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Hydrocarbon Oils

Volume 486: debated on Tuesday 10 April 1951

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In the last Budget, the duty on petrol and other light hydrocarbon oils was raised from 9d. to 1s. 6d. a gallon. This was the first increase in the tax since

before the war, and in my opinion was overdue. Although there was, of course, much argument about its merits during the Budget and Finance Bill Debates, I have seen little sign of the damage which it was alleged at the time the tax would cause to British industry and transport. I am satisfied that in our present circumstances there is a good case for a further contribution from this source to provide additional revenue. I propose, therefore, to raise by 4½d. a gallon—half the increase made last year—the Customs Duty on petrol and other light oils and on heavy oils used as road fuel. The increase will apply to any oils of this kind which become chargeable with duty, from 6 o'clock this evening. [ Laughter.] I hope that there will be no sudden exodus from the Chamber.

The new maximum prices, including the extra duty, will become effective at the garages after midnight tonight. As a result of this change, the basic retail price of petrol will be raised to 3s. 6d. a gallon. Even so, it will still be lower, in some cases substantially lower, than in most European countries.

It was estimated during the debates last year that the effect of the increase then imposed on the operating costs of commercial and passenger transport was about 4 per cent. The present increase, therefore, of 4½d. a gallon will raise operating costs by no more than 2 per cent. This is a very slight increase, and would not on its own justify any increase in fares or freight charges.

As the Committee will be aware there is at present a preference for indigenous oils of 9d. a gallon. I see no reason to change the extent of this margin, and the duty on indigenous oils will therefore also be increased by 4½d. a gallon from today. There will be corresponding adjustments in the rates on petrol substitutes and power methylated spirits which come into the same group. The extra yield of these changes I estimate at £35 million in 1951–52 and £36 million in a full year.

That leaves us with some £75 million still to be found. I do not propose to increase any other indirect tax. It would not, in my view, be wise to raise the duty on tobacco, or beer or other alcoholic drinks, which are already at very high levels.