my hon. Friend the Member for Monmouth (Mr P. Thorneycroft) made it quite clear that we wanted to discuss the general principle of the tax. That is not in fact altered by the concessions, although they are considerable, on the administration of the tax. It seems to me we should still be in absolute accord with what we said at the beginning if we continued to discuss the principle, which remains unaltered, of Purchase Tax on commercial vehicles, and then we could discuss the administrative details on the Schedule.

There is only one little difficulty. I quite agree with what the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) said, but we also shall be voting against Clause 13 because we desire to replace it by another Clause. It will be difficult actually to get a vote exactly on the point which the right hon. Gentleman needs. That is all I am pointing out. We are quite prepared to continue on this, but I did not want him to be misled on that point and then find himself in the same Lobby in the end.

We have had a certain amount of practice in going to the Lobby and if we are deprived of the opportunity on this occasion, I dare say we shall be all right.

While agreeing with my right hon. Friend the Member for Aldershot (Mr. Lyttelton) that these concessions, as far as they go, are very welcome, they do not touch the principle of the tax. In passing I would like to say that I am very glad that the Financial Secretary has found means to give a repayment of Purchase Tax wrongly paid, because one of the things we are always urging is that wrongly paid Purchase Tax should be remitted, and invariably we are told it is impossible. But in this case the Government have managed to do the impossible and they may be congratulated upon it.

I may perhaps point out that we have always said that vehicles are one of the very few things in regard to which we agree this is practicable.

I still thank the hon. Gentleman for his great kindness. I think my hon. Friend is very pleased about the "Land Rover." I am not very clear about pedestrian-controlled vehicles, but I dare say they exist if the hon. Gentleman says so. I want to deal with the earlier part of the hon. Member's speech when he was dealing with the motives which inspired the Chancellor to impose the tax. I thought the first part of the speech was very familiar. He started with a great panegyric on democratic planning. As I understand it, the democratic planning of this Government is like that of Dr. Schacht, the only difference being that Dr. Schacht was rather good at it—and that is a very material difference. The reason we are finding co-operation with Europe so difficult is that we are running a Schachtian economy. We do not believe in such a policy, but in the very progressive American policy. I understand that hon. Gentlemen opposite now consider that policy progressive.

Then we had a reference to "overfull employment" again. The only thing I want to point out is that in the Building Working Party's Report, signed by three leading trade unionists, there was a long passage on the evils of overfull employment and it seems quite respectable to refer to that now.

The main point the hon. Gentleman made was the question of the investment programme and that the buying of lorries was not fitting in with the investment programme. The thing that annoyed hon. Members opposite is that their planning made a sort of rough guess at what someone might buy in the way of lorries, and as all their guesses are bad they found it extremely irritating and decided that buyers should be punished because they did not agree with the guess.

Let us think a little on the question of investment. Surely the things we must not cut in our investment programme are the things which are absolutely basic. The two basic factors in production I would say are, first, fuel and power, and secondly, transport. If we do not have sufficient coal for our electricity and gas and if we do not have sufficient transport we cannot possibly have an efficient industry. That seems perfectly clear, and it is all very well to say, "We did not guess you wanted so many lorries." As my right hon. Friend the Member for Bristol, West (Mr. Stanley) pointed out, people do not buy lorries for fun but in order to carry on their business efficiently. They are not making a corner in lorries but trying to get some in order to run their business, and if they cannot get them they cannot run the business efficiently.

On the question of costs and prices, the hon. Gentleman said that devaluation provided a great opportunity to burst into the dollar market, and he said "We are doing everything we can to check the rise in internal costs." I am bound to say that this does not seem to me to be a very potent method of doing that. When one objects one always gets the housemaid's baby argument. I refer to the housemaid who had an illegitimate baby but excused herself on the grounds that after all it was only a little one. We have had that argument again and again from hon. Gentlemen. It was best answered yesterday by the hon. and gallant Member for Hull, Central (Captain Hewitson). Look at what the Chancellor does. He said in his devaluation broa that it would not make any difference to prices. Then we have railway charges going up and we are told that it will not make any difference. We are to have another £80 or £90 million put on road transport and we are told that it will not make any difference. As the hon. and gallant Member for Hull, Central, pointed out, 20 one-half per cents, together come to a large percentage, and that is what is going on.

Everything the Government do tends to put up prices. The hon. Gentleman said that we have a limited time to break into the dollar market. Conditions are at the moment extremely favourable, but what hon. Gentlemen are doing is to cut down that time as quickly as they can and leave us at the end of it with no other resource except a further devaluation. We are now told that devaluation is one of the greatest pieces of economic planning and forethought ever indulged in by the leaders of the economy of this country. I have no doubt that that will be again the answer if we go on like this. I repeat that we are grateful for these concessions but they are minor ones and do not go to the root of the matter. We consider this proposal to be basically Wrong.

I should like to thank the Financial Secretary for the important concession announced by the Government to benefit the "Land Rover," the Rover Company being the most important firm in my constituency. I should at the same time like to utter a note of warning. This story is a very good example of the difficulties in which the Government can place an important component of British industry by an ill-considered piece of fiscal planning. The "Land Rover" is today selling abroad to the extent of between £4 and £5 million a year. I understand that the Ministry of Supply attach great importance to this because they consider that these vehicles are of a kind which can provide for a market which we may be able to hold, if later we find it difficult in certain other vehicle markets to hold our ground there.

What happened after the Chancellor's Budget statement, when it was apparent that the "Land Rover" would have to pay the 33⅓ Purchase Tax, and that a farmer using one for cultivation would not receive the petrol concession whereas a farmer using a tractor perhaps in the next field would do so? Eighty per cent. of the home market orders for "Land Rovers" were cancelled in the course of a few days. That is a very important matter from the export viewpoint because these "Land Rovers," which sell to the tune of between £4 and £5 million overseas, have their prices subsidised by the profit made by the "Land Rovers" sold on the home market. The company was then faced with a most grave situation— that with the cancellation of 80 per cent. of home market orders they would have to increase the price of these vehicles sold overseas considerably, and of course they would then be bound to lose ground immediately to American competition.

I was a little anxious when, in announcing this concession, the Financial Secretary said that this lifting of the Purchase Tax would not apply to those "Land Rovers" used for passenger purposes. I was anxious because this is a vehicle which is used for three main purposes, for haulage, for cultivation and of course for the domestic running of the farmers and others use it for their livelihood. If this proposal is merely to have the effect of removing Purchase Tax in respect of those vehicles which are used only for haulage or fitted at the back with, for example, certain pieces of agricultural machinery, it may not have the required effect of keeping the home sales sufficiently high to enable the profit made from those sales to be used to lower the price of those sold overseas.

5.15 p.m.

I stress the point that now that the Government have accepted the fact that it is vital to do something in respect of these vehicles, it is necessary to do it in such a way that their sales on the home market will be maintained at the pre-Budget figure, and will not merely be a partial concession which will benefit only a proportion of such sales. However, we are most grateful that this story, at all events, looks as if it may have a happy ending.

While I welcome the concession which the Financial Secretary has announced, I agree with him that the fiscal weapon still remains a clumsy one in dealing with problems of the capital investment programme. The hon. Member for Monmouth (Mr. P. Thorneycroft) referred to the purchasing of a few lorries or something of that kind and pooh-poohed the idea that that was of any importance. But it is true that the commercial vehicle industry as a whole did, according to the Chancellor's statement, absorb double the amount of capital which it was expected should properly be invested in it in a balanced investment programme covering all types of investment. It was, therefore, rather an important matter.

It is disappointing that in spite of the considerable amount of control that can be exercised in this matter by the allocation of steel supplies, control has not proved to be sufficient or to have provided a good enough weapon to deal with this matter without resort to what the Financial Secretary himself refers to as the rather clumsy fiscal weapon for curtailing purchases or investment of capital in this way.

It is equally true that while we welcome the concession in regard to bodies, it does not make this weapon any the less clumsy in relation to the commercial vehicle production world as a whole. There is no doubt that the excessive pressure from the investment point of view has been in respect of the lighter type of commercial vehicle, certainly not in respect of the heavier type of commercial vehicle. There is not the excessive demand for the heavier type which would justify any measures at present to curtail the purchasing of them.

In regard to the lighter type of vehicle and chassis, which is readily adaptable either for private car manufacture or commercial vehicle manufacture, it is understandable, in view of the fact that we have a greater supply of goods on the home market, thanks to the measures of the Labour Government, that there is considerable pressure for the lighter type of vehicle for delivery purposes. Many retailers who have not delivered goods for a long time now find that there is some competition, and they naturally wish to look after their customers. That pressure will still remain whether there is Purchase Tax on the vehicles or not. Therefore, I am not at all sure that the tax in the form here proposed will achieve the Chancellor's stated objective, and which I accept is the only objective he had in imposing this tax.

It is true that it is these lighter types of vehicles which have a more ready sale in overseas markets. The heavier types of vehicles do not sell so well. There is obviously a much more limited market for them overseas, just as there is a much more limited market for them than for the lighter types in this country. The heavier type of commercial vehicles generally in use with an 8-wheel chassis and a gross load of 22 tons cost about £2,500 or sometimes a little more. The body used on it for normal transport purposes probably costs not more than about £400. But leaving the tax on the £2,500 it is still a pretty considerable figure. The effect of that is likely to be to shift the demand, because of the high rate of Purchase Tax, from the heavy vehicles to one of the lighter type where the tax is obviously less, because it is a cheaper vehicle.

That class of vehicle is, again, the type of vehicle which more readily sells abroad and the effect will again not be what the Chancellor desires, which is to stimulate the export market. I am not suggesting that everything has been done by everybody in the heavy vehicle market with regard to the heavier type of vehicle. We know there are difficulties. Last year there were difficulties; and as a result the Ministry of Supply agreed that a greater number of heavy commercial vehicles should be put into the home market because of the difficulties of the export market and in order to keep the people in this industry employed.

That is a factor with which I am particularly concerned and with which the engineers whom I represent are also con- cerned. The degree of skilled engineering work that goes into the heavy vehicle is, in proportion, greater than that which goes into the light vehicle; and if it comes to the question of war potential it is essential that nothing should be done to dissipate that labour force, unless it is done with great care. If the market abroad is stabilised and the demand from the home customer is to be further damaged by the transfer of demand from the heavy to the light type of vehicle, it inevitably means less employment in those particular factories which produce these heavy vehicles, unless some other channel is found to utilise their labour.

It is also true that the plants used for such production will not readily lend themselves to other types of engineering production. Such plant is laid down especially for the job and will not necessarily do other work efficiently, so that we cannot mix our economy to the extent of producing heavy vehicles and other things along with them. The problem is whether or not there is to be a constriction in the industry as a whole and that is a point I would ask the Chancellor to consider carefully. I feel that the tax of £800 or £900—£800 at any rate—which will remain on the heavier type of vehicle is an imposition which will tend to make the customers buy fewer of them. In effect, the Chancellor says that he wishes to do that, but I would ask him to divide the market into its respective sections and see that he does not unduly damage the heavier section, and at the same time still further increase the pressure on the lighter type of vehicle.

The Chancellor has gone some way, and we welcome very much what he has said about the pedestrian-controlled electrical vehicles, which is undoubtedly a very valuable concession and will be particularly appreciated. Hon. Members opposite talk about hitting at the small man, but it is essentially the small man who will benefit as a result of the decision not to put a tax on pedestrian-controlled electrical vehicles. I would ask the Chancellor to consider further the incidence of the nature of the tax, this clumsy bludgeon which falls equally on the just and on the unjust, with a view to separating it. If he wishes to curtail the investment pressure on the light vehicles he should do something about the heavy vehicles which by this impost suffer even worse than the light vehicles will suffer.

I know that it is extremely difficult for him to make all the concessions we would like, but I ask him to have particular regard to this industry and the numbers employed in the heavy commercial vehicle industry, with a view to adjusting the tax in some form so that it does not fall in such a heavy way upon the heavier type of industry.

I, of course, welcome the concessions which have been made. We shall no doubt be able to consider them in detail and make any remarks which are appropriate upon them. I wish now to address a few remarks to the principle of this tax. I understand it is not a tax intended to raise revenue at all. It is what might be called a planning tax. It is a tax designed to curb this insatiable desire, which apparently exists, to buy commercial vehicles, or what are sometimes called vans and lorries.

The hon. Member for Southall (Mr. Pargiter) has drawn attention to certain aspects of the uncertainty of this weapon. Presumably the Chancellor of the Exchequer will be deeply disappointed if the tax does raise a great deal of revenue, because then it will have failed in its main objective. Furthermore, by its very nature it is designed to hamper and hinder the best outlets which industry feels it has for its products. It is designed to stop manufacturers, farmers and shop keepers from doing their business in the way they think most satisfactory to themselves and to their customers. It is indeed a most uncertain weapon. No one can tell where it is going to fall and a man who is considering whether he will buy a new van or lorry will have to look at all sorts of aspects of the matters concerned, such as depreciation and the profit he may be making; and whether in the end he will come to the same conclusion as the Government planners must, at least, be very doutful.

I suggest that if anything is bringing planning into disrepute in this country it is not the sneers of the Opposition, not even the Conservative Opposition, but the extraordinary random effects of the operations of the planners. So far as the ordinary man can understand the general plan, it is at the moment to stop inflation and keep down costs. It is to help him to build up his business and to export more efficiently. But so often in the ordinary operations of his life the acts and activities of the Government, as he meets them, appear to effect the very opposite, and to hamper him, to put up his costs, encourage inflation and hinder export.

As I understand it, one great concern of the Chancellor is that more vehicles should be exported. It is absolutely essential that the export trade should have a large and flourishing home market. The one is complementary to the other, and I do not think that at the moment there is any hostility between the two in the commercial vehicle trade. Furthermore, the increase in costs which this will cause to so many industries and occupations in this country will put up the costs of a great many exports, and may hamper the general export trade; not perhaps to a very great extent but, as has already been pointed out, it is one of the many factors working in that direction.

One of the points made yesterday and not repeated today was that if we have a very high level of taxation we must bring all taxes up to that level and the Chancellor has taken the occasion to "whip in" a few taxes which have been lagging behind. We have not yet had any remarks on the suggestion made by the hon. Member for Monmouth (Mr. P. Thorneycroft) that this tax was designed to help the railways. To my mind, there is a certain argument for directing traffic towards the railways, but I think that the imposition of a tax on commercial vehicles is a very bad instrument for the purpose. One cannot help suspecting that something of this sort may well have been in the back of the Government's mind throughout consideration of this tax.

It seems to me that no case has been made out for this tax as an instrument of planning. It is not an instrument of revenue, as far as we know; it will put up costs; and, whatever the effect of these concessions, which we welcome, the principle of the tax remains an inefficient and a bad one.

What we have had from the Government today is not so much an exhibition of a change of heart as an exhibition of force majeure. They would love to have this tax operating at full scale; they would love to take the uttermost farthing out of the manufacturers of these commercial vehicles; but after introducing what the hon. Member for Southall (Mr. Pargiter) called a bludgeon of a tax without any thought at all—deriving it I suppose from the inner recesses of Transport House—they then discovered that the thing was quite unworkable. So they have come down to the Committee this afternoon with a proposal to remit a quarter of it and to cut out of the scheme all those small manufacturers of motor bodies who until this afternoon, would have had to be taxed.

There were several thousands of them; the opportunities for tax evasion were quite immense—so the Treasury was advised very late in the day—and, without saying in detail what has led him to it, the hon. Gentleman has come down and announced this remission. If the Chancellor had had wiser counsel—principally that from his hon. Friend the Member for Southall and those on that side of the Committee who see how costs are rising all the time in the industries in their own constituencies—he might not have brought in this tax at all, let alone have had to come down here and reduce it.

The speech of the Financial Secretary was, as is usual for him, a most interesting speech. He immediately showed himself to be extremely touchy on the subject of democratic planning, as one would expect from a high doctrinaire of the Labour Party. He reacted sharply when we mentioned the subject, as some high priest in the holy of holies might react if a novice or supplicant for favours twitched the corner of his robes inadvertently. The hon. Gentleman does not like any attack to be made upon the inner sanctuary of his party doctrine. He then went on to charge us with complaining against the use of taxation as a means of stopping investment in a full employment situation, and so stopping inflation. How that argument can prevail today, when for years past, there has been high taxation and rising costs and all the evidence of inflation, I cannot understand.

It is not good economic doctrine in these days of full employment to say that additional taxation imposed upon an article in some way conduces to an anti-inflationary policy. It adds to costs, as we were told last night by the hon. and gallant Member for Hull, Central (Captain Hewitson), speaking from a very important industrial circle indeed; it adds to wage demands; and if costs go up and wage demands increase, what is that but inflation? I cannot understand this argument that in some way this tax on commercial vehicles leads to an avoidance of inflation.

Then we were told that we could not make up our minds as between the physical and the fiscal weapon. The hon. Gentleman really ought to know Conservative Party policy better than that.

What is the policy of the Conservative Party?

He knows perfectly well that for five years, since the Socialists came into office, we have been demanding a progressive relaxation of controls and their substitution in appropriate cases by the price mechanism and the law of supply and demand. In general, we do prefer the fiscal or financial weapon to the physical weapon, every time; but that is not to say that the Government can come along and tax a particular part of the economy out of relation to all the rest and impede its development, which is what is happening in this case, as I shall show in a moment.

Then the Financial Secretary was bitter with us because we charge the Government with an excess of zeal in their Economic Surveys. I might say a word in passing about this annual target practice that goes on on the part of the Government. In 1949, we were told that 50,000 new vehicles were to be manufactured. That was forecast in the Economic Survey. We were led to believe that democratic planning meant that production would be held down to that figure by every sort of control there was. Not at all. The industry responded to a different technique from that of the Survey forecast—to that of appeals for higher productivity, to appeals for enter- prise and enthusiasm—and produced 100,000 vehicles which were sold in that year.

The Chancellor never learned the lesson, because in this year again, in the Economic Survey, we are given a certain figure, and the tax is brought in subsequently in order to see that that figure is realised. But there is not the slightest prospect of its being realised; the industry will always respond better to appeals for high productivity; it will always respond better to taxation reliefs and depreciation allowances, to all the incentives that are or may be given to a successful and flourishing concern, and it will refuse time and time again to respond to the gloomy prognostications and orders incorporated in the February Economic Survey demanding that productivity should be held down.

The Chancellor imagines that he is still a chemist; that he is working at a laboratory bench with atoms and molecules which are infinitely responsive to the chemical reagents which he uses. But that is not the way a society of enlightened people works. The Chancellor can never get away from the idea that he is able to produce a sort of museumlike structure for this great country, allotting a show case in one corner and another show case in another corner, and saying that industries must obey his plan as produced year by year in the Economic Survey.

If such a thing did happen, the way of life of this country would be completely ruined; we should go down before other nations which were producing new forms of transport, new characteristics of living, and getting away with the opinion of the world. Fortunately, this country is not obeying the dictates of the Chancellor of the Exchequer on this business of the production of vehicles—and everything else will be the same.

A much better plan would be to spend more energy on vehicular traffic, to encourage its development, to allow roads to be put in such a condition as to carry a very much greater volume of transport. As I said not long ago, on the Transport Commission Bill, it may be the case that the railways in this country are doomed to contract. There is much evidence in other countries that wheeled vehicles on the road are destined to expand. It would be much more appropriate to see provisions for such an expansion were incorporated in the Economic Survey and in the democratic planning of the Government.

On this question of exports, there is great doubt whether the tax will enable exports to be increased. The right hon. and learned Gentleman himself admits the argument that a very large home market is essential if we are to absorb the overheads of the industry and enable cars to be produced cheaply for export by the fact that he has reduced the high scale of Purchase Tax on expensive cars from 66⅔ per cent. to 33⅓ per cent. He admits that it is not possible to expand exports unless we have a home market, and yet he reverses the whole principle when it comes to commercial vehicles. I do not see how it is possible to sell vehicles abroad by stopping home supplies. What relation is there between Mr. Jones, of Balham, who wants to buy a two-ton lorry and is prevented from doing it by the Chancellor's Purchase Tax, and Mr. Silas Q. Jones, of Kansas City, who wants to buy the same thing? They are not even in touch with each other. Their needs and circumstances are entirely different. We cannot switch the vehicle from the one to the other simply by putting on Purchase Tax at home.

I am told that, since the tax was applied, Messrs. Guy Motors have closed down a night shift on their export programme, and are transferring that productivity to the home trade. That does not look as if this tax is going to have any beneficial effect on the export trade. We are told by people in the industry that it will not lead to any appreciable expansion of exports.

Will the noble Lord allow me? What was the percentage of exports of Messrs. Guy on which they have now closed down a night shift?

I do not know what the figure is. I only know that they have, in fact, closed down the night shift on the export programme.

Finally, there is the argument about applying this tax to capital equipment. The Chancellor is a great lover of principle. Time and again, he has rejected Amendments on the Finance Bill, affecting such things as Easter offerings, because they infringed a particular principle, and yet, this year, he introduces a tax on the capital equipment of industry which it has never borne before in any of its branches. The nation is urged to re-equip, but, as soon as it does it, the Chancellor smites manufacturers on the nose with this tax. It is a tax which discriminates against a vital industry, against the roads and in favour of the railways. There is no doubt at all that this is a cover plan, a sort of outwork defence mechanism of the railway system.

The Socialist Government, under the influence of hon. Members occupying railway seats, is wedded to the Railway Executive and the National Union of Railwaymen and, by every device, by refusing to repair the roads, by refusing to develop new roads, by putting on an extra Petrol Duty and by means of this Purchase Tax on commercial vehicles— by all these means, they are keeping the ring clear for the railways to recover. I do not think there is any prospect that, without competition from the roads, the railways will recover. It is my supreme conviction that we must have full-scale and uncontrolled competition between the roads and the railways in order to find out which is the most efficient, and which is the natural and right system of transport for the people and this country in this century. For all those reasons I deplore the imposition of this tax.

I am pleased to be able to follow the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), if only in order to take up a point in which he suggested that this side of the Chamber is dominated by representatives of the National Union of Railwaymen. It so happens that three hon. Members now sitting in this part of the Committee represent the Amalgamated Engineering Union.

What about their constituents?

I am perfectly prepared to deal with that point. Hon. Gentlemen opposite are presumed to represent constituencies, but more than enough in these Debates do we hear the voices of the great selfish vested interests. As a matter of fact, we have the Pharmaceutical Society represented by one hon. Member, and we all know, every time he speaks, whom he represents. We heard the brewers speak twice last night. [HON. MEMBERS: "No."] Oh, yes. We heard the brewers speak twice last night—

On a point of order. I do not know what connection this has with a tax on commercial vehicles.

I think it is only an example.

Further to that point of order, Sir Charles. I think we should all deprecate any suggestion being made that any hon. Member in this House represents any particular body and places the interests of that body in advance of those of his constituents. I do not believe that the hon. Gentleman intends to suggest that. We should all deprecate any such suggestion being made.

Further to that point of order. If indeed, we all deprecate any such suggestion, is it not a pity that the subject was started from behind the right hon. Gentleman who has just got up to deprecate it?

I would be the last to bring into this Debate the suggestion that anybody represented any particular vested interest, but, on the other hand, if the noble Lord will read HANSARD tomorrow, he will find that he said that we were dominated by the railway interests and by hon. Members on this side who were members of the National Union of Railwaymen. That is all very well, but it is very well known—although I do not want to pursue the point—that there are hon. Members on this side of the Chamber who are sponsored by the National Union of Railwaymen. I only tried to point out, as I am entitled to do and as I wish to do with some pride, that I am a nominee of the Amalgamated Engineering Union. I wish to make this further point. When political funds are disclosed, it is well known where my election expenses come from, but the same thing cannot always be said about hon. Gentlemen opposite. However, I will leave that subject.

I wish to speak as one who has knowledge of this industry and as one who has served his apprenticeship in it. I represent engineers whose work is bound up with road transport, and I have had representations from the union which controls the larger number of the skilled engineering labour in the transport industry asking that I should make a case to the Chancellor.

I want to come back to the general considerations. We ought to consider the very considerable concessions that have been made by the Chancellor. The hand-controlled electric vehicle that was mentioned earlier has no tax upon it whatsoever, and it is very significant that one of the leading Opposition Members does not even know of its existence. It is not a choice between the petrol vehicle and the electric vehicle, but a choice between a man pushing a cart and a more modern form of propulsion. In the driver-controlled electric vehicles there is an exemption of tax from the body of the vehicle, which is quite considerable and different from the vehicle mentioned by my hon. Friend the Member for Southall (Mr. Pargiter). It is a specially made vehicle for carrying bread or milk, and it has a considerable exemption. Then there is the exemption for the batteries worth over £200, and there is an exemption for the charger.

I want to refer to the disabilities of the heavy commercial vehicles. My hon. Friend the Member for Southall covered most of the points, but there is one on which I do not think he touched. The heavy commercial vehicle already labours under a disability of a 20-mile-an-hour speed limit, which has a discriminatory influence against it in so far as the prospective purchaser is concerned. It is a curious fact that we are prepared to have a passenger vehicle carrying many lives, which is allowed a 30-mile-an-hour speed limit, and yet an identical vehicle constructed for carrying goods is limited to 20 miles an hour.

The effect of a tax of 33⅓ per cent. upon a very much heavier type of vehicle will have a tendency—I put it no higher—for people to purchase cheaper vehicles, thus attracting less Purchase Tax, which will be grossly overloaded. There has been a tendency in that direction in the past. There is a tendency for a vehicle up to three tons to be reinforced with helper springs on the rear axle, to be completely overloaded and allowed a 30-mile-an-hour speed limit, whereas the comparatively safer vehicle and a much better engineering job is limited to 20 miles an hour. That fact, together with a 33⅓ per cent. tax, acts as a great discrimination against the best form of engineering in motor transport that we know in this country.

I do not think that we should completely forget the Chancellor's difficulty. The excess in investments in the home market was an excess greater than the housing cut that was envisaged in the devaluation Debates last year. I think that is a very considerable amount. The total expenditure in this field in the home market is greater than the whole of the education building programme. Consequently we cannot take any of these items in isolation. They stand one against the other. Bearing in mind the need to divert production to the export market, the Chancellor has been reasonably generous, and I should like to thank him for the concessions that have been made.

I am very glad to have this opportunity of saying a few words about the principle of this tax. As the Committee knows, when we come to the Schedule we shall have an opportunity of dealing in detail with the different kinds of vehicle covered by the tax, and I understand that we are also to have a new Clause in which a number of concessions are made. I should like to make an apology to the Financial Secretary because I heard the beginning and the end of his speech, but through circumstances which I could not avoid I did not hear the middle of it. However, I do know the exemptions which are made.

We object to the tax because it is another tax on industry. It is yet another impost—and we had one yesterday—on the motor industry. A most striking figure was given yesterday and I should like to refer to it again. The figure was given when the argument was being put forward that the present Government are not too friendly towards the motor industry. For Purchase Tax, for motor duties and for fuel tax taken together, no less a sum than £225 million a year is taken from the motor industry.

I am told that the real reason for this Purchase Tax is that there are too many commercial vehicles being used in the home market, but we have never heard any argument that if those vehicles were not being used in the home market they would immediately find purchasers abroad. If that were so I am certain that my hon. Friends would not be opposing the tax. On the other hand, from all the information we can get from the trade, we hear that the maximum number of vehicles—and a very fine number too— is being sold abroad and that it is not because they are selling on the home market that an even greater number is not being sold.

There is one interesting line of research. If too many vehicles are being used on the home market, by whom are they being used? There are really only three classes of road user. There is the Road Haulage Executive. Surely, they are not using more vehicles than they require. In any case, they are under the direct supervision of the Government. The "A" and "B" licence holders are almost under sentence of death, and are very unlikely to be squandering their money at the moment in buying vehicles when they may be taken over by the Road Haulage Executive at any time in the next year or two. Then we come to the "C" licence holders, of whom I am told there are some 700,000. I cannot help thinking that the Government have never been particularly friendly towards the "C" licence holders and those are the people at whom this tax is aimed.

6.0 p.m.

I want to reinforce what was said by my hon. Friend the Member for Monmouth (Mr. P. Thorneycroft) and other speakers, namely, that manufacturers and business people do not buy vehicles just for the sake of buying them. They buy them because they think they will improve their business. There are more dispersed factories today than before the war; businesses are sometimes carried on in two or three different places. That being so, it is absolutely necessary for them to have commercial vehicles, and it is for that reason, I believe, that the number of such vehicles has increased. Then there are the people who have to use the road for the carrying of fragile goods and things of that sort, and, of course, there is the ordinary delivery service. For all these things commercial vehicles are needed, and that is why their numbers have gone up.

Is the Chancellor quite sure that the figures given in the Economic Survey concerning new vehicles are always correct? In many cases, somebody buys a new vehicle and his old vehicle is used for other work. That is then counted as two vehicles. I was given an extraordinary example of one vehicle being counted as six. I think that when the Chancellor says that the number of commercial vehicles has gone up from 500,000 before the war to 800,000 now he should have those figures checked. In principle, we object to this tax because it is a tax on industry, and when the opportunity arises, which, I gather, will not be this afternoon, we shall vote against it. At the same time, I should like to say that we appreciate the concessions about which the Chancellor saw fit to tell us earlier this afternoon.

The hon. Member for Leeds, West (Mr. Pannell), not only supported our argument that this is a very grievous tax, but produced an excellent additional argument in that heavy goods vehicles bear an additional burden by virtue of the 20 miles an hour speed limit imposed upon them. At the same time, I do not imagine that his nominators—I only reverse the phrase; he admitted being a nominee—would allow him to join us in the Division Lobby.

I wish to concentrate on the bad and adverse nature of the tax on capital goods and capital investment. It is frequently argued by hon Members opposite—it was so argued yesterday and again today— that any tax, whatever it may be, that drains off the purchasing power of the general public is a blow against inflation, and is, in fact, deflationary. Surely, a tax of this nature does precisely the opposite I suggest that the whole idea that any tax is deflationary deserves reexamination.

Surely, it is necessary to ask who is going to pay the tax and where the money is to come from. In this case, it comes entirely from the ploughed back profits of industry. This money would otherwise be used on other forms of capital investment. It is widely known that, owing to high taxation, business as a whole is now short of funds for capital investment purposes. Capital investment in this country is running at a lower rate than in the United States of America by quite a lot; in fact, we are falling further behind in this respect. This tax on goods vehicles will drain away further funds in this field and thereby tend to weaken us still further competitively.

I wish to say a word or two about light commercial vehicles, because here, quite apart from the cost of production, is something which is directly going to increase costs of distribution. Whereas the tax on heavier vehicles will have a general effect in increasing the costs of production, and particularly the costs of our exports, the tax on light vehicles will hit the housewife far sooner, because it will be a tax on the distribution of goods and a tax on the small shopkeeper. A very important principle is involved in taxing any particular form of capital goods, and once this principle is accepted, the Chancellor can in future Budgets extend it in any direction he pleases; he can limit capital investment in any sphere where he thinks it undesirable. It gives him a much greater measure of control over and above the very wide control which he already possesses.

Having had just about half their profits taken, if businesses have to pay a considerable amount over and above that, on capital goods, then there will be very little left for capital investment at all. Surely, it is not a question of the men in Whitehall always knowing best; surely, the managers can judge what are the things they need to reduce costs of production, and, if they feel they need commercial vehicles, they should be allowed to invest their money in that direction. A tax of this nature is inflationary and not deflationary. It is not a tax that will act as a kind of make-weight for the lack of savings; it is a tax that will directly drain away money that would otherwise be saved and invested in other directions

Much has been said both today and yesterday about the railways, but there is a note of contradiction in what back benchers and right hon. Gentlemen on the Government Front Bench say in this respect. We have heard several admissions by back benchers that the position of the railways cannot have been absent from the Chancellor's mind. I do not believe for one moment that it was. If every opportunity is going to be taken, either by a tax on petrol or by a tax on commercial vehicles, of increasing the costs of road transport until they mount up to the level of railway transport, we in this country shall once again price ourselves out of the market. It will be just another nail in the coffin of low cost production in this country. There seems to be a very wide measure of complacency about this measure of increasing costs.

I must return to the remark made by an hon. Member that an increase of 1 or 2 per cent. in the cost of production did not matter. I can only say that in a business with which I am principally concerned, we lost a contract with the Greek Government a few months ago to a German firm over a matter of a fraction of 1 per cent. It would be interesting to see what the reaction would be if managing directors of businesses in this country were to write to their agents abroad notifying them of an increase of 1 or 2 per cent.

We hear a good deal about our economic successes, among which devaluation seems to be included. But if we are to introduce taxes which directly increase our costs of production, that is an admission that we are heading for further devaluation. Whatever the result of the last one may have been, I do not think that anyone would look with complacency on a further step in that direction. Therefore, I ask the Chancellor to state once again that he wishes to cut or limit the rise in the costs of production. If he wishes to stabilise sterling, he should abandon a tax whose only result can be to increase costs of production in this country, and, in particular, to increase the costs of re-equipment and of our capital goods on which alone we can rely.

My bon. Friend the Member for Stockport, South (Sir A. Gridley) mentioned that this Government and the Government that preceded it, had made not an iota of fiscal contribution, by way of help, to the aggravated problems of industrialists in the post-war period of reconstruction. In the course of his reply the Financial Secretary, running true to form, said, "See what we have done in our benevolence. We have granted you Income Tax initial allowances." This followed exactly the line of argument advanced by the Chancellor, when he presented the Budget and referred to a remission of 40 per cent. as an initial allowance that was granted in the 1949 Finance Act. In fact, this word "remission" is a gross misnomer. It should be widely known that these arrangements are not, in themselves, a remission of tax at all, but merely a deferment and an interest-free loan for the difference between the previous rate of initial allowance of 20 per cent. and the new rate of 40 per cent.

What the hon. Gentleman says is quite true, as we have often said. But as industry asked for this concession, presumably it regards it as valuable and useful.

We regard even a peppercorn, in the present dire circumstances of capital re-equipment, as a contribution, but it is so small as to be nugatory and trifling.

I object very strongly to the use of this word "remission". My hon. Friend the Member for Enfield, West (Mr. Ian MacLeod) referred to the shortage of capital for re-equipment. In this question of Purchase Tax on commercial vehicles there is a major departure from established fiscal policy in seeking to tax directly capital equipment, I wonder whether due consideration has been given to the fact that the arrangement for initial allowances on commercial vehicles purchased as capital equipment is now completely nullified by this Purchase Tax on commercial vehicles?

Perhaps I could illustrate it by taking a commercial vehicle, chassis only, which is priced at £1,000. Purchase Tax will raise that price to £1,333. The initial allowance of 25 per cent. will then reduce the £1,333 back to exactly £1,000 so that the Purchase Tax of 33⅓ per cent. has removed what advantages were derived by the industrialist on his initial allowance of 25 per cent.

Or vice versa.

I would remind the hon. Gentleman that, in making the initial allowance, the Inland Revenue take the total cost of the piece of capital plant or equipment concerned, and therefore, the 25 per cent. will be levied on £1,333. I believe it is not the intention of the Chancellor to remove the advantages derived by industrialists from the Income Tax initial allowance on commercial vehicles. Therefore, that point is worthy of special consideration.

In general, I condemn this tax as being wholly inflationary, wholly bad and as adding a very substantial sum to the cost of distribution and of manufacture. Although we welcome the small concessions made this afternoon on trailers, van bodies and the like, in principle this tax cannot do anything else but harm our industrial economy and raise still further the increased costs we have been faced with in the last few years.

The Financial Secretary referred to electrically propelled vehicles. I wanted to ask him a question on his statement before he sat down, but I was not able to do so. I should be grateful if he could give the information now. If I understood him aright, batteries were not to be charged Purchase Tax and the body on top was not to be subject to Purchase Tax. I ask the question because I have down an Amendment to Schedule 3 in my name and that of my hon. Friends that

"Battery electric vehicles designed and permanently fitted solely or mainly for the carriage of goods"

should be exempt from tax. Do I understand that the chassis of an electrical vehicle is still to be subject to tax?

Unless it is pedestrian-operated.

I am much obliged. I hope that between now and later stages of this Bill further consideration will be given to this question of taxation on electrically-operated vehicles. As I understand it, there are various reasons for the imposition of Purchase Tax. One is to stop vehicles from being used on the roads, by putting up the cost of them, and turning the transport of goods to the railways.

There is no dollar content in the fuel used in electrically propelled vehicles. Therefore, any arguments that might be adduced that it is desirable to save fuel cannot possibly apply to them. The argument might be used that goods which could be and ought to be carried by the railways are being carried by road vehicles. Again, that cannot possibly apply to electrically propelled vehicles, because these only operate in a very limited radius and, indeed, are helpful supplementaries and complementaries to the transportation of goods by the railways. Perhaps the most powerful argu- ment for encouraging their use is that the power they use, that of electricity stored in their batteries is regenerated at night time. We all know the great problem of the electricity authority in evening out the load. These vehicles are re-generated at the time when the electrical load is lightest. Surely, that is a help and an advantage to B.E.A.

For these reasons, and for other reasons that have been given by hon. Members on the opposite side, I hope that, between now and the later stages of the Bill, reconsideration will be given to this. On all sides of the House statements have been made showing how the increased cost of operation are bound to hurt industry and, in the long run, bound to cause unemployment and to put up the cost of living. I suggest there is no reason at all why these electrically propelled vehicles, at any rate, should have Purchase Tax put upon them.

When he spoke earlier, the Financial Secretary said that we on this side of the Committee had no policy. He mentioned fiscal and physical controls, a point with which my hon. Friends have adequately dealt. I suggest that the Conservatives, far from having no policy, have the policy of creating the right kind of conditions in which private enterprise can flourish. The policy of hon. Members opposite is precisely the opposite. By putting this tax on commercial vehicles they are putting a premium on efficiency. After all, as other hon. Members have said, why is it that industrialists wish to purchase commercial vehicles in which to carry their goods? They do so only because it will help them to become more efficient.

I will quote an example of a firm which did not wish to spend money on buying its own commercial vehicles, but which was, nevertheless, compelled to do so. It is not the business of this firm to run transport but it had to do so for the reasons I shall give. I have here a report which I think would interest the Chancellor of the Exchequer. It says:

"Since the local transport people we formerly used have been nationalised it has been quite impossible for us to give our usual 24-hour or, at maximum, 48-hour service to our customers. Under present-day conditions, when supplies are short and we have to keep many of our more important customers fed from hand to mouth more or less, this deterioration in service given by outside contractors, now unfortunately British Transport, is disastrous to our goodwill."

The report goes on to say:

"Already customers who expected delivery in two days have received in 8 to 10 days, have had plant shut down, operatives idle and have incurred loss in having to wait for goods."

Details are given of ten days and more taken for delivery and of goods which should have been exported but with which it was unable to catch the ships on which they were supposed to have been sent overseas.

That all means loss of efficiency and that is why this firm, and many others, have acquired their own vehicles in order that they can carry out the express wishes of the Chancellor of the Exchequer by becoming more efficient. But what does the Chancellor do? As soon as these firms try to carry out Government policy of being more efficient, he does all he can to stop them by putting this tax on commercial vehicles.

The burden of the tax is great. I have here many figures which, since the Financial Secretary made his announcement about certain concessions to be granted, are not quite accurate but which show in substance the grave effect this increased tax will have on industry. Let us take first a six-ton livestock vehicle. The increased cost in depreciation amounts to about a halfpenny a mile. For a five- to six-ton mass-produced vehicle on a tonnage basis it runs to about 3s. 7d. a day. On a five-ton vehicle, on an hourly basis, it is about 5½d. and on a six-ton non-tipping truck about 14s. 4d. These figures show how an increase in cost takes place on account of depreciation alone. It is these small additions, continuously taking place, that are putting up the cost of living everywhere and adding, one upon the other, to make it increasingly difficult to maintain our export trade.

I can only draw attention to this as one other instance of the way in which the Government are hindering industry rather than helping it. As I understand it, the main reason for the imposition of this 33⅓ per cent. Purchase Tax is to slow down capital investment in commercial vehicles—that is, to stop a progressive efficient industry, to stop manufacturers from being more efficient. I want to ask the Chancellor of the Exchequer why the equivalent amount of capital investment has not been stopped on the railways. As the Chancellor of the Exchequer knows only too well, the railways are losing vast sums of money. They are an outmoded method of transportation and there are many branch lines which could be shut down so that their maintenance and capital costs could be avoided. I suggest that if the capital cost which is being incurred in certain directions in the railways was stopped and the 33⅓ per cent. tax which is being applied to commercial vehicles were removed, the economic state of the country in the future would be more healthy. There would not be the same disadvantage to efficiency and to progress as that with which industry is now faced as a result of this tax.

My hon. Friends have referred to the question of road and railway relationships. It seems to me that when hon. Members opposite talk about the co-ordination of road and railway, it is always to shut down the more efficient road transport and to boost up the less efficient railway. There should be rather more co-ordination in shutting down some of the inefficient parts of the railway and in giving greater encouragement to road transport. This country would then be better placed to face the difficult years which lie ahead and to maintain and increase its export trade in face of the growing competition from many countries now recovering from the war whose productions are becoming increasingly competitive.

The reduction of this tax to the chassis only was a step in the right direction by the Financial Secretary, but it removed none if the objections in principle to the tax. The Financial Secretary said that matters, raised in the Debate had influenced him in his decision and I should be interested to hear from him what those arguments were which made him alter his mind. There is, however, one aspect of his planning which I should like to bring to his notice. He is rather sensitive about what he calls sneers at democratic planning, but I think he misunderstands, what the Opposition are criticising. The Opposition are criticising the fact that his plans and those of his Socialist colleagues are not good plans and that hon. Gentlemen opposite are not planning properly. Obviously, if the Government take a decision they have to act according to a plan. Our objection is that their plans are inefficient.

I should like to follow the argument of the hon. Gentleman and of his right hon. and learned Friend when they maintained that there was an excess of investment in commercial vehicles. I shall assume for the moment—which, of course, is not the case—that they are correct. Let us see where that leads us. Many of the vehicles which are bought are bought to replace old vehicles. When they replace old vehicles they do so because the maintenance of the old vehicles has become too great to be economic, because the old vehicles are worn down and because a time has been reached when one cannot go on using the old vehicles. They then have to be replaced.

I am assuming that I am following the hon. Gentleman's own argument. What is the excess of investment by a man who replaces his own vehicles? Is he investing excessively in commercial vehicles? I imagine that the Financial Secretary would say that he is not. The man whom he would regard as investing excessively is the new man on the road or even the man who increases his production and his export market and who has to take these vehicles to the port. The hon. Gentleman may say that this man is investing excessively. But how will the hon. Gentleman look after the man who must replace his fleet?

I have some practical instances of this. I know of one big firm which makes commercial vehicles and which is about to enter the Canadian market. I hope that their application to the Exchange Control and the Bank of England will be successful and that they will be given the necessary capital expenditure to enter that market. They also sell a large number of vehicles in other export markets—they have not yet entered the Canadian market—and, of course, they sell a large number of vehicles in this country. It is necessary for them, in order to get their costs down, to have a large output, and since the tax has been announced they have had a disturbingly large number of cancellations. I have seen the cancellations of those people who were intending to replace old vehicles which it would be a danger to continue to operate.

Will the hon. and learned Gentle- man allow me? I happen to represent a division that is interested in the manufacture of commercial vehicles. I am told that at a factory where there was said to be drying up of orders the shop stewards, when they challenged the company, were told that they were only hypothetical orders which had dried up.

I do not want to mention the name of the firm because of the application to the Canadian market, but I can assure the hon. Member that I have seen the cancellations from the customers. I selected to look at especially the cancellations of people who were using distributing vehicles like milk floats—people who could not raise their costs, and who should not raise their costs because that would raise the cost of living. Yet they have to replace their vehicles in their fleet. Are they guilty of excessive investment in commercial vehicles if they do? That is a very important point.

Will the right hon. and learned Gentleman or the Financial Secretary say what these people are to do? The articles are in common use and are price controlled, and they operate on the minimum of margin, yet now the right hon. and learned Gentleman increases the price of those vehicles so that they have to continue to run their old vehicles. And that is the result of his planning. I was assuming for the purpose of this argument that I was with him. I was planning with him. But where on earth is he getting to? He has to produce another plan to distinguish between those who, in his view, are wrongly increasing their investment in commercial vehicles, and the people who are, I must assume even according to his views, rightly buying commercial vehicles to replace their others.

It seems to me that in this particular case the right way to tackle the problem would be first of all to be quite clear whether the figure in the Economic Survey is, in fact, the right one. Nobody has explained what is the relationship between the figure of investment in commercial vehicles and the other figures of the investment programme. The hon. Gentleman has not seen fit to explain that. He says they all have to depend one upon another. I do not disagree with that. What I disagree with is the proportions laid down, and the fact that industries that have increased output and surpassed the targets laid down by the planners, find that it is supposed to be a crime and must stop. On those grounds I say that the reason which the hon. Gentleman has advanced dogmatically about an excess of investment ought to be explained. He ought to explain what he means. I think that if he explains what he means he will see how unjustifiable is the tax which it is sought to impose.

First of all, I should like to refer to the tax concession of which we have heard today. I hope that in anything I say I shall not appear ungrateful for even this small mercy, but I think it would be true to say that this concession is mainly granted because of the administrative difficulties which would face the application of the tax in its present form. I quite realise that before these taxes are put into the Bill very little consultation can take place; but in fact, owing to the large amount of private body building, the tax to be administered, according to the way set down in the Bill, would lead to very great administrative difficulties. I do not think that the concession represents very much of a change of heart. I think it represents administrative convenience.

On the other hand, of course, it is true to say that once we begin to nibble away at the tax—milk trolleys at one end and heavy vehicles at the other—we are beginning to acknowledge that the original lax was ill-conceived. I think my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) made a very substantial point when he pointed out the difficulties that the body builders and so forth would have in the application of the tax as it was. We have not yet heard the details of how it is to work.

Now, there is here a very important point in this whole subject, which was touched upon by the Financial Secretary. Although he allowed some rather tendentious matter to get into his dialectics, it is one to which I must refer. First, I very much hope we are not going to be led into thinking of the planning of manufactures as of the Government interfering with the laws of supply and demand, because if they do so the laws of supply and demand are going to "lick" them. That is what is going to happen. The main idea of planning in the economic field, I think, as an un- regenerate Tory getting more Tory every day, is to try to help people meet demands for which they have estimated. That is the true idea of planning—not to say that because people cannot conform therefore they ought not to have that assistance.

When we are dealing with Purchase Tax on consumer goods we can see the argument that we do not want people to buy the more expensive goods. It is for that reason that the Government believe in shiny noses and unpowdered cheeks, because they have the tax at 100 per cent. on cosmetics and on lipsticks. That I understand. But when we come down to the field of capital goods, or semi-capital goods, then an entirely different set of circumstances arises, and nothing would be more foolish than to start out on the policy of saying that because people want rather more lorries or commercial vehicles than they did before, therefore they ought to be stopped; because then we should be getting in between the laws of supply and demand.

Not only does this argument apply in relation to lorries and to our whole national economy, but it has other effects inside the industry itself. We have had a very considerable experience—and this is not at all a party matter—of the evil effects of taxation upon the design of motor cars. Those evil effects were acknowledged by the now Minister of Town and Country Planning when I think he very wisely altered the incidence of motor tax and went over to the flat rate tax. When we are imposing a Purchase Tax on commercial vehicles, we not only abandon the idea underlying Purchase Tax that we should restrain undesirable consumption of consumer goods, but we also are distorting commercial demand for commercial vehicles.

That point was very well brought out by two very able speeches from the opposite benches, one by the hon. Member for Leeds, West (Mr. Pannell) and the other by the hon. Member for Southall (Mr. Pargiter). Both said—I think it was they who said it—that the effect of this tax might be to drive people normally using heavy vehicles to the lighter types of vehicles in order to avoid tax; and one hon. Member said that that led to misuse—"over loading," I think, was his phrase—of the lighter vehicles. A short time ago we tried to get away from the disadvantages of distorting design and demand by the taxation of motor cars, and now we are back again in the same position.

I want to discuss for a short time why the tax is vicious in principle. It is really because it taxes the machine tools of an industry. My hon. Friend the Member for Monmouth (Mr. P. Thorneycroft), in his most able and eloquent speech, pointed an analogy by asking what we would think of anybody who proposed to put a tax upon a railway engine now. That is a very striking analogy. In a way, the analogy of the machine tools of industry is still more applicable, although not so striking. Surely, it must be a bad fiscal idea altogether to get at the very root and core of production and impose taxes there. It is bad enough if the drinking water in a house becomes polluted, but the problem is localised. If the reservoir, the whole supply, becomes polluted, then the effects spread out through the whole system. That is what will happen with this type of taxation.

We have heard a great deal about what the Treasury Bench are pleased to call "fiscal weapons." What a very peculiar phrase to use in relation to the productive industry of this country. I have been brought up to think that weapons were things used to defend oneself against enemies, or, if one is very violent, to attack them with. Yet here we have statements by the Financial Secretary that these are fiscal weapons to be used against the people who have been foolish and wicked enough to exceed in their demands the figures laid down by the gentlemen in Whitehall in the Economic Survey for 1950.

At this point in his speech the Financial Secretary—it may have been done deliberately for the purpose of argument —confused the matter of financial and physical methods of control. I turn for one moment to say that our general doctrine is that if we keep a proper financial control over the finances of the country, which can be done by a comparative handful of men, then a great many physical controls now necessary will not be necessary. We do not believe in using fiscal weapons to damp down demand for what are the capital goods of industry, because of the two effects which I say will happen.

All this is made a little more aggravated in our minds because the yield of the tax was at the best very low and after the concessions, which I believe are due to administrative reasons, the yield will be still lower. I suppose that about £10 million or £11 million will be the most that will be raised from this tax. That is really much too small a sum to raise if we are to cause these various ill effects which I am certain will be caused by the imposition of the tax. It is worth mentioning in passing—and I think the right hon. and learned Gentleman would confirm the figure—that the motor industry as a whole is now making a contribution of £225 million a year to the National Exchequer. That sum is much too high, but it is necessary to remember that the Government are going out of these other fields of Petrol Duty right into the field of the productive tools of industry —and that for £10 million or £11 million.

I have only a few other comments to make. First about exports. My information—and I should be very glad to know if the Chancellor confirms or refutes it— is that there is no evidence anywhere of any export demand for commercial vehicles remaining unfilled owing to the pull of the home market. On the contrary, although we have a splendid record in exports, in the last few months commercial vehicles have become more difficult to sell. It would be convincing if the Chancellor could point to export demands which were difficult to fill because of the supply of vehicles being insufficient; but that is not the case at all. What is at present hampering the export of vehicles is the fact that the home market has become most restricted owing to these artificial measures, and therefore the manufacturer has not got his overheads spread over a large enough field, and he finds it difficult to keep up the supply. I am advised that there has been no demand in the export market left unfilled due to the pull of the home market.

6.45 p.m.

I also want to ask the Chancellor whether, as a result of this tax, he imagines that there will be a contraction in the industry in this country. That question has already been asked and it is a point on which the Committee are entitled to information. I think that it will cause a contraction because, for all that the planners say, they cannot plan the export demand. All they can do is to estimate what it may be and try to make the filling of it by private industry as easy as possible. I am very much afraid that the imposition of this tax, which is so vicious in principle, will make cuts in production in England and cause transitional unemployment in this particular industry.

To sum up, there are once again the arguments which we have heard all through yesterday and this morning— "really, right hon. Gentlemen opposite ought not to be so distressed about this; only another half or one per cent. on costs of production." But here we are at a time when every Minister, quite rightly, stresses the need for reduced costs. "We cannot maintain our present standard of living, or increase it, unless the costs of British industry are brought down and unless exports can find their place in the markets of the world at competitive prices." That is the type of speech which we all make, and I am sure that it is the correct type.

But whenever we look at what the hon. Gentleman calls the "fiscal weapons" that he proposes to use against British industry, they always tend, sometimes a little, sometimes a little more, and sometimes greatly, to increase costs and to disprove the words which he uses. Also, the effect, as it is with some other taxes we have discussed, will be to increase costs of distribution. Hon. Members in all parts of the Committee agree that costs of distribution should be kept as low as possible consistent with the amenities which the consumer is entitled to have and the efficient distribution of the goods. But the Government only pay lip-service to the business when they increase the Petrol Duty, which must increase costs of distribution, and then impose a Purchase Tax upon commercial vehicles, a large number of which are engaged in exactly this trade of distribution.

It is for all these reasons, although we are grateful for the concessions of which we have been told this afternoon, that we believe that this tax is based upon a thoroughly unsound principle and that the revenue which it will raise is very small; and therefore we propose to press our Amendment to a Division.

The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) has put very clearly the point of view which hon. Gentlemen opposite hold in this matter. [Interruption.] I am delighted to see the right hon. Gentleman the Member for Woodford (Mr. Churchill) has crossed the Floor and joined us on this side of the Committee. It reminds me of an occasion when the right hon. Gentleman offered to become a Socialist if I would drink a bottle of champagne.

I hope that the right hon. and learned Gentleman will not be led into the supposition that my right hon. Friend is entirely behind him.

No, I am not led into that supposition any more than I was led on the occasion I have mentioned.

I see no reference to this in the Amendment under discussion.

It is illustrative.

The right hon. Member for Aldershot said that these so-called concessions announced by my hon. Friend appear to have been made more for convenience than from a desire to mitigate the tax. That is perfectly true so far as the chassis arrangement is concerned. We were not able, as my hon. Friend said, to consult the industry fully before the Budget. Immediately after it, we got into consultation with them, and we found that for their convenience, as well as for our own, it would be much better to make this a tax upon the chassis. So far as the electrical vehicles are concerned, that, I think, could correctly be called a concession, beause we took them out on the strength of the argument put before us by deputations and others dealing with that subject matter.

When the right hon. Gentleman came to deal with his idea of what planning should and should not do, I think that he gave a perfect definition of the policy of the Conservative Party as being completely laissez faire. That is to say, he said that planning must not interfere with supply and demand; it must only accentuate it. That is not only laissez faire but increased laissez faire.

I did not say that.

I think that the right hon. Gentleman will see that he did, if he looks at HANSARD tomorrow.

"Accentuate" supply and demand—I do not remember saying that word in the last 36 hours.

The right hon. Gentleman may not have used the word "accentuate," but he said that so far as interfering with supply and demand, it must facilitate it. "Facilitate," I think, was the word used. He wants to accentuate the forces of supply and demand so as to drag more easily the supply into the channel of demand. [Interruption.] I am not suggesting what the hon. Member for Monmouth (Mr. P. Thorneycroft) wants, I am talking about what the right hon. Gentleman said. It will all be in HANSARD, and I can be challenged through HANSARD tomorrow. If I am wrong, I will take the opportunity of apologising to the right hon. Gentleman on the next occasion.

I mentioned that because I thought that it was perfectly fair to point out the difference between the two sides of the Committee on this subject. We believe that it is necessary, especially in the matter of the capital investment programme, to take steps to interfere with what would be the supply and demand pull if it were left unchecked. For instance, there was a great demand after the war for all sorts of luxury building. We felt it essential to interfere with that demand in order that the resources might be channelled into something which we believed would be more useful but less profitable to the builder. I take that as a typical case.

Exactly in the same way here, where resources of steel are being utilised in the interests of the country, or should be utilised in the interests of the country, we believe that however great the desire may be of people to utilise it in a certain way, there must be limits to the amount of encouragement of its use in that way in which the State should indulge.

Am I right in supposing that the demand for steel for the increased production of commercial vehicles represents 37,000 tons out of a production of 15 million tons.

Certainly. The right hon. Gentleman knows, and he and his hon. Friends have said, that one of the worst forms of inflation is to try to do too much capital investment, and they have constantly said that we are trying to do too much and we ought to cut down our capital investment. The question is: What capital investment are we to cut down? The right hon. Gentleman is now saying that we ought to use physical methods of control, and he asked why did we abandon the allocation of steel. The reason we abandoned the allocation of certain kinds of steel, not all kinds, is because when we get a certain volume of supply, physical control becomes less effective, as everyone knows. We get a black market seeping through the physical control which it would need an enormous number of people to police, and it becomes necessary, as we have always said, to substitute other forms of control—fiscal or financial.

The right hon. Gentleman prefers financial. We use financial control in a number of matters, as I mentioned in the Budget, and we use fiscal control in others. I think that it is a most extraordinary argument to hear, coming from the benches opposite, that fiscal control should not be used on capital goods. Who was it, who, in 1932, imposed import duties on steel and machinery? It was the right hon. and hon. Gentlemen opposite. Those taxes have continued, as everyone knows. In fact we had in Clause 10 yesterday to exempt certain kinds of machinery from those taxes which were made on imports of machinery into this country, and which now run at 20 per cent. The steel taxes imposed at that time, I think, ran to 33⅓ per cent.

I hope that I am following the argument, but surely there is a great difference between the impost of taxes on foreign imported manufacture and a Purchase Tax on British manufacture. I do not follow the analogy.

I should have thought that both were fiscal methods of controlling supply. One controls home supply and the other controls foreign supply. If the right hon. Gentleman is talking of capital investments, the person who wanted steel to put up a building, and who wanted to import it from Belgium at that period of time, was compelled to pay 33⅓ per cent. duty on it. Why? In order to stop him doing it.

No.

The right hon. Gentleman will not convince me, and he will not convince any one who has read the argument dealing with this, that the reason for putting on an import duty is not in order to stop as much of the supply coming in as would come in if there were no import duty.

To stop him from using the Belgian steel.

The right hon. Gentleman said that it was in order to stop him from using the steel. The object of the import duty is to stop him from using the Belgian steel. That is the object of it. It is done by making the Belgian steel more expensive. Therefore, he has to pay more for British steel. This is all perfectly obvious.

The right hon. and learned Gentleman and I were both in the House at the time of the passage of the Import Duties Act and the fiscal operations of 1932. I am sure that he recalls that one of the chief objects of the tariff which has been described to the Committee was that it was a Revenue tariff to help balance the Budget after the economic crisis.

No. This was a duty, if I remember rightly, which was imposed I think on the recommendation of the May Committee. Their recommendation was not on Revenue grounds. It was on production grounds for the steel industry of this country, and the steel industry had to make certain promises as to what it would do to put its house in order, in order to meet this competition. The object of the protection was to stop people getting the cheaper steel which they would otherwise have used from Belgium and to make them buy the more expensive steel they got from this country.

Will the right hon. and learned Gentleman in his flow of dialectics explain how the impost of Purchase Tax on commercial vehicles manufactured in this country is to help our trade against the foreigners?

I am afraid that the right hon. Gentleman cannot evade his part by asking me to explain my part. I am somewhat surprised to hear the right hon. Gentleman inveighing against any taxes on capital goods for the industries of this country, when his friends themselves imposed in 1932 by fiscal means a tax upon capital goods used in British industry. Never mind what the purpose was. We are talking about planning. Was this not a case of planning by the Conservative Party by fiscal means in order to raise the price of steel?

Hon. Members opposite, particularly the hon. Member for Southall (Mr. Pargiter), have pointed out that the planning which the right hon. and learned Gentleman is doing will create unemployment, whereas the planning referred to in 1932 was to do away with the terrible unemployment figures.

I am not impugning the motives in 1932. All I am saying is that planning was used, by fiscal methods, to prevent people doing what they wanted to do, to wit, to buy steel from abroad. All I am saying is that in these circumstances it is very odd that Members opposite should object to fiscal methods of planning, as they have naturally used these methods themselves. The fact is we believe that in this particular case, owing to the over-expenditure in the capital investment programme on this item, the best and only effective way to limit it is by fiscal means.

Over-expenditure on what grounds?

Over-expenditure on the basis that it has been discussed in successive years in the Surveys on the capital investment programme, which so far as I know have never been criticised by Members opposite. It has been in separate documents, and it has been in the Economic Surveys. They have always admitted as far as I know, and they admit it now, that we have to have a balance between the different items. We cannot, in fact, allow any one item to run away.

We have to balance our building for factories, schools and hospitals, and the use of machinery for the railways and electricity and water supplies. These all have to have some allocation. We cannot do all the things we want. Everyone agrees about that. Therefore, we have to allocate our resources as best we can. In that allocation we have said that more has been devoted to this type of capital investment than we can afford as a nation if we are to do the other things which are also necessary. That may be right or wrong.

It certainly is wrong.

The right hon. Gentleman has no material whatsoever on which to base that observation.

Surely the Chancellor knows that the various White Papers that have been published have steadily contradicted one another, and that his planners have had the misfortune to be perpetually mistaken?

This does not advance the knowledge of anyone as regards what the right hon. Gentleman thinks the capital should be spent on; whether he thinks more should be spent on vehicles, and, if so, from where it should come.

The planners do not know either.

It is the right hon. Gentleman who is at the moment making the statement that it is wrong. I am merely asking what is right.

Not the planning.

The right hon. Gentleman does not know. The point is, whether we rightly or wrongly have taken this view, that there is over-investment on this item, and the proper method to stop over-investment is to apply fiscal methods such as we suggest. It is on that basis that we ask the Committee to proceed with this.

The right hon. Gentleman the Member for Aldershot said that as far as he was concerned there did not seem to be any

I did not say that. I said my advice was that there was no demand which had remained unfulfilled because of the pull of the home market, which is a little different.

I am sorry, but I thought it was the same thing. But this is precisely what was said four years ago in regard to ordinary motorcars, but by the very strictest limitation of the utilisation of these cars in this country we have created an enormous export trade, despite even what the trade itself though possible at the time. Curiously enough, there has been a 33⅓ per cent. tax on these cars all the time. I am not saying that is a reason, but it happens to be a coincidence.

There is no reason, in our view, why there should be a contraction of the industry, any more than there was a contraction in the case of the motorcar industry when we stopped the sale of cars in this country. We believe that markets will be found overseas for these vehicles and that it will not be necessary to contract the industry. It is on these grounds that we ask the Committee, somewhat artificially, I am bound to say, to reject this Amendment, as we are later to ask the Committee to reject the Clause in order to put down a new one. However. I think it will clarify the position on both sides if we resist this Amendment, and we are prepared to proceed to a Division to show what are our views.

This is a remarkable Clause, and a remarkable situation has arisen in regard to it. The Clause has been withdrawn by the Chancellor himself.

Not yet.

He has announced that it will be negatived, or voted against, with the object of substituting another Clause. It is a Clause imposing an important tax. The speech delivered by the Financial Secretary to the Treasury in favour of negativing the Clause was also very remarkable. He told us that it was impossible beforehand to have full consultation with the interests involved. He said something to this effect: "We were unable to discuss and find out what was the proper incidence of the tax and how it would work, and because of that we put the tax in as a guess, as a shot in the dark." That is the way in which the Finance Bill has been built up. The Treasury put in a Clause and let the House of Commons solemnly discuss it, and then they come to the Committee and withdraw it, although it contains such an important tax. It was a shot in the dark, a pure guess by the Treasury, to put the Clause in.

We are glad to see this Clause because we remember having a discussion on the matter five years ago when the then Chancellor of the Exchequer made the concession. The only thing I want to ask is why this particular form of Clause has been adopted. As I read the Clause, it means that the extension of this exemption from Purchase Tax upon war memorials is for another five years. I hope that the Government will look at this matter between now and the Report stage to see whether the exemption ought not to be made permanent. It does not seem to me that there are likely to be memorials erected 10 years after the war, but if one were not quite completed or more had to be done to it, it would be a pity if we had to re-enact a further extension. This is only a small point but I think it is worth looking at, and I hope the Clause can be re-drafted so that the exemption will be permanent.

It was pointed out by the predecessor of the present Chancellor that this relief for a particular user must be regarded as an exceptional relief. It was for that reason that he said he felt obliged to put some term upon the relief which he gave, and that position still holds. It would be rather dangerous to start giving relief in respect of particular users in this way. In the circumstances, the position is as it was when the then Chancellor gave the relief in 1945. Without making any kind of promise and after listening to what the right hon. and gallant Gentleman has said, I think that is as far as I can go.

I wonder whether the right hon. and learned Gentleman, when reconsidering the matter, would bear in mind that this exemption is entirely outside the ordinary run of matters dealt with by Purchase Tax. I have no doubt that he has had this matter very much in front of him, but I would remind him that although the marginal note to the Clause says that it is dealing with an extension of Purchase Tax exemption in regard to war memorials, the Clause operates only in respect of war memorials inside churches and places of religious worship. For that reason I urge upon the right hon. and learned Gentleman that the circumstances are somewhat exceptional.

I think that he was one of those in charge of the Finance Bill in the autumn of 1945 when this matter was originally discussed, again in the middle of the night. It was at least dawn, and the Committee was somewhat tired with its exertions, when the previous Chancellor of the Exchequer, after a considerable expression of view from all sides of the Committee, agreed to make the concession. The reason I now ask the right hon. and learned Gentleman to give this matter particularly sympathetic consideration is that he will be aware that before a war memorial can be erected inside a church at all, there is a somewhat lengthy procedure of obtaining a faculty for that purpose.

I happen to know this, because I was connected with the erection of a war memorial in the Thames Estuary, and I know how long it took to obtain the faculty for erecting it. On the occasion of its unveiling, the vicar of the church said, in impressive language which drew a great response among the company present: "This memorial will remain here as long as this church stands." That is, of course, the situation with these memorials. They are not admitted for erection in the churches except on that understanding and on that basis.

That being so, is it not rather unfortunate that it should be necessary to come back to Parliament every five years for the remission of a tax which I am certain no member of any party would wish to impose? I am sure that no hon. Lady or hon. Gentleman in the Committee, or outside it, would wish to see Purchase Tax imposed upon the very sacred memorials to those who fell in one or other of the great wars. It would be a very proper gesture which would be appreciated by thousands, I was going to say millions, of people throughout the land who have associations with these memorials if, on the Report stage, the Government could say: "Here and now, away with Purchase Tax on these memorials."

I desire to support what has been said by my hon. and gallant Friends, only in a rather different direction. I am concerned with the memorials for all men and women who served in the war and whose memorials are erected in public places. It would not be appropriate to erect memorials to them in religious places because they were not members of particular Churches. Am I to understand that if such a memorial were erected in a place or building which was not for religious worship the Clause would not apply?

indicated assent.

I should have thought that as they all fell in a common cause, as Christians, Jews, Methodists and members of the Church of Scotland, it might be difficult to find a particular religious building in which their memorial could properly be placed. As it is, if the memorial were placed in a public park, then the conditions laid down in the Clause do not obtain. I therefore ask the Solicitor-General to consider whether, if all the other qualifications are satisfied, the phrase relating to a place of religious worship could be permitted not to apply?

I have listened to what has been said by hon. Gentlemen opposite. As I said when I previously addressed the Committee, this relief must be regarded as exceptional. I can give no kind of undertaking at all, but we will carefully consider what has been said. We understand the feeling behind the sentiments that have been voiced, and we will carefully consider the matter.

There is another point which I would like to put. There is a practice of placing flags upon war memorials. Those flags become damaged by weather and in other ways, and at intervals have to be replaced by new flags. I think I am right in saying that the material of which the flags are made is subject to Purchase Tax. I suggest that the question might be considered of exempting from Purchase Tax the textile materials of which these flags are made. Otherwise those flags may in the end have attracted more Purchase Tax than the actual materials of which the war memorials themselves are made.

I wish to bring to the attention of the Committee the very considerable dissatisfaction which exists in His Majesty's Navy, particularly among the ratings, regarding the reduction of the store allowance of duty-free tobacco from 1 lb. to ¾ lb. for a shore-based establishment and from 2 lbs. to 1½ lbs. for sea-going ships. I suppose we shall be told that the reduction has been made in order to lower the demand from the Service in conformity with what has been demanded of the civilian population and that it is an effort to get the Navy to play its part in easing the situation which has arisen through the shortage of dollars. However, it has caused very considerable dissatisfaction.

I am also told that the Government have been concerned at some abuses which have arisen in regard to the administration of the duty-free tobacco, and we are told that as a result of the Government's new arrangements more will benefit from the concession than has been possible in the past, and that therefore on that ground there is a case for a slight reduction. But if the cut in the tobacco of the serving man in the Navy has been brought about in order to save dollars, there is equally a case for a reduction in the free coal concession to miners. Although coal may not cost dollars, it does earn hard currency, and if it is right that naval personnel should have their tobacco cut because tobacco costs dollars the argument can equally be put forward in our present position that a cut should be made in the free coal allowed to miners, because it can earn hard currency. If it is to be a case of fair shares, naval personnel should not be the only people who are asked to make concessions.

I submit that there is no real case for saying that there will be any saving in dollars because of the reduction of dutyfree tobacco to the Navy. It is now possible for a man in the Navy to purchase as much tobacco as he was receiving before and the only change is that the Exchequer will now collect from naval ratings the money which in the past has been lost by allowing them to receive duty-free tobacco. It is obvious that this puts no restriction on the amount of tobacco which the naval rating can consume. All it does is to impose a greater cost on him if he wishes to smoke as much as he did before. That is one of the reasons for the very considerable amount of irritation which exists at the moment.

The Opposition feel that if this has been imposed in order to bring the Navy into line with the rest of the country, which has been asked to use less tobacco because of the shortage of dollars, there shoudl be no further cuts, and we ask that the reduction in the issue of duty-free store tobacco shall be reinstated at the earliest possible moment. I am concerned about this chiefly because of the irritation which exists. The best interests of recruitment to His Majesty's Forces are not served when these little pinpricks— that is how naval personnel look upon them—are constantly being levelled against them. I am delighted to see the Parliamentary Secretary to the Admiralty in his place. As a result of his knowledge of the lower deck he will realise that that is a danger, and I feel sure that we shall receive an assurance that the cut will at least be temporary and that no more cuts are envisaged

I support the plea made by my hon. and gallant Friend the Member for Gillingham (Squadron-Leader Burden). In the first place, the Clause regularises a situation which has been recognised as requiring attention for almost 20 years. As one who had the honour of serving in that great Service I can say that one objects to any interference with the rights and privileges of the Navy, for that is natural, but we recognise that something has to be done.

The other matter to which my hon. and gallant Friend referred is the cutting down of the allowance of tobacco to men serving in His Majesty's ships and also in certain shore establishments. That is something which is very grievously felt by all ranks and ratings in the Service, and we would only agree to it on the grounds that it equalises the situation as between those who serve in the Navy and those who are civilians or are employed in the other Fighting Forces of the Crown. We should first like to be absolutely assured that that is what is happening. We should also like to have some further explanation of how dollars will be saved in view of the fact that a naval rating, like anyone else, can now purchase as much tobacco as he likes.

What we want principally from the Government are the two assurances for which my hon. and gallant Friend asks. I will repeat them. The Navy is suffering a 25 per cent. cut at present—it is an overall cut of 20 per cent. but it is spread out and the actual cut is 25 per cent.— from 2 lb. to l½lb. and from 1 lb. to ¾ lb. We want to be absolutely certain that this will be restored as soon as it is possible to do so, and that no further cut whatever will be applied to the naval issue of tobacco. I hope that we may have those assurances.

I have not served in the Navy but only in the Mercantile Marine, and I am not quite certain what the practice is in the Navy. As soon as a ship gets outside the three-mile limit the seals are taken off—

Not in the Navy.

No, but the Mercantile Marine goes to sea much more than the Navy does. I fully recognise that, and that is probably one of the difficulties. The merchant seaman spends the greater part of his life at sea but the man in the Navy spends the greater part of his life ashore, which is one of the difficulties that arise. I should like a little technical explanation from those who are supposed to know. It appears that many men in the Navy will now be put in a much worse position than men in the Mercantile Marine. Maybe the trouble is my complete ignorance of the practice with regard to cheap wines and tobacco in the Navy. I do not wish to see the men in the Navy worse off than the men in the Merchant Service.

I fully support what my hon. and gallant Friend the Member for Pollok (Commander Galbraith) has said but I am not quite clear about subsection (5), which says that the power of the Treasury is to be exercised by Statutory Instrument. In point of fact this has been brought about by an Admiralty Fleet Order. Is that a Statutory Instrument or not? Do we get a chance of speaking on this A.F.O. which will carry out the power of the Treasury in this respect, or is it likely to take effect without any discussion?

As the hon. and gallant Member for Pollok (Commander Galbraith) said, what we are considering now is Clause 15 of the Bill which gives us power later on, to make regulations which will be brought before the House for its assent under the Statutory Instrument procedure.

The Minister is not quite right. It would not be for the assent of the House. It would automatically have effect unless somebody prayed against it.

Well, if it is not for the assent of the House, it is for the dissent of the House. It makes no practical difference to the result. [HON. MEMBERS: "Oh"] Let us not have a quarrel about that on this occasion. Let me put it in a completely non-controversial way by saying to the hon. and gallant Member for Merton and Morden (Captain Ryder) that the House will have an opportunity of expressing a view about this matter if it wishes to do so.

There is an Admiralty Fleet Order in print now, but it is not dated and is presumably waiting for this Clause to become law.

indicated assent.

What would be the next step?

The hon. and gallant Member is quite right. There is an Admiralty Fleet Order in being. The cut has not yet been applied and will not be until the proper procedure has been followed. This was done in order to give the Fleet advance notice and as much of the details as we could give in explanation of the few words that the Chancellor said about this in his Budget statement.

I think the subsections of the Bill are as reasonably clear as draftsmen ever make subsections and it would perhaps not be proper that we should discuss the details which will come in the regulations later on. However, as the point has been raised, perhaps I may put the picture in its proper frame. It is clear, and it would be wrong for me to deny, that the men in the Navy will suffer a cut which amounts to 25 per cent. of their tobacco allowance.

If I may say so to the hon. and gallant Member for Pollok, without being pedantic, it is not the Navy which is suffering the cut but the men in the Navy, because the Navy as a whole will not be suffering as great a cut as that since there is a spread-over, This means that instead of resentment—which I am bound to say I have not found and I have been round quite a bit in the last few weeks, though the hon. and gallant Member for Gillingham (Squadron-Leader Burden) said he had found some—many men in the Navy are prepared to accept this cut because it is bringing in a large number of other men who were just as much entitled to the duty-free tobacco as are the chaps who were getting it formerly. The new regulations will enable us to bring in these men and to ensure that almost every man in the Navy, with certain minor exceptions, will be entitled to dutyfree tobacco. That is a substantial improvement over the existing condition and will remove many grievances and irritations.

I will give some idea of the continuing value of this concession because I would not like it to go out from this Committee that whittling away has made it nugatory. A man in a sea-going ship will be entitled to 1½ lb. of tobacco, which makes about 600 cigarettes a month. He will in due course be able to get some of them in the form of "blue liners" as they are now called—we used to call them "ticklers"—because they have a line down the middle with "H.M. Ships only" on them. They will cost 8s. for 400. He will also get 200 cigarettes of proprietory brands in the canteen at 7s. 11d. which will cost him together 15s. 11d. a month for 20 cigarettes a day. In civilian life the same cost is, I am told, £5 5s., so in fact this concession is a valuable one and will save him nearly £4 10s. a month.

Similarly, for shore-going establishments it is of the same sort of order. A man will get 300 "blue liners" a month for 6s. So this is an extremely valuable concession for the Navy which is now being put on a proper legislative basis; the custom which has grown up will now have legal backing, and the Admiralty will play a substantial part in its administration. I hope, therefore, that the Committee will give us the Clause.

May I ask the Parliamentary Secretary a question to clarify the last part of what he said? Is it still the case that duty-free tobacco is available only in shore establishments where the Customs authorities are satisfied that the proper arrangements are being made for the checking of liberty men, and so on, going ashore, to get rid of an obvious abuse? I take it that it is not the case that every naval rating serving ashore will necessarily get duty-free tobacco but will get it if he is in a shore establishment for which proper arrangements are made?

That is broadly true, but by changing the nature of the safeguards we intend to extend this concession widely. At the moment it depends on an establishment being fenced in, whereas if we apply other methods of administration it is possible to bring in many more men.

The hon. Gentleman has not given either of the assurances for which I asked. I do not know if he is going to do so?

I do not think the hon. and gallant Member really expects that I can give assurances about the future in that way. There is no intention at the present time of making any further cut, but I cannot say categorically that the cut will be restored. I do not think I can be expected to bind my successors on either of those matters and it would hardly be right to ask me to do so. The hon. and gallant Member also asked me about how the dollar saving was to be effected. It is being effected to some extent by using more non-dollar tobacco in the victualling yard tobacco supplies. I would like to be in a position to give those assurances but I doubt whether it would be proper for me to do so. On the other hand, I would not like the hon. and gallant Member to conclude that because I am not in a position to give those assurances, a further cut is contemplated, because that would not be true either.

Would the hon. Gentleman be able to go as far as to say that it is the intention of His Majesty's Government, when the financial situation allows, to restore the issue to the same standard as it has been up till now?

That is a little hypothetical. We have to set off against the cut now being made the increase that is being given to several thousands of men who are being brought in. I do not wish to bind myself either way. I do not wish to say categorically that the cut will not be restored but, on the other hand, I cannot be expected to say that it will be restored. Is it not better to let this go as it is at the moment? I think we can always trust the Admiralty not to be backward in restoring this concession when it is possible to do so.

This, of course, is the Income Tax Clause, but as you know, Sir Charles, we have an Amendment down on Clause 19 which, if carried, would increase the reliefs. I wonder whether it would be for the convenience of everybody if, instead of discussing Income Tax at this stage, we could have a wider discussion on the Amendment which I hope to move, which would bring that matter into the proper relationship with the general Income Tax position?

I understand that the right hon. and gallant Gentleman is referring to the Amendment to Clause 19.

That is right.

It will be perfectly convenient for us to discuss any Income Tax matter on that Amendment.

Would it be permissible, Sir Charles, under that arrangement, to discuss the standard rate of taxation as it affects production and savings?

I am rather doubtful about that.