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Orders Of The Day

Volume 931: debated on Monday 9 May 1977

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

Finance Bill

(Clauses 14, 15 and 21; new clauses relating to value added tax, subcontractors in the construction industry, benefits from employment (motor cars), and capital gains tax)

Considered in Committee.

[Mr. OSCAR MURTON in the Chair]

4.11 p.m.

Before I call the first amendment, I have two announcements to make. The first is that I regret that an amendment to Clause 15 in the name of the Leader of the Liberal Party, the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel), and his right hon. and hon. Friends was left off today's marshalled list of amendments. The amendment, No. 24A, has now been made available in typescript form in the Vote Office, and I have decided that it should be grouped for debate with Amendment No. 15.

Secondly, I have received two manuscript amendments, one to Government Amendment No. 1 and one to Government Amendment No. 10, in the names of the right hon. and learned Member for Surrey, East (Sir G. Howe) and some of his hon. Friends. I have decided to select these two amendments, and a typescript of them is also being made available. The first group of amendments will accordingly consist of Government Amendment No. 1, with the manuscript amendment; Amendments Nos. 2, 3 and 4; Government Amendment No. 10, with the manuscript amendment; and Amendment No. 11.

On a point of order, Mr. Murton. My right hon. and hon. Friends and I tabled an amendment on 2nd May, which is on page 2289 of the Notice Paper, in identical terms to Amendment No. 3 in the name of the right hon. and learned Member for Surrey, East (Sir G. Howe).

That is correct. The names of the hon. Member for Perth and East Perthshire (Mr. Crawford) and his right hon. and hon. Friends were added to that amendment.

On a point of order, Mr. Murton. It will be within your knowledge that Hansard for last Friday is not available. Since we are to debate the Finance Bill on Tuesday and Thursday, can you tell us whether the Official Report for today will be available? It is essential that we should have it on Tuesday and Thursday if we are to continue a meaningful debate on the Bill.

I regret to inform the hon. Gentleman that that is not a matter for the Chair.

Further to that point of order, Mr. Murton. I wish to stress the importance of the point made by my hon. Friend the Member for Eastbourne (Mr. Gow). I am glad to see that the Leader of the House is present. He will appreciate that in a Committee stage of this kind it is most important, particularly with debates that go into the following day, that we should have access to properly printed Hansard reports of proceedings. If Hansard is not available, will the Leader of the House give any assurance about the availability of typed versions? Is there any possibility of using the emergency printing presses that languish in the Basement and might be put to good use for this purpose? It is of great importance that we should have access to reports of this kind.

The Lord President of the Council and Leader of the House of Commons
(Mr. Michael Foot)

I fully appreciate the great inconvenience caused to the House by hold-ups in the provision of documents. We shall do everything possible to overcome it, but I cannot give any exact undertaking about what will happen. We shall do our best to meet the problem. I fully appreciate the importance of the matter.

Clause 4

Hydrocarbon Oil Etc

I beg to move Amendment No. 1, in page 5, line 1, leave out subsection (1) and insert—

'(1) The rate of the duty of excise charged by section 11 of the Finance (No. 2) Act 1975 (hydrocarbon oil etc.) shall differ according to whether the oil is light oil or heavy oil; and accordingly—
  • (a) in that section after the words "£0·3000 a gallon" there shall be inserted the words "in the case of light oil and £0·3500 a gallon in the case of heavy oil";
  • (b) in the following provisions (under which duty is charged by reference to the duty on hydrocarbon oil), that is to say—
  • (i) section 6 of the Hydrocarbon Oil (Customs & Excise) Act 1971 (petrol substitutes and power methylated spirits);
  • (ii) section 3(3) and (4)(c) of the Finance Act 1971 and Article 3 of the Excise Duties (Gas as Road Fuel) Order 1972.
  • for the words "hydrocarbon oil" there shall be substituted the words "light oil"; and
  • (c) in section 92(2) of the Finance Act 1965 (grants towards duty on bus fuel) for the words "hydrocarbon oil" there shall be substituted the words "heavy oil".'.
  • With this we are taking the following:

    The manuscript amendment to Government Amendment No. 1, leave out from first 'shall' to the end and insert:
    'be at the rate of £0·3000 a gallon'.
    Amendment No. 2s, in page 5, line 1, leave out subsection (1) and insert:
    '(1) At the end of section 9(1) of the Finance Act 1976 (Increase of duty on hydrycarbon oil, etc.), there shall be added the words "except for the period from 29th March 1977 to 31st May 1977, when the duty charged shall be £0·3500 a gallon.".'
    Amendment No. 3, in page 5, line 1, leave out subsection (1).

    Amendment No. 4, in page 5, line 3, after shall ', insert:
    'as respects the period beginning at 6 o'clock in the evening of 29th March 1977 and ending at 6 o'clock in the evening of 5th August 1977'.
    Government Amendment No. 10, in page 5, line 31, at end add:
    'but as respects the period beginning at that time and ending at 6 o'clock in the evening of 5th August 1977 the rate of the duty of excise charged by section 11 of the said Act of 1975 shall, notwithstanding subsection (1) above, be £0·3500 a gallon in the case of light oil as well as heavy oil and the provisions mentioned in paragraph (b) of that subsection shall have effect accordingly'.
    Manuscript amendment to Government Amendment No. 10, leave out '5th August' and insert '31st May'.

    Amendment No. 11, in page 5, line 31, at end add:
    'and shall cease to have effect at midnight on the last day of May 1977'.

    May I thank you, Mr. Murton, for your consideration in accepting the manuscript amendments, the first of which is intended to extend the range of Government Amendment No. 1 to cover derv as well as petrol. The Government tabled that amendment on Thursday, by which time the Notice Paper was not being printed in the ordinary way. On Friday the House rose at 1.30 p.m., and most hon. Members on both sides of the House—but Conservative Members with more effect—were enagaged in the local elections of Thursday and Friday. This is literally the first opportunity we have had of tabling our amendment. It indicates the undesirability of the Government's proceeding to these rather belated changes of mind as a result of whatever transactions may or may not have taken place with their colleagues in the Liberal Party. international agreements prohibiting illicit payment

    The cost of Amendment No. 1 is £140 million in public sector borrowing requirement terms for 1977–78. It needs to be compared with the loss of revenue for 1977–78 if the Ways and Means Resolution had been lost, which would have been £365 million. The reason for the much lower cost is twofold. In the first instance, it reduces the 5p tax on petrol only and not on derv. Secondly, it deals with the timing. It inserts in Amendment No. 10 the date of 5th August from which this reduction will take place.

    The timing of 5th August has two advantages. First, it avoids very serious administrative problems that would otherwise apply. The manuscript amendment to Amendment No. 10, in the name of the right hon. and learned Member for Surrey, East (Sir G. Howe), seeks to insert the date of 31st May. The problem here is that on the best advice I am told that the Ways and Means Resolution that has been carried by the House would be paramount even if the date of 31st May were inserted. The amendment of the right hon. and learned Gentleman would not take effect until the date of the Royal Assent, whenever that might be. Until Royal Assent, we would be legally obliged to go on collecting the tax under the Ways and Means Resolution. There would then be the consequent chaos to which we referred in the debates on the Budget.

    There would be great difficulty, to put it no higher, in repaying to the motorist—as opposed to the supplier—the actual reduction in the tax. That is one reason why we have not inserted a date earlier than the Royal Assent. We do not know the precise date of the Royal Assent. In view of the uncertainty that would follow if the date was unknown, we felt it would be much better to name a specific date, the last day on which Royal Assent is possible, namely, 5th August. That avoids the administrative problems and uncertainties. I believe that the Committee will prefer this approach to the difficulties that would occur if we accepted the right hon. and learned Gentleman's amendment.

    The second advantage is the cost. The cost of the manuscript amendment, which would alter the date to 31st May, would be to add another £30 million to the public sector borrowing requirement for 1977–78, whereas the Government amendment, together with Amendment No. 10, would minimise the effect on revenue. Therefore, I hope that it will be more acceptable to the Committee.

    I am aware of some of the problems that have been referred to in the Press in the past few days, including the administrative difficulties of 5th August. We could not put "Royal Assent" rather than a specific date, for the reasons I have given, but if the Committee agrees to the amendment I propose to consult trade organisations. If a more appropriate date within a few days of 5th August could be found which was more convenient to all concerned and would create fewer difficulties, I think that on Report it might be possible to insert that date.

    I wish to make clear that I, my right hon. Friend the Chancellor of the Exchequer and the Government as a whole would prefer to keep the whole clause. I make no bones about that. But it is, I suppose, a strange situation. One has to recognise, with the democratic situation that now exists in this place, that there is not a majority in the Committee, as I understand it, for the clause as it stands.

    We may have to get used to this situation in future. Even when, after the next General Election, the Government are returned with a majority, we may well find that Back Benchers are not quite so amenable as they have been in the past to accepting everything that the Government suggest. It is perhaps worth noting the difficulties which Governments may get into from time to time in not being able to carry the whole Committee on a particular clause of a Finance Bill. That is just possible. So I make it clear that, whilst I am unhappy to have to ask the Committee to accept the amendment, I recognise the inevitability of there being no majority for the clause as it stands. This amendment, however, will limit the cost in the best way that we can conceive.

    Does not my right hon. Friend agree that Labour Back Benchers made considerable objection to the proposed increase on petrol, and that some indicated their intention to vote against this clause?

    I had it in mind to come to that point. I am aware of my hon. Friend's views, which are shared by many others of my hon. Friends. But, speaking for myself, quite apart from the other arguments, to which I shall come. If I had £140 million to spend this would not be my priority about the way to spend it. Nevertheless, as I say, I accept that that is not the view of the majority of the Committee. We have, as my hon. Friend has said, received very strong representations from some of my hon. Friends, from people outside the Committee, from right hon. and hon. Members in the Liberal Party, from trade union leaders and many others on this point. We were bound to take note of them—hence this amendment.

    I recognise the understandable concern, expressed in the Budget debate and on Second Reading, about those in rural areas and in heavily built-up urban areas who are running motor cars that they can barely afford to run. There are very serious problems, particularly in rural areas, where there is no other way of getting to work because there is no public transport service.

    But again I do not think that dealing with those problems by reducing the petrol tax is the best way to help. Surely the way to help lower income groups, whether in rural or urban areas, is to have a decent public transport service, or to do it through social security benefits, or to see a real increase in net take-home pay.

    In considering the major problems of transport in the rural areas, one should look at what has happened in what are called the shire counties. My right hon. Friend the Secretary of State for Transport told the House last week that he increased the allocation of transport supplementary grant to shire counties in order to enable them to spend more on public service transport, but then found that the Tory-controlled shire councils did not spend the money on it. So when I hear the Conservatives complaining to us about rural transport problems, I find it a little difficult to take.

    Is not the right hon. Gentleman forgetting that the remainder of the money for such support would have to come from the budgets of the councils themselves, which are being pressed by the Government not to spend more—indeed, to cut their budgets? Is he not being ambivalent?

    I am not. The hon. Gentleman should read last week's debate. My right hon. Friend the Secretary of State for Transport told the House then that he made an allocation of the transport supplementary grant on the basis of proposals put by the shire counties. There are not now many Labour-controlled shire counties, and there were not even before last Thursday. These shire councils, having received grant on the basis of their own proposals, have in some cases changed them. So, as I have said, when I hear the Conservatives talking to us about the problems of rural transport, and that sort of thing happens in the shire counties, I find their complaints a little difficult to take.

    I still believe that the arguments for an increase in the petrol tax are sound. I shall not go into detail of the main reasons, because we have been through them before. But there is, first, the conservation argument. It is true that the actual impact would be marginal, but, on the other hand, to go the opposite way is to reverse the situation. A decline in petrol tax must surely be the wrong way of dealing with the problem of petrol conservation.

    Secondly, there is the question of the switch to indirect taxes in order to enable us to reduce direct tax. The proposed increase in petrol tax was not even a real increase in indirect taxation. Thirdly, there are the alternatives. The right hon. and learned Member for Surrey, East and his hon. Friends are constantly telling us about the alternative of value added tax. But the VAT alternative, and, indeed, any other, has a worse effect on the retail price index and a worse effect on employment.

    Fourthly, the tax increase would mean a "relatively small increase" in petrol prices. That is not my choice of words. I am not sure that I would have chosen them precisely. They were used by the hon. Member for Guildford (Mr. Howell) on Second Reading. But it is a small effect.

    In my view, no real case has been made against the Government's proposal to increase the petrol tax. Nevertheless, as I have said, we recognise that, while we have the best of the argument and the best case, there is a majority against us in the Committee. But the problem will not go away. We shall have to come back to the problem of the petrol tax, as otherwise it would be the one indirect tax to decline, and I cannot believe that that is what the Opposition really want.

    The idea of indexing taxation is extraordinary coming from a Government who cause inflation. Why, therefore, does not the right hon. Gentleman propose indexed allowances also for the benefit of the taxpayer?

    I am not sure whether the hon. Gentleman is arguing in favour of keeping the 5p petrol tax in line with inflation from last year.

    He is not? I am still not sure of his argument. We are increasing personal tax allowances, although not as much as we would have liked. The right hon. and learned Member for Surrey, East has never argued in favour of indexation. Nor have I. But he is in favour of a switch to indirect taxation. Surely it is consistent with that thinking to maintain the petrol tax in line with inflation as from April 1976. If we do not, it will go into decline as a proportion of total taxation.

    The hon. Member for Blaby (Mr. Lawson) is remarkable. He suggests that a change from one year to another in line with inflation is indexing. I know that he has tried very hard to persuade his Front Bench of the virtues of indexing. He has tried since he joined the Opposition Front Bench, just as he tried before he joined it. I know that the fact that he is sitting behind the right hon. and learned Member for Surrey, East means that he has only to whisper in his ear. The right hon. and learned Gentleman is not as well up on this matter as the hon. Gentleman is, so the hon. Gentleman has to do so. An increase in indirect taxation from one year to another because of inflation is not indexation.

    I know that the hon. Gentleman wants to commit his Front Bench to the indexation of personal tax allowances and indirect taxes, presumably on a proper and full basis. He has not been able to convince his own Front Bench, and I am bound to tell him that he has not been able to convince me. Indeed, he has not been able to convince the House, and he will not be surprised to learn that I do not propose to suggest at this stage that we should move towards a form of indexation.

    4.30 p.m.

    The right hon. Gentleman is a little confused. I have always made it clear that, as in every other country that uses some form of indexation, it does not preclude discretionary changes in taxation, open and above board, by the Government of the day whenever those are necessary for economic or other reasons. Therefore, there is no difference between indexation and what the right hon. Gentleman is saying is required with the petrol tax. Nor, per contra, is there any contradiction in our saying that there should be a discretionary change, in as much as petrol duty should come down.

    The hon. Gentleman should be careful when he uses the phrase "our saying". I know that he is a member of the Opposition Front Bench, but he is not on the Front Bench at the moment. He knows that his Front Bench is not in favour of indexation. I do not know whether the hon. Gentleman has already resigned from his Front Bench, but his right hon. and hon. Friends are not in favour of indexation.

    On Second Reading, the hon. Member for Guildford used a strange argument for the alternative that is being proposed by the Opposition. In fact, it was not an argument but was, rather, more of an assertion. He did not appreciate the case. He was arguing that the standardisation of VAT at 10 per cent. was better than selective taxes. Why is it better? On reading his speech again, the only argument that I can find that he advanced in favour of that assertion was that it was proposed decisively by the Shadow Chancellor of the Exchequer. Clearly, anything proposed by the right hon. and learned Member for Surrey, East is important, but to say that it is an argument for the alternative is, to put it mildly, overstating the case a little.

    I do not know whether what the hon. Member for Guildford was putting forward was a new Conservative philosophy. I hope that Plato and Pythagoras will forgive me for using the words "Conservative" and "philosophy" together. I do not know whether the Opposition are saying that they would never increase selective indirect taxes. Is that what the hon. Member for Guildford is really saying? Is he saying that when some Government have standardised the rate of VAT at 10 per cent. he will never increase selective indirect taxes?

    It appears that the hon. Member for Guildford does not intend to answer my question. It was a strange argument to advance that selective indirect taxes must decline whilst VAT must go up as a proportion. It is an odd argument that we are hearing from the Conservative Front Bench, and perhaps at some time someone will explain it. If the argument is not explained, we are bound to come to a certain conclusion.

    If the Conservatives are in favour of increasing indirect taxes generally, including selective ones, but are not in favour of increasing them this year, perhaps they will tell us the year in which they would be in favour of increasing them. Is it not a fact that they are not in favour of increasing those taxes this year because this year they can be their thoroughly typical irresponsible selves? Is not that what it is about?

    I would rather that the right hon. and learned Member for Surrey, East told me what his case is, and I shall listen to it.

    No. I am sure that the right hon. and learned Member for Surrey, East is most grateful for his hon. Friend's help—

    but I see that the hon. Member for Guildford proposes to put the case. I hope that the hon. Member for St. Albans (Mr. Goodhew) will not mind if I give way to his hon. Friend.

    The Chief Secretary is dragging himself to the wrong conclusions and to a total distortion of our position. Our case for increasing VAT to 10 per cent. is, as the Chancellor of the Exchequer has explained again and again, that it happens not to fall on food or transport, and therefore is less regressive than other taxes. Secondly, we resent the disreputable choice of the Chancellor of the Exchequer in earlier years to reduce VAT to 8 per cent. for electoral reasons. VAT at 10 per cent. is the right level, and that is what we are arguing as we are entitled to do.

    Of course the hon. Gentleman is entitled to argue that. He is entitled to be as irresponsible as he likes. I have no objection to that, but I hope he will agree that I am entitled to expose his irresponsibility. I am sure the Committee will have noted that there was no answer to the question that I posed. Is the hon. Gentleman in favour, for all time, of not increasing selective indirect taxes? Does he want to see petrol tax decline as a proportion of total taxation? I see one of his hon. Friends shaking his head, but the hon. Gentleman is not shaking his head in any way. He is sitting there mute and not letting us have his views.

    The hon. Member for St. Albans cannot speak for his Front Bench. Nor can his hon. Friend the Member for Blaby do so.

    I am afraid not; perhaps at some other time. I know that I am being unusually discourteous, but I hope that the hon. Gentleman will forgive me. I have been trying, without success, to ascertain the official Opposition's view. I do not know whether the hon. Gentleman can tell us what it is, given that the Opposition Front Bench does not know.

    I am putting the Government's view. And not only the Government's view, but my view, too. They happen to coincide.

    I think that the important thing with the amendment is to ensure that the reduction in the petrol tax goes to the motorist, and not to the petrol suppliers. I am aware of and share the view expressed both inside and outside the House that petrol suppliers might take an extra margin and therefore not give the motorist the benefit of this reduction.

    I hope that petrol suppliers will take note of the will of the House. However, I am not prepared to rely on that happening, and petrol suppliers will be bound by the price controls to pass on the tax cuts in the form of reduced prices, although if the Opposition had their way we should not have that power either. I expect petrol suppliers to take all necessary steps to see that motorists benefit directly from this reduction in the petrol tax. If they do not, my right hon. Friends who deal with these matters will be ready to take action.

    I now turn briefly to the question of offsets, which might be of some interest to the Committee. As the Stock Exchange is closed, I can refer to this matter. If the amendment is accepted, there will be no loss of revenue until 5th August, so we shall have time in which to consider what offset there should be. The need is, therefore, less urgent than it might otherwise be.

    The decision on the nature and extent of the recoupment and, indeed, whether there should be any, can be considered between now and 5th August and a decision taken in the light of other developments affecting the Chancellor's room for manoeuvre. We should be bound to be influenced by any other changes that occur during the passage of the Bill, but in the light of the amendment, which meets the main concern about the increase in petrol prices, I hope that the Committee will accept Amendment No. 1, and Amendment No. 10 that goes with it, and reject the other amendments to the subsection and, indeed, to the clause.

    Can the right hon. Gentleman help the Committee on the interpretation of the clause as amended? When one looks at the effect of a clause, one sees that the amendment is drawing a distinction between light oil and heavy oil, which for this purpose is petrol and derv used as a motor fuel. Subsection (1) is concerned with motor fuel, and subsections (2) and (4) deal with heavy oil and light oil respectively for home use. Can the right hon. Gentleman enlighten the Committee as to which of those subsections deal with what, in the light of the amendments to subsections (2) and (4)? This is not an inconvenient time to do that, because we shall be looking at all these subsections together.

    We are dealing with subsection (1), as the right hon. and learned Gentleman knows. My amendment would leave the increase in tax on derv and would reduce the tax on petrol. We shall deal with the other amendments when we reach the other subsections.

    I recommend the amendment to the Committee, although I should have preferred not to move it. This amendment will keep the cost down to £140 million rather than the very much larger sum that would have been the cost if the Ways and Means Resolution which was carried at the end of our Budget debates had been lost.

    I am not sure, Mr. Murton, whether I ought now formally to move my amendment to the Government amendment.

    The right hon. and learned Gentleman can move it now or at the end of the debate.

    We have seen the Chief Secretary—by his own admission—in unusually discourteous form and, I would add, in unusually discursive form in, as he described it, presenting the Government's view of the matter. What strikes us is that there is some confusion about precisely what the Government's true view is. On Second Reading the Chief Secretary vigorously defended the tax provisions contained in the Bill as originally drafted. He then commended them to the House of Commons with enthusiasm.

    This afternoon the Chief Secretary spoke with two quite distinct voices. At the end of his speech he commended the amendment to the Committee having spent most of his speech on the clause unamended. So we take some pleasure in seeing the Chief Secretary move a wrecking amendment to his own Finance Bill.

    We welcome the withdrawal of the duty increase in petrol as far as it goes. We find the chaotic manner of its introduction somewhat unimpressive but characteristic of the state the Government have now reached. The amendment appeared on the Amendment Paper at a belated hour on Thursday night after Lord knows what tribulations, disputations and consultations with those who claim credit for it and who sit on the Liberal Bench. We shall examine later just where the credit for this change of mind lies.

    We are not impressed by the technical argument advanced by the Chief Secretary. I should like the right hon. Gentleman's help on this matter later. He said that it would not be possible to effect this reduction on 31st May. We deliberately selected and put into our amendments the date 31st May to allow the Government time, in this helter-skelter process in which they are engaged, to introduce another Budget Resolution to legitimatise the reduction with effect from 31st May. My hon. Friends and I see no reason why this should not be done. Will the right hon. Gentleman say whether there is any substantial procedural reason why this should not be done? My hon. Friends and I have read the Act. I have no doubt that the Chief Secretary has, too. We believe that it would be possible to make this reduction take effect from 31st May. The right hon. Gentleman has not yet met our argument.

    Coming to the merits of the tax, the Chief Secretary asked us to explain our objection to this tax and our preference for a broader spread of increases in indirect taxes. I should have thought that it was by now becoming common ground in the House of Commons that there was a case for shifting the burden from direct taxation to indirect taxation. Indeed, the Chancellor commended that case in his Budget. He has embarked on reductions in direct taxation and, presumably, is making this increase in indirect taxes as a means of bridging the gap.

    However, what the Chancellor has chosen to do is to introduce this particular clutch of taxes on petrol, oil and all the associated products. Our complaint is that this is a selective increase in a selective expenditure tax.

    If a Government are to begin shifting the burden in this way, there is a great deal more sense in introducing an increase in the flat rate of value added tax, which is spread over a wide range of products—as my hon. Friend the Member for Guildford (Mr. Howell) explained—which is less regressive, which does not apply to food, transport, housing or fuel, and which does not have the particular effects to which this proposal has given rise.

    4.45 p.m.

    This is a selective tax. As has been pointed out by the Chief Secretary's hon. Friends and others, it is deliberately biased against those who have no option about the method by which they travel to work. It is deliberately biased against those living in rural areas. It is deliberately designed to have precisely the wrong effect on the reverse yield gap between going to work and staying at home, which is the very point about which the Chancellor of the Exchequer has been expressing himself so eloquently for so long.

    Will the right hon. and learned Gentleman now take the opportunity of answering the question put to him by my right hon. Friend the Chief Secretary? The value added tax in real terms rises automatically each year because it is a percentage paid on the value of the goods sold. If we were to take the right hon. and learned Gentleman's advice, we should be increasing still further the tax on half the goods consumed but allowing the tax on tobacco, drink and petrol to fall year by year. Is this really the right hon. and learned Gentleman's policy? If not, how does he justify the line of argument on which he has now embarked?

    In this Budget the Chancellor is not touching the tax on drink in any event.

    The advice that we have given the Chancellor throughout his misguided course on this matter is that he should never have moved away from the 10 per cent. rate of VAT. We have always condemned that move on the grounds that it was made for squalid—

    No, let me finish. The move away from a flat rate of 10 per cent. was made for squalid electoral reasons in the summer of 1974. The Chancellor should never have gone on to two rates-8 per cent. and 12½ per cent.—which have cast the retail trade into continuing confusion. If he had remained with the figure of 10 per cent. VAT, he would be raising £700 million more today, far more than is being raised by these impositions.

    Our complaint is that this is a particularly ill-designed, ill-judged measure to introduce at this time instead of it being done in the context of a general shift of burden. If the Chancellor thinks that this is an eccentric view, he might reflect on the unique position that he has contrived to occupy as a result of the Budget. The opinion poll which was held the week after the Budget was introduced showed that the Chancellor, compared with every other Chancellor in Britain since 1952, has achieved a unique double. This is the only time in history over those 25 years that a Chancellor has got more people saying that he is doing a bad job than that he is doing a good job. That is the first aspect of the right hon. Gentleman's achievement.

    The second feature is that the Chancellor has got the largest number of people ever recorded in the history of polls believing both that he is doing a bad job and that the Budget is not fair. That is a sufficient condemnation of the ineptitude of the Chancellor in making this imposition.

    In addition, this is an ill-judged move to make at this time. It is extraordinary conduct to impose an additional tax on petrol and oil products at the very time that one is arguing with the OPEC countries against the wisdom of their raising the price of those products.

    Do I take it that the right hon. and learned Gentleman is totally opposed to President Carter's proposals to reduce America's oil consumption by raising the tax on petroleum used in motor cars?

    It is hard enough for the Chancellor to cope with Britain's economic problems without dealing with those of the United States. Let him take note of this fact. If I am invited to comment on President Carter's approach, I will make two points. First, the United States has a far lower price for petrol and oil products than this country. Secondly, this country has comparatively few advantages in the world in terms of natural resources. As the Chancellor never tires of telling us, we shall shortly be self-sufficient in oil and petroleum. We should be glad to derive some advantage compared with the United States. All that I am suggesting to the Chancellor is that we have to put our own house in order and decide our own energy policy in the light of our own pricing mechanism and our own resources.

    I shall not give way. It becomes clear that the Chancellor has got himself into a most curious position when one studies the way that he is now getting out of this particular mess. Having introduced a selective tax instead of a more broadly-based increase in expenditure taxes, he is now making a retreat that is not designed to fulfil any strategic, economic or energetic political purpose except meeting the parliamentary arithmetic. He is ending up with an even more selective imposition of tax by retaining the higher rate of duty on derv, central heating fuel, industrial heating fuel and other lubricants. It seems extraordinary that the great crusade of principle upon which the Government had embarked—we remember the Chancellor saying in his Budget speech that his measures were all directed to important matters of principle and all justified on their own merits and of importance to the strategy of this Government—has crumbled before our eyes. We are left with the hapless industries using derv, the road haulage industry and road passenger transport industry—with certain exceptions—having to face alone the impost of an additional £90 million taxation when only last year an extra £170 million in taxation was imposed upon them. The rationale for this selective impost has totally disappeared.

    The Chief Secretary looks quizzical about this because a week or two ago he told us how important it was to have this burden, but he now says that it is important that it should be cast in a different way. To land that burden now on those people who need industrial resources and central heating, on certain buses and on the road haulage industry is to introduce an absurd element of injustice. This is the second year that these people have had to face such an imposition, and it makes no sense.

    The deal that is now presented to the House is being hailed by some outside commentators as the first fruit of the Lib-Lab pact.

    Then let the first two fruits of that squalid alliance continue to blush unseen. However, let us examine that contention. This is not the result of the Lib-Lab pact. The Government would have preferred to keep the clause intact. The Chief Secretary said that it was worth the House taking note of the difficulties that face the Government. The Government would find it difficult to conceal them. This conclusion has been forced upon the Government—as the hon. Member for Thurrock (Dr. McDonald) said a moment ago—as much by the disintegration of the Callaghan-Tribune Group pact as by anything else. It is an outcome of the parliamentary arithmetic that has been forced upon the Government by the changes in Parliament that the British people have effected in successive by-elections. If the Government still had their previous majority they would not have been seeking the support or advice of the Liberals, nor would Liberal advice have mattered one jot to the Government were it not for the fact that the Conservative Opposition, from the outset, had opposed this tax as misguided. It is the result not of the Lib-Lab pact but of the continuing alliance between the parties in opposition to a Government who have lost their majority in the House. This Government ought not to be introducing Budgets at all.

    The changes that the Government are now being driven into making are giving rise to particular practical difficulties. The Chief Secretary tried to deal with one point. He was rightly anxious to see that the reduction of tax would be passed on to motorists through a reduction in petrol pump prices. However, there have been reports in the Press that the Motor Agents' Association is asking what will happen, if the reduction is delayed until 5th August, to those garages that have large amounts of duty-paid petrol in stock. I realise that if that argument were taken to the extreme one could be said to be against reducing taxes at all, and far be it from me to press for that.

    The Chancellor is an expert at reversing most things, but this is the first time that he has reversed his Budget in mid-flight. The House is entitled to an explanation how it will be dealt with. There are fears that some garages may run out of stock as a result of the proposed reduction.

    I do not wish to delay the House for long. I am glad that the Government have been compelled by the arithmetic of the House to abandon at least part of the misguided provisions of their Budget. I am profoundly discontented that the change has been made in such a selective way and that other parts of industry will be paying a higher rate of tax, because that will put those parts of industry at a disadvantage. This is the inevitable consequence of a Government trying to stagger on and to introduce legislation when they have outlived their time, their mandate and their usefulness.

    I did not get the impression that the Opposition spokesman sounded terribly pleased. I am not sure why not, because, after all, the right hon. and learned Gentleman's constituents will benefit from this reduction as much as mine will. I should have thought that he might sound more glad that, in this instance, parliamentary arithmetic—as he calls it—has done something for his constituents and for mine.

    I must point out that in a parliamentary democracy there is not much wrong with parliamentary arithmetic. Parliamentary arithmetic has to control executives. It is most unfortunate that some executives have pushed through the House, by dint of entirely faulty parliamentary arithmetic, a load of nonsense such as the right hon. and learned Gentleman would not now dream of reintroducing. An example would be the right hon. and learned Gentleman's Industrial Relations Act. If he does not believe that it was nonsense, surely he will promise to reintroduce it. Faulty parliamentary arithmetic allowed him to push that legislation through the House. It is a pity that there were not then enough minority parties in the House to stop his game.

    No doubt the right hon. and learned Gentleman will remember the reservations that we made and that we stated on Second Reading that, although we were prepared to vote for the Bill, we would oppose it unless substantial changes were made. That is exactly the thing that he is now criticising the other way round in our action on petrol tax. We stated that we would support it as part of the Budget legislation but that we would oppose it later. That is exactly what we have done.

    Anyway, the parliamentary arithmetic may not have been all that the right hon. and learned Gentleman believes, because the votes last week on rural transport indicated that the Irish are not particularly good at attending the House at the moment, so there may not have been a majority to support our view on petrol tax. It was therefore necessary to indulge in considerable argument in order to obtain this concession. I do not regard it as a victory. If it is a victory for anything, it is a victory for common sense and that is all.

    What the Chief Secretary has said about the problems that confront the House when there is parliamentary arithmetic of this kind may well be a lesson for the future about introducing taxes that start at 6 p.m. on Budget Day. Governments should learn that in such parliamentary situations—and I hope that in future the Chancellor will not believe that a lot of damn-fool Back Benchers will back anything that their Government introduce—it may be better for Parliament to vote before the tax is effective. I do not believe that that would cause a run on the Stock Exchange or any other such problem.

    5.0 p.m.

    We were castigated when we abstained on the Budget Resolution because we thought that it would cause administrative chaos to repay the tax. I was interested to see the Conservatives come into line with that argument. Having tabled an amendment that would cause exactly that chaos, namely, that we should go back to the situation that would have obtained if the vote against the Budget Resolution had been carried, the Opposition noticed our amendment, agreed that, as usual, we had taken superior advice and decided to follow in our footsteps. I am glad that they were converted to that view.

    The Chief Secretary was wrong to argue that he had not changed his mind and I regret that he has not changed his mind on the principles. On all counts, there are strong arguments against an increase in petrol tax.

    The argument for increasing the tax was that it was a revenue raiser. Originally, the increase would have raised £300 million—£225 million from petrol and £75 million from derv. Now that we are talking in terms of 5th August, there has been a reduction from £225 million to £140 million on the petrol alone.

    Of course revenue is important, but as with any other tax, Parliament is entitled to ask whether this is the best way of raising revenue. The second important question on any tax is whether it is fair between one citizen and another, and the final question concerns its likely economic effects.

    The Chief Secretary used the argument about revalorisation. I accept that argument. Indeed, I advocate the total indexation of the tax system. We cannot isolate one tax from the rest and if we are to index the tax system we must index the whole system and automatically revalorise all expenditure duties. The best way to do that would be to have ad valorem taxes, but we shall be debating that in Committee upstairs.

    The Chief Secretary also said that many people on all sides wanted a change from taxes on income to taxes on consumption. I agree, but it is still relevant to debate which consumption taxes and their effect on the economy as a whole.

    There is a sort of a vague feeling, not so much in the House as outside, that road transport is wrong. It is difficult to pin down the people who take this view because some are anti-noise, some are anti-pollution, some are anti-roads. There is a land use argument among some of the agricultural lobby which may be more important in future, and some are railway romantics. I suppose that we are all railway romantics to an extent, but whenever I start to feel that way, I remember the passage in "Middlemarch" in which the yokels came out with pitchforks to drive off railway surveyors because they did not want abortions in their cows.

    There will always be people with pitchforks to stop change. There is an element of that in most of us, but we have to accept the facts of life as they are, and that means accepting that people prefer road transport. It may be bad and sinful of them to do so, but 92 per cent. of all passenger mileage is by road and 90 per cent. of all inland freight tonnage is carried by road.

    We may fret and fume, but for the great majority of people, road transport is preferable. It offers flexibility, convenience and an essential degree of liberty. Even if a switch to rail transport is accepted as desirable, there is no certainty that it can be accomplished because road transport has a remarkable inelasticity of demand.

    The Government's case has been that by increasing the tax on petrol they would stop people consuming petrol and that might result in a small switch from the car to public transport. However, if we go back to 1973 and the start of the oil price increases, many people predicted then a permanent reduction in the use of the car and its popularity. Three and a half years later we see a different story. The problem in the British car industry is not how to sell the cars but how to make enough—despite amazing rises in the price of new cars and the cost of servicing and running them.

    Whatever some people may think ought to be the case, the car is seen by many people throughout the country as a necessity and not a luxury. They feel the need for a car. It is instructive to con-pare what was expected to happen in the hours of gloom in 1974 with what has happened to demand for petrol. It is a fair indication of the inelasticity of demand for road transport.

    In 1974 the NEDO published a report called "The increased cost of energy—Implications for UK Industry". After noting that between November 1973 and February 1974 the median price of petrol had increased by 43 per cent., the report said:
    "It would suggest a steep fall in consumption, with the resumption of the previously rising trend delayed for at least several months. It may not be resumed even then, since people's expenditure patterns will be influenced by the state of the economy as a whole and by their income expectations."
    It went on to say:
    "A further effect will be a reduction in the rate of growth of car ownership.
    It would be wrong to say that all its predictions had been confounded, but it is difficult to distinguish between the direct effect of the oil price increases since 1973 and the less direct effects of the recession. The economy has not been growing and one would not expect the consumption of petrol or the purchase of cars to grow very much. The extraordinary thing is that petrol consumption has increased.

    Does the hon. Gentleman agree that the very high rise in the price of petrol in the past three years has been due not so much to the Arabs as to the Chancellor of the Exchequer who has asked for twice as much extra as have the Arabs?

    That may or may not be the case. I accept that taxes on petrol have risen. I have many arguments to make, but one must be careful before arguing for a cheap energy policy. I do not think that the right hon. and learned Member for Surrey, East (Sir G. Howe) was arguing that and I am certainly not arguing in favour of a cheap energy policy as a long-term approach to our problems.

    In 1973, motor spirit delivered to petrol retailers totalled 16,659,321 tons. The figure fell in 1974 and 1975, but in 1976 it was well above the 1973 level at 16,878,600 tons.

    The hon. Gentleman is pointing out that demand is increasing rapidly despite certain restrictions. In view of the diminishing reserves and the continuing increase in demand that he seems to be forecasting, does he not think that there is a strong case for conservation measures to be introduced?

    I shall come to that in a moment. I am not saying that demand has risen rapidly. It is difficult to tell how far the small rise in demand that has occurred has been due to the recession, has been held back by the recession or has been held back by a substantial rise in the price of oil.

    In a period of three years during which the price of petrol more than doubled, consumption increased—though not by a great deal. It may be said that it would have increased by much more if the price had not increased by so much. So might it have done if there had not been a recession.

    A further indication of the inelasticity of demand for petrol comes with an examination of petrol as a share of total oil consumption. In 1973 motor spirit amounted to 15·9 per cent. of total United Kingdom oil consumption. In 1974 the figure was 16·5 per cent., in 1975 18·4 per cent., and in 1976 19·5 per cent.

    If petrol is considered to be the luxury end of the market—and there are those who argue that car transport is in some way a luxury—it should not have increased its share of total oil consumption. Incidentally, that share of around one-fifth of the total oil consumption shows how futile it is to concentrate efforts to save energy simply on the motorist. A 1 per cent. cut in consumption of all non-motorist usages of oil would have the same effect as a 4 per cent. cut by the motorist. We might do more to achieve a total energy conservation by concentrating on the 80 per cent. instead of on the 20 per cent. figure.

    It is hardly surprising that the Department of Energy is unable to quantify the saving in petrol consumption which it suggested would happen as a result of the petrol price increase. On 20th April in a Parliamentary Answer the Department gave the following view:
    "the Budget increase in road fuel duty is expected to reduce motor spirit consumption by about 1 per cent. to 2 per cent. in 1977–78 below what it would otherwise have been, and by more in the longer term."—[Official Report, 20th April 1977; Vol. 930, c. 112.]
    I very much doubt those figures, and on the basis of the figures I have quoted one sees that judging by past experience they do not stand up to examination. The figures of car sales are notoriously difficult to read, but who would have thought that the prophets of gloom in 1974—NEDO among them—would have believed that in 1977 the problem of car manufacture would be not unsold cars but long waiting lists for delivery enabling importers to take something like 45 per cent. of the total market this year?

    My conclusion from all this is that petrol is not price-elastic. That might lead the Chief Secretary and the Chancellor to conclude that since the product is not elastic in demand price it might be an ideal base for a tax, but other factors have to be considered—fairness and overall economic effects among them.

    Is a petrol tax fair between one citizen and another? Primarily it has an above average impact on the rural motorist. The Guardian newspaper seems to believe that people should not live in rural areas. It takes the view that they only choose to do so. I suppose it could be said that they choose to read The Guardian—or some of them do for their sins. Therefore, says The Guardian, they should pay a price for living in rural areas. Some people do choose to live in rural areas, but for millions of people there is little choice. Even if jobs were available in urban areas, houses would still have to be found in those areas, and certainly the cost of providing housing would be substantial. That might mean more second homes available for other people.

    They certainly seem to occupy most of the country cottages in my area. I gather The Guardian claims to be an environmentalist newspaper. Is it part of The Guardian's environmentalist case that people should desert the countryside and huddle together in urban communities? The social and environmental costs of such urgan crowding are infinitely greater than any saving that might be made on average.

    Some Liberal Members, including myself, have been pilloried in certain sections of the Press and elsewhere for representing our constituents' views as though that was a matter of condemnation. It is true that many of us represent rural areas, but it is no bad thing that any such views should be expressed vehemently in this House. I give notice that if representing and fighting for the interests of my constituents is a sin, I propose to remain a sinner, and I shall enjoy it.

    People living in rural areas are massively dependent on private road transport. In large parts of rural Britain there is simply no alternative. It is no coincidence that in the South-West region and East Anglia there is the highest car ownership per 1,000 households—namely 850, compared with the figure in the rest of England of 740. A figure of 68 per cent. of all journeys over one mile in the South-West region in 1972–73, according to the National Travel Survey, were carried out by car, although Britain's average amounted to 59 per cent. Spending on cars in the South-West and in East Anglia is by far the highest as a percentage of total household spending than elsewhere in the country. This is not happening because those areas are wealthy. Indeed, Cornwall has the lowest income per head of any county, but we have the highest car ownership because a car is a necessity and not an economic luxury.

    5.15 p.m.

    This in part is an answer to the Government and to those who say that this will have an adverse effect on the retail price index—namely, if we were to raise the VAT to 10 per cent. I see that the Chancellor of the Exchequer disagrees with me, but the pattern of expenditure in the various regions varies widely. The retail price index depends on the weight given to the particular category of purchases in the average family. There are, substantial regional variations. In the South-West, expenditure on maintenance and running of motor vehicles in 1974–75 amounted to 8·1 per cent. compared with 6·4 per cent. in the United Kingdom generally. If we had been building up a retail price index for the far South-West, we would have found that an increase in the petrol tax would have a much greater than United Kingdom average effect and, I suspect, a greater effect than if we were to increase VAT. However, that is a difficult calculation to make.

    In 1975 deliveries of petrol per head of population were 0·378 tons in the South-West compared with 0·272 tons in the rest of the United Kingdom. Those figures illustrate the importance of petrol and the private motor car. Therefore, the effect of increasing the petrol tax in rural areas is greater than in urban areas.

    The question of getting to work is the most important factor of all. This is what the Government must consider in their policies. I accept that getting to work, even by public transport, is very expensive in urban areas. It now costs 70p return from my house in North London to the House of Commons, and that is one reason why I do the journey on a moped rather than by London Transport. But the costs are higher generally in rural areas, and of course there is no alternative. On a rainy day in London I can leave my moped and travel by tube, but in rural Cornwall that is not possible.

    One of my constituents who lives in Newquay travels to Truro every day by car because there is no other means of transport. His take-home pay is £37 a week. When one considers what he could obtain by living on supplementary benefit, this means that there is no incentive for him to go to work. Another constituent who works for a local authority came to see me this weekend and showed me his pay slip. He is taking home a wage of about £38 a week—which by standards in Cornwall generally is not low pay, and indeed the wages earned by both those constituents are fairly average. The Government may argue that the effect of the petrol price increase will not be great for the average motorist spread over the year. But it appears that the cards are stacked against the man who has to travel to work and that the higher costs will cause him more and more to stay at home.

    The argument can also be put forward by the wives of such men, and it is difficult to counter. A wife can now say that she will get more from supplementary benefit and other allowances, including the payment for school meals to which she is entitled, which together amount to more than the husband is bringing home.

    I agree with the point the hon. Gentleman is making, and in a recent letter to my right hon. Friend the Chancellor of the Exchequer I made the same point relating to one of my constituents. Would it not be more logical to meet this problem if the Liberal Party were to press my right hon. Friend to remedy the worst injustices of our tax system by deducting these essential travelling expenses from income tax? Would that not be a much more rational approach?

    I accept that point entirely. Indeed, I have raised it myself on previous Finance Bills and pressed it on Governments of both Labour and Conservative persuasion. The arguments are Treasury arguments, of course, and out they come to the effect that it would be administratively difficult, extremely complex and so on. But there is plenty of precedent in Europe—in Germany, for example—for allowances for getting to work.

    I believe that a better way might perhaps be to look at the tax thresholds, at least to start with, and then in development areas possibly to replace the regional employment premium with a getting-to-work grant, which might be paid through the employer. I believe that that would enormously improve the ability of employers to create jobs in some parts of rural development areas.

    We are told that there are about 10½ million job changes per year. If the tax allowance for travel-to-work costs were based upon distance, there would thus be about 10½ million tax changes per year for this one item alone.

    That is part of the problem of our tax system, with PAYE based on an annual tax. If we had moved over to a weekly tax base, which we should have had to do with the credit income tax—this was one of the problems which the Select Committee had to discuss—it would have been easier. But it is not an argument which I am putting now. The German system works on a standard allowance, and the effect in that case would be much the same as increasing the personal allowance. There is not much difference in that.

    The Government do not yet understand the problem of alternatives in rural areas. The Chief Secretary today castigated what he called Tory-controlled councils for spending on other things the money which the Department of Transport had made available to them for subsidising rural bus services. I have to tell the right hon. Gentleman that I am no longer by any means convinced, though I used to be, that the answer to the rural transport problem is more bus subsidies.

    I have come to the conclusion that more bus subsidies will simply mean more empty buses running around Cornwall. I do not believe that we should fill them—most of them are pretty well empty now—and the cost of subsidies in such areas is already huge. I have had some alarming figures put to me from the Cornwall area showing, for instance, that the total cost of bus subsidies in 1976–77 is estimated as running to about £2½ million. That is just for Cornwall alone, and it is large enough, in all conscience. Moreover, there is hardly a bus service in the county which works at a profit, and some of them work at extraordinary deficits.

    One begins to ask oneself, therefore, whether it is really worth continuing to pay out these vast sums of money to keep empty buses running about. I realise that this is dangerous talk, because one will be accused of sabotaging rural bus services, but one has to task whether bus services are energy-efficient in the first place.

    On 1st November in a Written Answer—this is col. 471 of Hansard—the Under-Secretary of State for Transport said that a car carrying one person used from 3 to 4·8 megajoules per passenger-kilometre, a minibus carrying 12 persons used 0·6 megajoules of energy per passenger-kilometre, and a bus carrying 70 persons used 0·15.

    That looks bad for the car. But cars do not carry only one person, and not all 70-seater buses carry 70 people. According to the Department of Energy in its Energy Paper No. 10, the average load of a car on rural journeys is 1·7 passengers and of a rural bus it is only 15. Pursuing those calculations, one finds that megajoules per passenger-kilometre for the typical rural bus are 1·4 and for a typical car they are 2. That is still not very good for the car, but Cornwall's figures do not lead me to the conclusion that buses are running about with 15 passengers in them. That is certainly not my experience in the West Country. My conclusion is that the energy used per passenger kilometre is not very different as between the rural bus and the car.

    The advocates of more rural buses will say that we should increase the tax on petrol to force people on to the buses. How high would the tax have to go, and how high would bus subsidies have to be to persuade people to make the switch?

    I have spent quite a lot of time trying to convince myself of the argument for more buses, and I admit that I have failed. I am now convinced that on every ground—energy conservation, price, public costs and service to the rural community—the answer lies in the other direction, in encouraging a higher load factor in cars. I believe that the answer to the rural transport problem in Britain lies in every car owner becoming his own passenger transport contractor, carrying people about for profit and gain—for hire or reward, as the Act now says.

    I am sure that the hon. Gentleman will agree that there is an alternative to the ordinary rural bus, namely, that we should utilise Post Office vehicles.

    I agree. It ls not just a question of using private cars. If one takes a typical village in Britain and plots out every journey going in and out of it, one finds an incredible number of journeys in and out, yet many people who live in the village will feel more cut off in terms of the services which they have, if they do not own or drive a car, than their grandmothers or great-grandmothers did many years ago.

    It seems to me that that is the direction in which we should be seeking a solution, making use of the journeys which are now being made, whether by post bus or other form of public transport or by private car. Those are the services which we should be using. I draw a comparison with the hospital car service. We have enlisted the aid of the private car owner in order to provide an extensive range of service for hospitals.

    In my view the law should be changed to allow that to happen. It is not just a question of allowing or forcing insurance companies to give cover. People must be allowed to advertise their service. I envisage a state of affairs in which the local papers will have a series of advertisements saying, for example, "Two seats to Plymouth next Friday morning, leaving Newquay 10 a.m.". I believe that that might well solve the problem. Local community groups could do it, too.

    I am indebted to Ian Heggie, the director of the transport studies unit at Oxford University, for some very interesting figures. Moreover, in his letter to me he adds that in terms of energy efficiency the private car can match the bus in rural areas.

    I come now to the crux question about which the Government are concerned, that is, energy conservation. In comparison with other countries, Britain is not doing at all badly in this respect. Whether this is a consequence of our present economic growth and productivity one does not know, but annual consumtion per head of motor gasoline, in tons of oil equivalent, is about 0·31 in the United Kingdom, 1·43 in the United States and 0·34 in Germany. So Britain is not a nation of gas guzzlers. It is the Americans who are the gas guzzlers, and President Carter is absolutely right to try to do something about them. But that does not mean that we should hang our heads in shame and say, just because he is increasing the tax on petrol, that we must do the same. We already have a good record in this respect—perhaps not good enough—and I think that this puts our performance in context and nails the argument that the British people ought to pay more for their petrol because others pay higher prices. I do not believe that it should be so.

    The balance of payments argument is important, of course, but we should remember that it works for other products, too. If a high price for energy is the solution to the oil deficit, surely it is also the solution to the food deficit. In 1975 United Kingdom petroleum and petroleum products imports amounted to £4,168 million, but imports of food and live animals amounted to £3,931 million—only marginally less.

    5.30 p.m.

    The Government accept that cheap food is good for Britain. How can they argue in the next breath that dear energy is also good for Britain? If high prices for energy reduce our dependence on imported energy, would high prices for food not also reduce our dependence on imported food? It is a very difficult calculation to make, but the Government cannot quote an argument in support of their line on energy conservation without at the same time accepting it on the other question of food.

    The Chief Secretary will no doubt, in replying to the debate, take note of the point raised by the right hon. and learned Member for Surrey, East about the motor agents. I hope that he will explain to the House how the Government see this question of the repayment to the motor agents. That is more or less what they are asking for if the agents are not to destock oil. I do not think that all the retailers in this country will run out of petrol on 5th August, because it happens to be at the height of their petrol sales, and they will not do themselves out of a penny or two.

    But what happened when the price went up? Who got the benefit that time? Was it an enormous problem for the retailers of this country to deal with? It did not seem to be at the time. I suspect that they made a fairly handsome profit on the deal, and as a motorist my heart will not bleed too much if they make an equivalent loss the other way round this time.

    I think that the last point made by the hon. Member for Cornwall, North (Mr. Pardoe) answers the original Conservative question about the relevance of the Tribune group as against the Liberals. It has always been a mystery over the years, whenever taxes have increased—and particularly on petroleum products—that one is offset against the other.

    I take it, Mr. Murton, that you do not require me to move Amendment No. 9 at this stage. Is it your intention to take the amendments together, or what is the position?

    I want first to comment on the parliamentary position as it has been posed to us by the right hon. and learned Member for Surrey, East (Sir G. Howe). The debate has shown the inadequacy or the limitations of the parliamentary method. It is a very difficult position to overcome, speaking in terms of a true democratic practice, because in finance matters it is not possible, as I understand it, under the conventions, for the House of Commons to initiate any discussion which would lead to the imposition of additional taxes. The convention is that it is the Government who must do that. They initiate any move, and it is not within the competence of the House itself, either in Committee or in full House, to levy taxes upon the country.

    The situation, therefore, is a curious one, in the sense that it is possible for the House of Commons to defeat the Executive and thus negative a tax stated in the Budget, but what the House of Commons cannot do is to replace that tax by something else. There is always a kind of oddball discussion going on, because the House of Commons by majority opinion may wish to eliminate a particular tax but it cannot go on to round off the argument by proposing something else. It has to wait always for the Executive to come down the mountainside to the House of Commons and let us into the secret of what they intend to do. The House then reacts to the situation always of necessity in a negative way. It cannot be positive about this.

    That is the weakness of this sort of situation, whether it is a Steel-Thatcher pact or a Steel-Labour pact. Incidentally, a Steel-Thatcher pact is a particularly formidable weapon—I do not know whether anyone has ever seen it—particularly if it is a stainless Steel-Thatcher—

    Order. The hon. Gentleman is posing some form of humorous aside. The names of right hon. and hon. Ladies or hon. Gentlemen who are Members of this House may not be used. Only their constituencies may be mentioned.

    I am sorry if that expression offends, Mr. Murton. I should have thought it was a fair description of the tool to be used, if that is the right term. However, I will not pursue that, except perhaps to say that it is a large hook-shaped thing for drawing loose ends together.

    My point is that in order to make sense of this sort of exercise—if we are to have it in the future—we must try to devise a means whereby the House itself or the Committee can propose to the Government that they ought to initiate certain tax discussions.

    This raises a very pertinent question which is quite unique in this country, that is to have discussion across the Floor about a tax before it comes into effect. That is the point raised by the Liberal Party. This is what we ought to try to do. There is no reason why the House of Commons should not discuss taxation openly, just as the Government now do it in secret. There is no reason why those exchanges should not take place across the Floor of the Chamber.

    We ought all to be able to contribute to the discussion as to what sort of taxes should be levied upon our people. According to the constituencies that we represent, and the district or region, and the different problems which exist there, we ought to be able to put our points of view when the Budget is being devised. This is a problem that we have not yet been able to overcome, and we cannot overcome it in this present situation.

    I shall be very interested to listen to the Financial Secretary telling the House how he is likely to undertake the exercise with regard to replacement revenue. He cannot, on a trial and error basis, come to the House of Commons from time to time as a messenger from the Cabinet and say "How about this for size?" He cannot come to the House and say "How does the House react to this sort of tax?" Conservative and Liberal Members might come together and say "That is no good. Take it away and let us have a look at something else."

    It is not possible then for the Financial Secretary to come back again from the Cabinet and to say to the House "I have had a look at the other possible courses. Try this one." That would not be a very positive method of devising means by which we could assemble the revenue, in other words, by that sort of trial and error process—"Try that for size" or "Take it or leave it". We cannot do that in the situation that we have at the moment.

    This brings me to the point that the Left of the Labour Party—or, indeed, the Right of the Labour Party—has always recognised the limitation of House of Commons procedure when it comes to initiating a positive contribution towards the whole process of policy making. It cannot be done in the House of Commons in a successful way at all, because we can stop things in the House only by coming together. A new move cannot be initiated. Coalition of any sort, therefore, whatever form it takes, is a very negative thing. It can never be positive within the parliamentary system.

    There was a reference to a newspaper called Tribune. Other groups of people support other kinds of newspapers and there are various groups in the House, but those who support Tribune have never seen the way forward as being a link with the Conservatives for the purpose of defeating some particular aspect of Government policy, for the simple reason that, having defeated something and therefore stopped it, it is not possible for ideological opposites to come together and initiate an alternative which is satisfactory to both elements within the coalition which originally created the situation.

    Order. I should be grateful if the hon. Gentleman would relate his argument to the amendment that we are discussing.

    I should have thought that it was extremely germane and relevant to the problem that we now face. However, I think that I have made my point.

    I hope that, if the amendment goes through, the Financial Secretary will have some discussions with the petrol companies and will make it clear that they have a wide social responsibility and commitment not to try to replace any of this tax reduction by an additional profit margin, however justified or convenient they may feel it is to make an additional levy. In other words, I hope that they do not think of this as being a convenient way of increasing their margins. I hope that the Financial Secretary will make that clear to the companies in the discussions.

    On the selective rebates which have been suggested, the Labour Party in its current documents sets out good reasons why they are not possible on a regional basis.

    I think that President Carter is to be congratulated on some of the unpopular comments that he has made about petrol and oil consumption in the United States. What the Government are trying to do is contradictory to an industrial policy. It is absolute idiocy to push up the price of petrol and at the same time to say to British Leyland that the Government will restrict the money available for the development of the small car. We had some lunatic on behalf of the Government say that they saw the future of the British motor industry without a small car.

    That was said. There is a contradictory development here. I believe that we should go some distance along the Carter road. We should he thinking and devising ways of ensuring conservation. For instance, I should like to see the imposition of a road fund tax on petrol of so much per gallon instead of £40 a year tax on a motor vehicle. We should transfer the tax to so much per gallon. That would be a direct way of making the gas guzzlers, as the Liberals call them, pay for their excessive consumption of fuel. That would be a good way of relating engine design to our national needs.

    I thought that the Chancellor promised last year to end the vehicle tax and to put it on fuel. However, he has not told us why he is not doing that. In fact, he has increased both. That is not what he promised last year.

    It is true that my right hon. Friend referred to setting up an internal study of how to do away with the road tax and to devise another system. That adds further to the contradictory situation. If we want to move towards increased taxation on petrol, we should at least first get right the question of the small car industry. I take it that question will come up in the discussions.

    I remind the Financial Secretary of the discussions within both the trade union movement and the Labour Party about future designs of smaller engines and smaller consumption of fuel. I hope that we shall move in that direction.

    5.45 p.m.

    President Carter's taxation ideas are related directly to the size of the car. That approach led to bad motor car design years ago when we had graded taxation according to the size of the engine.

    The difference is that in America cars cost an enormous amount of energy to make—far more than here. Has the hon. Gentleman seen an estimate by Sir Ieuan Maddock, who was chief scientist at the Department of Energy, that the typical American car costs as much to make in energy terms as it uses in the whole of its lifetime?

    I am grateful to the hon. Gentleman for those interesting facts. They relate to the whole of the argument. I hope that before long we shall get down to the business of energy and cost efficiency in the design of motor cars and that we shall encourage our engineers and designers to consider conservation of scarce resources. We should have a co-ordinated approach towards the design and manufacture of the small car and the whole question of energy costs and saving to prove that we are going in the same direction.

    My final point relates to VAT. I take it that it is universal opinion that we should not trail after our European neighbours or the member States of the EEC but should retain our 8 per cent. VAT. We should be very reluctant to consider a further increase in VAT. It is directly related to the cost of living. Therefore, we should do everything possible to avoid increasing the retail price index in that way. I come back to my point about Treasury Ministers coming to the House of Commons with their various experimental ideas. I hope that one will not come down the line in future. There should not be any increase in VAT. I hope that the message that goes back will be that we have tried it for size, that it does not fit, and that it is not acceptable to the Committee.

    As I pointed out in an intervention, we have not yet had an explanation why the Government have not done what they intimated that they would do—namely, to transfer the flat-rate vehicle tax on to the actual fuel consumed. There would be a number of advantages in doing that. One is that we should no longer have to employ people to collect the vehicle excise tax. We should still need to have registration of new vehicles and change of ownership, but the considerable amount of work involved in collecting the car tax would be reduced. In order to yield the same amount of net revenue to Government, we should not have to collect the same amount in extra fuel tax as was collected in vehicle excise duty.

    The hon. Member for Tottenham (Mr. Atkinson) pointed out that at one time vehicle excise duty was collected on the basis of engine size. Actually, it was worse than that. It was not the engine size but the diameter of the cylinders in the engine. As the stroke was not taken into consideration, that resulted in the perversion of engine design, which gave us very long-stroke engines. There is no rational formula for allocating taxation—if one is concerned with fuel saving—to engine size, because actual fuel consumption depends on the efficiency of design, the all-up weight of the car, the drag and the gearing employed.

    I am glad that in this context the Secretary of State for Transport has announced the forthcoming alteration to the speed limits. If a manufacturer is to have a rational gearing for a car, he will not want lower cruising speeds on dual carriageways that are not motorways, and even lower cruising speeds on roads that are Class A but not dual carriageways. That would present the designer with an impossible task in selecting the proper gearing for the car. If, by having higher permitted speeds one can have higher overall gearing, this will be felt in indirect gears as well. It is not helpful to the manufacturers if this is done at the last moment. The earlier the announcement the better.

    I would not have objected to the increase in fuel tax if it had been a substitute for vehicle excise tax. In rural areas, as well as those people travelling to work each day—who might be assisted by a tax allowance—there are retired people and housewives without any earnings relief from taxation. They are totally dependent on cars for shopping, visiting the doctor and a whole spectrum of purposes, but they do not consume very much fuel in the course of a year. The £40 a year excise tax is a very severe burden on them.

    If I may put in a personal note, my old 1947 Morris Eight, which is not unknown to hon. Members, has done 191,000 miles and is well matured. This year it cost me £40 in excise duty, which is £5 more than I paid for it, fifth-hand, 15 years ago. In country districts many people are extremely hard up. They have cars that are second or third-hand, and therefore they have to meet heavy repair and maintenance charges. Among other things, there may no longer be a local garage doing repairs where they live. They may have a garage that is only a filling or service station. Imposing an increased vehicle excise duty on these people when we should be getting rid of it altogether seems rather topsy-turvy to me.

    If we are interested in making efficient use of our energy resources, the case against individual vehicle excise duty is overwhelming. If we are interested in the efficiency of tax collection, and not losing a lot of the money raised from tax in the process of that collection, we must agree that the vehicle excise duty is an inefficient way of going about things. The case that the Government have to make is the case not only for greatly increasing the cost of motoring but for increasing it in this manner.

    The Government would have had no complaint from me if they had increased excise duty by 5p a gallon in place of the existing vehicle excise duty. It is not hard to do the sum. Assuming that a motorist does 30 miles to the gallon and drives 4,000 miles a year, an extra Sp a gallon in excise duty would pay the £40 a year of vehicle excise duty. In many rural areas, people may drive even less than 4,000 miles in a year. Quite a lot do only 1,000 or 1,500 miles a year, but their cars are still indispensable to them. To in-increase the vehicle excise duty by more than a third and then to increase fuel tax on top of that imposes a very onerous burden on them.

    Some hon. Members have mentioned that some garages have actually increased the price of petrol to the consumer before using up all the petrol they had in stock at the lower rate. That may well be so. Certainly small rural garages are short of capital anyway. When the tax goes up they have to find, out of thin air, more capital to refill their tanks with the same amount of petrol before selling to the consumer, and because credit is not given these days for petrol supplies to garages, they have to pay for their fuel on delivery. That is the standard practice. If the excise duty on fuel is increased by 5p a gallon, and a garage has a tank capacity of 25,000 gallons, that garage must find £1,250 from thin air just to finance exactly the same service to the community as before—that of not running out of petrol.

    Garages in rural areas pay higher prices for petrol anyway because they take smaller supplies and because they are generally in the more outlying zones. They have more capital tied up in the business. Therefore they have to find this £1,250 out of thin air. In many cases, this means that they have to borrow the money from the local bank, in which case they will be paying interest on it. They have to widen their profit margins to the consumer in order to pay the interest and eventually to pay back the bank. It is a never-ending process to get the money back. When the tanks are empty, they have to be filled again; therefore a permanent increase in working capital is needed.

    Inflation has grossly eroded the ability of many small businesses to remain in business. That is another aspect of the rural transport problem. Enough has been said about the necessity for not imposing this increase in petrol tax without abolishing vehicle excise duty. People with cars in rural areas are finding increasingly that they have to go further and further afield for car repairs. If the proposed changes in MoT testing mean that such tests can be done only in big towns, there will be an additional great expense, as well as inconvenience, for people who are dependent on their cars for getting to work, for shopping, for visiting the doctor or the hospital, and for normal social intercourse.

    It is certainly the case that a revived rural bus service is not the simple answer. By the very nature of its route, it is bound to be slow in getting from point A to point B if it has to serve a large number of villages.

    6.0 p.m.

    People who believe that the minibus is the answer forget that a public who have got used to relying on getting on the bus when it comes will not take kindly to finding that the minibus is already full and that therefore an appointment cannot be kept. One can make any transport system pay by running such small units that it is always running at full capacity and queues of people are left behind. If that is the only bus that day, it is no solution to people's transport problems.

    Would the hon. Gentleman not also agree that a large part of the cost of running a bus is the labour cost?

    Yes, certainly. It takes no more labour to run a large bus full of schoolchildren than a minibus which cannot be used to take 50 children to and from school. The public often do not appreciate, when they see a large half-empty bus and wonder why a smaller one cannot be used, that another fleet of buses would be needed for schoolchildren. The result would be higher operating costs, not lower.

    The conclusion that one is bound to draw is that the Treasury decided on this tax increase without considering its social effects, regarding it purely as a revenue device. Advised, probably rightly, that the demand for petrol is not very price-elastic, those concerned rubbed their hands and said, "The yield will be another 5p on each of the existing number of gallons sold. That is easy to predict and budget on, so it is an ideal way of raising a tax."

    They entirely forgot that straws can break a camel's back. People's incomes are rising not all or much more slowly than the cost of living; they have increased rates, water rates and electricity charges to meet as well as the general increase in the cost of living. All the spares and servicing for their cars will cost more anyway with the onrush of inflation. Whatever has been said, many people know that a new car is something that someone else will have but that they will never have: their future will be one of operating second- or third-hand cars. In that situation, it is not only unwise but heartless to impose such a tax and literally to be careless of the hardship that it will cause.

    I entirely agree with the hon. Member for Tiverton (Mr. Maxwell-Hyslop) about the vehicle duty. It is significant that speeches against that duty today have been made from the Back Benchers rather than the Front Benchers of the Opposition—if I may elevate the Liberal Bench to the status of an Opposition Front Bench. Although the right hon. and learned Member for Surrey, East (Sir G. Howe) spoke about discrimination against the derv tax, which is left as it is, he said nothing about the vehicle excise duty, which is also unchanged.

    The hon. Member for Cornwall, North (Mr. Pardoe) also had no complaint against the excise duty being left as it is. The heavy lorry users of derv do not meet their resource costs, whereas the motorist with a small car which does a low mileage pays far more than a fair share of the taxation. It seems fairer to remove the excise duty than to remove the 5p a gallon petrol tax.

    I speak for all low-income motorists—I understand that there are more in Cornwall than elsewhere—who would gain from the abolition of this tax. The rural motorists probably use their cars for lower mileages, since among the urban motorists are many long-distance travellers who have the benefit of company cars and considerable tax relief.

    We should not forget that the excise duty is inequitable. It is so difficult for the lower-income motorist to pay. He has to find £50 all at once at the same time as he pays his insurance. One of my constituents finds it so difficult to find the £50 that he pays it quarterly or four-monthly and pays his insurance month by month. That is much more expensive in the long run and much more harmful to the lower-income motorist.

    If such a motorist were to pay all his tax in the petrol price, he would be able to estimate more accurately the cost of his journey and compare it with public transport. That would be in his interests and in the interests of public transport. I urge the Government to proceed with the sound idea, which is practised in most countries, of putting the burden on the petrol tax rather than the vehicle duty.

    I was worried by what the hon. Member for Cornwall, North said about oil conservation. He seems to live in cloud-cuckoo-land, apparently believing that the shortage of petrol is far in the future. Two recent reports, one from BP and one from a professor in the North-East of England, as well as many reports from the United States, show that the danger of oil shortage is much greater than we have supposed. It is all the more unfortunate that the hon. Gentleman should minimise the dangers. He said that there was more possibility of our running out of other things, like certain foods, but the dangers will be greater still if we run out of oil.

    The hon. Gentleman twisted the figures somewhat to back his case. Nearly all experts agree that a bus uses less energy than a car per passenger carried. The hon. Gentleman can twist the facts by reducing the number of passengers in the bus and increasing the number in the car and show that there would be little difference. Of course, if there were eight or nine passengers in a big bus and four or five in a car, no doubt the bus would consume more energy per passenger. However, although such a situation may arise in some areas, with increasing shortages of petrol, our taxation policy should favour a sane transport policy by increasing the number of passengers in the bus so that the maximum number will be carried.

    The trouble is that if the passenger does not want to be in the bus the hon. Gentleman would have to direct him to go into it, and that is not acceptable in terms of individual liberty.

    What I am suggesting is that our taxation policy must be directed towards eventually getting a sane transport policy. Eventually, because of oil shortages, passengers may be forced to use buses. It is better for us to try to conserve petrol now than to be forced into much more desperate situations later. On the other hand to allow, as the hon. Member for Cornwall, North seems to be prepared to do, the death of rural public transport, is frightening.

    If the hon. Gentleman knew Cornwall as well as I do he would reckon that the death of public transport has already taken place and that it is only its ghost which is around. I am just preparing for its exorcism, which will undoubtedly take place. I have a letter from the director of the Transport Studies Unit, University of Oxford, in which he says:

    "I am enclosing a copy of a table I published in an article in the Surveyor, entitled 'Energy Conservation: Facts for Fiction'. You will see that the energy cost (which relates almost entirely to fuel costs) of bus and car in rural areas are almost exactly the same".

    I would refer the hon. Gentleman to a better source of facts on energy use—the National Council on Inland Transport—which includes a number of academics and which will produce an entirely different set of figures. Moreover, I take the position that it should be our object to provide buses and to give rural transport services assistance because many people who will never be able to use a car anyway are living in the country. They include a large number of old people as well as a number of schoolchildren. Public transport will be absolutely essential for them. It is interesting to note also that if we were to denude rural areas of all bus services we should find it difficult to get buses for schoolchildren even if they were specially hired for that purpose.

    The hon. Member for Cornwall, North gave a figure for the carrying of freight by road which seemed to suggest that other modes could not be used for carrying some of that freight. The hon. Gentleman mentioned 92 per cent. as the amount of goods carried by road out of the total carried in this country. But, of course, unlike goods carried longer distances in heavy lorries, the roads take only 72 per cent. It would be possible, as surveys have shown, for railways to be competitive in this regard and while not by any means taking even the larger part of that 72 per cent. they could certainly take a significant part. We shall have to look at other modes to some extent to reduce our reliance on petrol.

    I turn to taxation relief for people who travel to work. If everyone who travels to work by private car were to be given taxation relief the result on urban sprawl would be very great. It is forgotten that anyone who lives away from the centre of a town naturally finds property cheaper. If a person were allowed to deduct taxation on earnings for this, naturally more and more people would drift outside the towns. Of course many people now use company cars to get to work, and they get tax relief. It would seem to me a fair compromise that relief should be given to those people who use public transport to go to work. That would help maintain public transport services, reduce the use of petrol and in that way solve one of our problems.

    I would also compare Norfolk with Cornwall because there our rural bus services have almost died out. On every estimate that I can make at least one-third of the male population in my area go to work by car because no bus can possibly get them there. It is an average distance of about 15 miles out and 15 miles back. That is about 5,000 to 7,000 miles a year, for which these people have to pay the cost of getting to work and, of course, they are taxed on the extra money they earn because they go into towns rather than stay in their own villages. I do not believe that travelling to work in buses would help the majority of my constituents who go to work by car.

    I agree that in a case like that it is as the hon. Gentleman says. It is interesting that he mentioned 5,000 to 7,000 miles a year, because that mileage has been stated as being the breaking point when it is cheaper for the man who travels 7,000 miles or less to have taxation put on petrol instead of on vehicle duty. That is the break-even point. It is significant that the hon. Gentleman should have used that figure.

    I urge the Government to consider this more equitable form of taxation. By abolishing the vehicle duty and instead putting the amount of tax on petrol, we should help to conserve energy. I hope that a more serious view will be taken by both the Government and the Opposition of the need to conserve energy supplies, especially oil supplies.

    6.15 p.m.

    The hon. Member for Preston, North (Mr. Atkins) is obviously a doomwatcher. He imagines that tomorrow, or in two or three years' time, oil will run out.

    I made no such remark. Since the hon. Gentleman expects me to mention a figure, I am say- ing that in 15 years' time the shortage will begin to show and in 25 years' time it will really bite.

    In about 15 years' time the price of oil will probably have risen to about $30 per barrel. By that time petrol will be extracted from coal and the whole cycle will begin again, and there will be no shortage at all. Therefore, one has to take the arguments about conservation a little guardedly.

    What worried me was that the Chief Secretary spent all his time trying to support the idea of an increase in petrol tax without bearing in mind that consistently, since the tax was first introduced, it has gone up and up, and everyone considers that the poor driver is the person who can be milked on almost every conceivable occasion. The Chief Secretary made the observation that we shall have to come back to this sooner or later. The poor motorist will have to put his head on the chopping block yet again.

    Is the Chief Secretary aware that 50 per cent. of households, with incomes as low as 60 per cent. of the national average, have at least one car and that to these people an increase in fuel tax represents a burden, particularly the £10 increase in the annual licence fee? If we take an average family of two adults and two children, with a 1500 cc car running 10,000 miles per annum and an income of £4,000 per annum, the tax reduction figure works out at approximately £64 per annum. But 50 per cent. of that will be lost because the family will be paying £31 tax on petrol and excise duty.

    What the Chancellor has done is make one concession to reduce income tax, yet he is taking 50 per cent. of it back again. The time has now come to look at this realistically and bear in mind that the motorist must be considered first. Before he left the Chamber the Chancellor referred to the momentous work that President Carter is doing in the United States. But the situations there and here are entirely different. The United States is importing oil at the rate of 9 million barrels a day, and therefore something had to be done. The price of high grade petrol is 37p per gallon as opposed to 85p to 90p in the United Kingdom. Everybody knows that the 5 cents increase in America will be traded off. But in the United Kingdom we are assuming a position of self-sufficiency by 1979–80 and, of course, the tax is very much higher.

    The hon. Member for Cornwall, North (Mr. Pardoe) said that the demand for petrol in 1976 had been 16·9 million tons, which represented a small increase of 5·2 per cent. over the previous year. However, in the first quarter of 1977, North Sea oil substitution accounted for about 30 per cent., or 4·2 million tons of petrol, over a full year.

    If we have ample stocks of petrol, why should not a few of the beleaguered motorists of the United Kingdom be allowed to take advantage of it? The motor industry has to contribute about £4 billion in taxes. The motorist has been milked and milked again, and we are told in this Budget that but for the fact that it was known that the Liberals the Conservatives and others would vote against the proposals he would have been milked again on this occasion.

    Then there is the conservation argument. Why are the Government tackling 20 per cent. of the barrel? I am equally aware that fuel oil is subjected to a very heavy tax, and there is little justification for that, either. However, that takes a larger part of the barrel. The Government should bear in mind that this is not so much a tax on oil as a tax against oil to satisfy the coal lobby.

    I make one observation in passing. The argument has been put forward time and time again that the United States has not been alone in putting an imposition on petrol. But I invite hon. Members to compare pump prices in pence per gallon for premium motor spirit in March 1977 in various countries in Western Europe. In West Germany the price was 101p, in France 123p, in the Netherlands 117p, in Belgium 108p, in Sweden 107p and in the United Kingdom 90p. Hon. Members will see that the tax percentage of the pump price in the respective countries is 58, 59, 60, 57, 49 and 50. On that basis, therefore, it is right for the Chancellor of the Exchequer to say that the United Kingdom is the lowest taxed in Europe, with the sole exception of Sweden, where the figure is 49 per cent.

    Will my hon. Friend take into account the fact that in relation to average earnings the tax in this country is far higher than it is in comparable circumstances in West Germany, Sweden, and so on? He is not making a fair comparison.

    I was about to move to the second phase of my argument and to make the very point that my hon. Friend has in mind. I relate hourly earnings with motor spirit prices. Doing that, I find that the United Kingdom has a purchasing power of 100, Belgium has 123, Sweden has 178, and West Germany has 146. We have to remember that in West Germany and these other countries, total tax is very much lower than it is in the United Kingdom, and these figures are before tax. So let us not hear about what is happening in the United States and in Western Europe.

    Still on the conservation point, let me refer the Chancellor of the Exchequer to paragraph 41 of the Report of the Select Committee on Science and Technology on Energy Conservation. He will see that the Department of the Environment came up with an interesting piece of evidence, that
    "without drastic interference in consumer choice—for example by petrol rationing or by seeking to double car occupancy without increasing total passenger mileage—no single measure applicable in the transport field, even in the long term or to the fullest conceivable extent could save more than about 2 per cent. of total primary energy, and most would save less".
    It is no good continuing to chase the motorist. The motor car is indispensible, for a number of reasons. A person living in the country finds a motor car indispensable to him if he is to get from the place where he lives to work and home again. People regard the car as part of their station in life, despite the Government's efforts to tax them to death.

    What is happening here is that the Government are simply putting on to the poor motorist loads of tax, hoping that he will be able to contribute a little more. The Chancellor must recognise that the Government are taking from the motor car tax and associated taxes £4,180 million every year. They contribute 25 per cent. of total expenditure taxes. Therefore, I am rather disconcerted to discover today that the Chancellor of the Exchequer wants to return to this later and pound the poor motorist once again. Before he does so, I suggest that the right hon. Gentleman should think about the country and should study the figures in recent by-elections.

    I am very uneasy about what is happening here today, and I am all themore uneasy because I have no particular stircture either on the Government or on the Opposition parties, and no strong feeling either way about this tax.

    In the first place, I do not blame the Government for introducing it. Whatever may be urged by hon. Members, its introduction barely keeps pace with the rate of inflation in terms of the tax revenue that could have been expected. I know that legislators do not like to be told that, but it happens to be true. I do not blame the Government for dropping it, either. Presumably their business managers have made the right calculations, despite the scepticism of the hon. Member for Cornwall, North (Mr. Pardoe), which I do not share. The figures produced by Whips are never wrong. If the Government did not have sufficient votes it would have been childish of them to go on pressing for a provision for which they knew they would not get approval.

    I do not blame the Opposition. The Conservative Party said that it did not want this tax and, very properly, added that it would have been better to have a VAT rate of 10 per cent.

    I do not blame the Liberal Party, either. As the hon. Member for Cornwall, North rightly said, Liberal Members have to look after the interests of their constituents, though I cannot quite accept that they did not have some other motive in mind as well, namely, that some rare and refreshing fruit in terms of actual power had to be demonstrated to show that there was some rationale in the arrangements that they had made with the Government.

    It is not any of that which worries me. What worries me is the very factor in which some hon. Members, especially the hon. Member for Cornwall, North, are taking more than pleasure. It is the belief that this is how a legislature shows its power over a Government and that this is what we want more of in the future.

    As one who is passionately anxious for the legislature to have more power over the Government and who is exceedingly sceptical about all Departments of Government, especially the Treasury and the Inland Revenue, I know that this is exactly what I do not want to be the pattern of the future.

    In my opinion, occasions like this get legislators a bad name. The two really crucial issues before any legislature that takes taxation seriously and plays a constructive part in devising it have nothing to do with taxes on petrol, on cigarettes or on alcohol. I speak as a car owner, a drinker and a smoker, and as one who represents a constituency in which a great many cars are made and used. In that sense, I have an interest exactly similar to that of the hon. Member for Cornwall, North. My constituency interest is also in favour of this tax being aborted at the stage which we have reached.

    6.30 p.m.

    I take comfort from the fact that, on the basis of what we now know, the Budget was probably not quite as expansionary as it ought to have been, so no grievous harm has been done, unless we begin to accept this sort of thing as a pattern and forget the two essential points that as legislators we should be thinking about. The first is the vital need to keep in our minds, the minds of those who vote for us and, even more importantly, the minds of the people who select us, the link between expenditure and taxation. A large number of our problems arise because Government expenditure is much too high and continues to be much too high in spite of the recent cuts.

    Secondly, the taxes that have to be raised to meet too high a level of expenditure are wrongly levied in this country. That is a view that I have been stressing for years and now appears to have a certain acceptance on the Government Front Bench. Our level of direct taxation—income tax—is ludicrously high, and our rate of indirect taxation is not taking enough of the burden.

    If the legislature were doing its job as I would wish, far from castigating the Government about petrol tax and telling the populace how monstrous it is that a section of the population should suffer from an indirect tax, it would think that the Government deserved a certain measure of congratulation. The hon. Member for Bedford (Mr. Skeet) said it was terrible that the Government had given some relief on income tax but had taken half of it back in indirect taxation, at least from car owners. I disagree with the hon. Gentleman. That is not terrible. It is marvellous. I want years and years of the Government cutting income tax and meeting the shortfall by increasing indirect taxes.

    I know that one can argue that the Government should not have increased the cost of fuel but should have raised the money in some other way, perhaps by raising the rate of VAT. I shall come to that point in a moment. The Government might have some other form of motor taxation, which I would be wholly against.

    I agree that we should look at the vehicle excise duty. I would prefer to sec it go altogether and have a higher tax on fuel for the reason so often put forward by Conservative Members, that of choice. There is no choice in keeping a car on the road after one has paid the duty, but there is a certain measure of choice, even in rural areas, in how frequently one uses one's car. Tax should always fall where there is the greatest element of choice.

    In all these ways I find that what the Government have done is not so terrible. It is not so terrible, either, that the House should have reversed the verdict, through the power of argument or the mathematical calculations of the Labour Whips.

    What would be a tragedy would be for us all to say afterwards "This is how the legislature will work in future. What a wonderful thing it is not to have majority Governments!" We should never forget the old jibe about the Congress of the United States in the nineteenth century, that it voted for all the appropriation Bills and against all the taxation Bills.

    In that connection I noticed with interest the comment of my hon. Friend the Member for Tottenham (Mr. Atkinson). It is exactly the views of people like my hon. Friend that lay on the Treasury the need to raise taxes at that level. My hon. Friend least of all—he is an old friend of mine, and will not mind my saying this—should talk about how taxation oppresses various classes of the community. Those taxes are raised to pay for some of the schemes that he most favours, which have produced the very situation described by the hon. Member for Cornwall, North. The hon. Gentleman honestly and honourably said today "For God's sake let us have no more bus subsidies, because they will not solve the problem of my constituents or improve the transport system in Cornwall. They will only waste more public money, which will mean more taxation."

    That is the point I want most to put. The whole matter has no doubt been great fun, especially for Liberal Members. I do not think it has done great harm, because the Government are possibly taking in too much in taxation this year, judging by what we now know about the state of the economy. But this is not the way in which the House of Commons ought to discuss these issues.

    Having said some harsh words about my hon. Friend the Member for Tottenham, I turn to a matter on which I entirely agree with him. The convention whereby we are not allowed to suggest replacement for taxation that we do not like is nonsensical. We ought to have the right to discuss major areas of the Budget before the Budget is even presented. Secondly, we ought to have the right to say that we do not like a particular tax and to suggest an alternative which does not produce a revenue shortfall. That is what I would like the legislature to do.

    However valuable this discussion has been for the constituents of the hon. Member for Cornwall, North and mine, however much it may be a petty triumph over the Government, it is not the rôle I want for the legislature. I do not want anyone, including myself, to kid himself that it is.

    The Conservative Opposition have acted perfectly honourably. They have said all along that they want a switch to indirect taxation, and I think that they are correct. Increasingly, the Government have come to meet them on that point, as general opinion in the country has, as it is increasingly realised that the old scenario that direct taxation was progressive and indirect taxation was regressive is wrong and leaves out of account the wide area of choice that is left to people and the regressive nature of our taxation system, which has an entry point so high up the scale. The Government have come to see this. The Opposition were even fair enough to say that the Government should not increase petrol tax but should bring VAT back to 10 per cent., and that they should not have reduced it to 8 per cent. in the first place. That is correct.

    I agree with the hon. Gentleman's broad theme about the desirability of switching from direct to indirect taxation, in comparing tobacco tax with petrol tax as alternatives, but is he not underestimating the plight of people with limited means in rural areas, whose dependence on motor cars is far greater than he seems to assume?

    That is a good point for me to conclude on. It is exactly that sort of opinion that worries me most.

    I am an old friend of the hon. Gentleman's, so he will know that I am not attacking him personally when I reply that it is too easy. VAT could easily become like income tax. Does the House ever have a serious discussion that is likely to change anything about the level of income tax that the Government say they want? I have been in the House for a long time. It is always the same story. Governments put up their income tax proposals and the Opposition say that they are too high. Even Labour Oppositions do that. My right hon. Friend the Chief Secretary and I used to do it. We complain about the Conservatives' rate of income tax and they complain about ours. The complaints are never taken seriously. Everybody assumes that what is proposed is what will be paid.

    The Treasury even has a cant phrase to deal with the matter, speaking of "equity between taxpayers" one of the most nonsensical phrases ever invented. It is used whenever a Minister is in trouble. When he is having to defend a monstrous rate of tax, such as the 83 per cent. on the top level of incomes plus the investment income surcharge of 15 per cent., he can always say "This is equity between taxpayers". We should not allow VAT to become the same sort of tax. It falls on a wide range of goods purchased by everybody. We do not want to accept that because there is a shortfall in revenue and we do not want to increase income tax we shall increase VAT.

    I have no doubt that what the hon. Member for Barry (Sir R. Gower) said about elderly people needing motor cars in rural areas was true. But how many hundreds of other examples could every other hon. Member concoct to show that a needy, deserving or socially valuable group should also have a tax concession?

    This is how we have always done it. We have never taken much notice, in taxation terms, of the Bills that we pass that cause the taxes to be levied. We forget all about that.

    We never seriously expect to affect the rate of income tax. Apparently, we are not going seriously to expect to affect the rate of VAT. But about the buttons and bows, about invalid carriages, about what happens in rural areas to owners of motor cars, we have an enormous amount to say, and congratulate ourselves, as legislators, that that is controlling the Executive. It is not, and nothing that happens today should persuade us that it is. We should direct our minds to those proposals that would enable us to have a genuine rôle in a discussion of the taxes that could be raised and the taxes that could be dropped and replaced by taxes that the legislature and not the Executive wants. That is the sort of control by the legislature that I want to see.

    I hope that the Committee will forgive my confusion. I had originally intended to speak to the amendment standing in the name of my right hon. Friend the Member for Western Isles (Mr. Stewart) on behalf of the Scottish National Party. It was identically worded to the Conservative Amendment No. 3 in seeking to delete the whole of subsection (1) of Clause 4. Our amendment was printed on the Order Paper of 2nd May, but because of the chaos involved in the redrafting of the clause, it has been subsumed, like Amendment No. 3, by the Conservative manuscript amendment. I sympathise with the Conservatives in this chaos, caused by a Government who do not really know what their own Bill is about because the Liberals appear to have changed their minds.

    I am glad that the Liberals have had a change of heart about the 5½p increase on petrol tax. I listened to the heartrending story told by the hon. Member for Cornwall, North (Mr. Pardoe) about the difficulties of people in his area in relation to public transport. It is a pity that the Liberals did not vote against the proposed increase on the relevant Budget Resolution. I am glad of the support that the Conservatives are giving against the proposed increase, and also of their comments on the need to keep the car licence duty down. But when the SNP went into the Lobby against the Budget Resolution increasing that duty to £50 it got very little support from the Conservatives. Only about 40 of them—and only three Scottish Conservatives were among them—came through with us.

    The SNP is not happy, either, with the differential between private cars and heavy vehicles. Scotland, in population terms, has much longer road distances than England has—even longer than Cornwall, in relative terms. It is therefore relatively more dependent, per person, on road transport than England is, and the costs in our rural areas are the greater on the roads because so much more is carried on the roads.

    6.45 p.m.

    I am informed by the British Road Federation that in Scotland 90 per cent. of inland freight tonnage and 99 per cent. of food, drink and tobacco goes by road, and that 96 per cent. of users' expenditure on freight goes to road transport. If it were possible to increase those percentages, they could hardly be increased for Scotland. This is not the time for me to talk of our proposals for haulage charges, either on the mainland or for the Islands, but we wish to implement the Norwegian system whereby charges for haulage over water are charged as though over land.

    The hon. Member for Wycombe (Sir J. Hall) mentioned the use of post buses. They are a help, but they are not the answer in their present form. If one lives at the end of such a bus route, one cannot get back to one's dwelling place on the same day. One has to stay overnight in the centre from which the bus is to start the next day.

    The situation emphasises that Scotland's imports and exports depend heavily on road haulage. We therefore welcome the decision not to increase the tax on petrol for cars, but we are not happy that the relief, will not be extended to heavier vehicles. The Chief Secretary said, ominously, "We shall have to come back to the petrol tax." Those words were ominous to people not only in the rural areas but throughout the country. The right hon. Gentleman also made the ominous statement about offsetting the loss of revenue.

    The SNP will not accept anything that offsets the loss of revenue by raising whisky duty yet again—that has gone far enough. The need to offset the loss of revenue by raising other taxation may or may not be necessary in the context of England, but it is not necessary in the context of Scotland, because the revenue from Scottish oil, running at about £1,200 million this year, rising to £3,000 million by the end of the decade, is an awful lot of offset.

    While the SNP is not in business to put the right hon. Member for Finchley (Mrs. Thatcher) into Downing Street, it is in business to oppose those parts of the Finance Bill that are against the best interests of Scotland. That is why we shall be voting with the Conservatives on their manuscript amendment, and also for Amendment No. 6.

    I would like to ask a question of the hon. Member for Cornwall, North (Mr. Pardoe). The right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel) told us that the new arrangement between the Government and the Liberal Party meant that there would be a new element of stability in our affairs. How come, then, that the first event in that arrangement is that the petrol tax is put up on 5th April and is now to be put down again on 5th August, if the Government amendment is carried, as I gather it will be? That seems to me to be somewhat unstable. Moreover, there has been all the talk about what would happen. It was going to happen on the night of the Budget Resolutions, but it did not. Now it is to happen tonight, but it will have no effect until August. That is hardly a stable way of carrying on the affairs of the country. I wonder what has gone wrong.

    We are told that the hon. Member for Cornwall, North would have enough friends to defeat the increase in petrol tax—indeed, the Government have more or less acknowledged that fact by putting down their own amendment. But I do not understand how that can be described as a product of the Lib-Lab deal; surely it is a product of the "Lib con". It seems to me that the Lib-Lab deal is being torn up this evening and instead, surreptitiously and without trumpets being sounded, the Liberal Party is coming into the Lobby with the Conservatives. So this is a Lib-Con deal which has brought about this particular piece of "goody" for the Liberal Party. We must get this straight. I was interested to read in a Northumbrian newspaper a letter over the name of Lord Ridley, who is not unknown to me. He concluded:
    "O Beith, where is thy sting?
    O Steel, where is they victory?"
    That seems to sum up this night's work pretty accurately.

    What worries me is a point that was also raised by the hon. Member for Birmingham, Ladywood (Mr. Walden). What about the revenue? I forget the exact figures that the Government lose if their amendment is carried. There was a time when we were told by the Chancellor, huffing and puffing, that we would have to have 3p on a pint of beer. I can see no amendment or financial resolution down to that effect. The hon. Member for Ladywood is right in pointing out that we, as Back Benchers, cannot put down an amendment to increase the tax on beer. I had expected to see one to that effect from the Government, but it is not there, so I conclude that that is not to happen.

    I hear words from hon. Members in all parts of the House that perhaps it is all right, that it should not happen because the economy is looking a bit more deflated than we thought 10 days ago, that a fillip of £300 million will not do the economy any harm, and the whole thing has been quietly forgotten and buried.

    I remember a time—it was exactly three years ago—when I moved an amendment to the Finance Bill to reduce the tax on petrol from 25p to 10p. That was on 3rd March 1975. Having urged that case, I concluded that it would be wrong for me to press it to a Division because I did not believe that the revenue could accept the loss that would be caused in terms of the Budget judgment and our deficit.

    I did not vote for the amendment, but one of the Liberals forced a Division and the entire Government voted to uphold their tax. Those who voted for my amendment were all the Liberal Party, with one exception, the whole of the Ulster Unionist Party, the whole of Plaid Cymru, the whole of the Scottish National Party, and, strangely enough, two Tory Whips. I do not know how they got in there. They are both Whips now but, to do them justice, they were not Whips then. I am referring to my hon. Friends the Members for Beeston (Mr. Lester) and Bute and North Ayrshire (Mr. Corrie). Two people who did not vote were myself and the hon. Member for Cornwall, North. I do not know whether that was because he did not think the revenue could take it then. Perhaps he thinks that it can take it now, and I wonder what has been going through his mind about the effect on the borrowing requirement if we pass the amendment.

    I believe that this is a defect in our procedures and that we should be able to increase other taxes, especially as the time has come when hon. Members can vote to achieve something. I make it clear that we should put VAT up to 10 per cent., which would about cover the cost.

    My reason for doing that is that the sheer price of petrol is too heavy. It is 45p of tax, and roughly 40p of revenue to the Arabs, the oil companies and the petrol stations. The Government take more than all those three together. This is the sort of tax that one levies on luxuries—a tax in excess of the base value of the product—and I do not believe that we should continue to pile it up.

    I do not think that President Carter's energy initiative was felicitously phrased. He said that America should lead the world to reduce the consumption of petrol. But the world is leading him, and has been doing so for quite a long time, because we use about one-third of the amount of oil that is used per head in America. Therefore, it is not for President Carter to tell us to follow his dashing lead by putting a tax on petrol, but for us to follow the lead so ably given by the Chancellor of the Exchequer in putting 45p tax on a gallon of petrol while he has been Chancellor.

    These matters were discussed last weekend at the Summit Conference, and I was delighted to see that the world leaders set an example in that energy-saving walk from Downing Street to Lancaster House. At least they saved a little energy, though I was surprised to read the comment of the right hon. Gentleman the Prime Minister on that walk. He was overheard to say to President Giscard d'Estaing:
    "It is very difficult. Steel is very nice. He is very honest."
    I wonder what President Giscard d'Estaing's reply was to that, and I wonder, too, what the right hon. Member for Roxborough, Selkirk and Peebles thinks about the Prime Minister.

    The hon. Gentleman used the word "honest" in relation to my right hon. Friend. The hon. Gentleman regaled the Committee with the extraordinary statement that the Chancellor of the Exchequer had raised the tax on petrol by 45p. As the tax on petrol, with this increase, is 39p, it would have been difficult for the Chancellor to have done that. Will the hon. Gentleman explain what has gone wrong with his figures?

    Does the hon. Gentleman mean that, with a total duty of 35p plus VAT, the Chancellor of the Exchequer has increased the tax on petrol by 45p in the last three years? That would be a little difficult.

    I might have made a slip, but I tried to say that the total tax was 45p from all sources. Perhaps I did not say it directly. If I did not, I apologise. I think that it is about that, depending upon the grade of petrol. I would not allege that the Chancellor of the Exchequer put on all that tax during his period of office, but he has put on tax after tax on petrol, and that I believe to be true until tonight's work if that is what has happened.

    I think that if we are honest about energy policy we shall not feel that an increase is necessary in petrol tax, particularly as I agree with the hon. Member for Cornwall, North that we have proved that petrol is pretty well price-inelastic, and that it does not have any effect in terms of saving petrol to pile the tax on to it in the way that we have done in the past.

    I do not think that that is the answer to the energy problem. I think that if we are to look to an energy policy we shall have to talk about nuclear power, about new ways of finding oil and petrol, about coal, and about all sorts of other matters that should be outwith the scope of this debate. I do not think that it is fair to plead energy policy in defence of this tax.

    I end by being as honest as I can on the question of where the money should conic from. I think that the hon. Member for Preston, North (Mr. Atkins) had it entirely and absolutely wrong when he said that we should spend more money on public transport to subsidise it more heavily, and that it was all right to tax petrol for private cars more heavily so that the money was there to pay that subsidy. Indeed, the hon. Gentleman went so far as to say that people should be forced into empty buses to fill them.

    I do not think the hon. Gentleman will find that that is a very popular view in the country, but in any case it is an entirely wrong view. Here again I agree with the hon. Member for Cornwall, North that the right thing to do in the rural areas is to allow the private car to be the main, if not the only, form of transport, and allow licences to be granted freely—indeed, licences should not be necessary—for people to ply for hire or reward, taking those who do not have their own cars to wherever they want to go to shop, to visit the doctor, to see friends, or for any other purpose.

    There are many retired people who would welcome the opportunity of doing that and who would not charge very much, and it would be of enormous benefit to the inhabitants of rural areas. To go on ploughing money into public transport is to cause these high rates of petrol tax and road tax to find the money to pay subsidies.

    We have been going the wrong way about this, not merely because we thought that there was a genuine solution through the use of rural buses and other forms of public transport that are not really wanted, but because there is in the minds of many Labour Members, including many in the Government, a feeling of prejudice against the private motorist.

    The private motorist does not fit into the bus. The tidy centralising mind would like to put him into a bus where there is a spare scat, but that is not what he wants. He wants the independence and status of his motor car. He wants the chance to live a life that gives him a new dimension of freedom—freedom to go where he wants, when he wants, and for as long as he wants.

    What does the hon. Gentleman say about the real difficulty that is created for the motorist who gives lifts?

    I think that this matter has been dealt with. If not, and if the hon. Gentleman will help me introduce a Private Member's Bill to deal with it, we can deal with it next Friday. It is not difficult. The law has not been relaxed to allow lifts to be given without a licence. I do not know why the Chief Secretary wastes his time with this debate on this silly tax of his instead of devoting the afternoon to introducing a Bill to free licences for private cars. Then he could have the afternoon off and the Secretary of State for Transport could whip such a Bill through. We should all be delighted. If that had been done, the whole farce of this afternoon's debate—all for the greater glory of the hon. Member for Cornwall, North—could have been avoided.

    7.0 p.m.

    We have witnessed an extraordinary phenomenon this afternoon. The Secretary of State, when he began to move the amendment, regaled the Committee with copious arguments as to why the increase which was announced in the Budget was not only desirable then but continued to be desirable to this day. He gave one convincing argument after another why the Government not only had been absolutely right at the time of the Budget but continued to be correct in insisting that the increase in duty was in the public interest and was in the interests of conservation.

    Just as some hon. Members on this side of the Committee were beginning to be convinced by the Chief Secretary's argument, he finished his peroration by calling on the Committee to accept the amendment, which is designed to reverse the proposal made in the Budget.

    I understand the reasons why the Chief Secretary sought to do that and why he is reversing his own proposals in the Budget. However, it might have been slightly more sensible and, indeed, perhaps have carried more respect if the Chief Secretary had put his original orders to the House of Commons and allowed it to reach a decision. If the Government had been defeated on such an occasion, so be it.

    The actions of the Chief Secretary this afternoon suggested that he had a singular lack of faith in his ability to convince the House of Commons on such a move and that by adopting this course he was in effect anticipating defeat. He has backed down at the last moment without accepting the arguments which have been put forward.

    The Liberal Party has argued ad nauseam that the back-down of the Government is a victory for the Liberal-Labour agreement. That is an extraordinary argument. For it to have any validity it would have to be argued that but for the existence of that agreement the proposal to increase the rate of petrol duty would have gone through. Such a proposition has only to be stated to be seen to be manifestly absurd.

    We know that the Government are and will continue to be a respecter of the Liberal-Labour agreement as long as they are in a minority in the House of Commons on any issue on which they cannot carry hon. Members in any other party. However, since the Liberal-Labour deal, the Liberal Party has opposed the Government on any controversial issue—whether it be rural transport, defence, teacher training colleges in Scotland, or indeed this increase in the rate of petrol tax—but, nevertheless, for reasons of its own desperate bid for survival, is prepared to keep the Government in office for however many years the Government choose to hang on.

    The reason for the Liberal Party's decision was a desire to keep the Tory Government out of office. This is a reasonable reason. If I have to choose between the devil and the deep blue sea, I do not see why I should choose either the devil or the deep blue sea. It is not I who have claimed that this reduction in the tax is due to the Liberal-Labour pact. If this tax were not coming off today, I have no doubt that the hon. Gentleman and his right hon. and hon. Friends would be parading round the country blaming the Liberal Party for the tax. The hon. Gentleman must not take it to heart if I go round the country thanking the Liberal Party for having the tax reduced.

    The hon. Gentleman cannot have it both ways. If he is going round the country saying that the Liberal Party is responsible for the removal of the increase, he must prove that. It is untrue to say that somehow, but for the Liberal agreement to keep the Labour Government in office, this increase in the petrol duty would have gone through. He must know that. By saying that the purpose of the Lib-Lab pact is not to keep the Labour Government in office but to keep the Conservatives out of Government, he is simply saying that he wishes to prevent the obvious wishes of the British electorate from being put into effect. He has in effect conceded that if the electorate were given a choice it would return a Conservative Government to power.

    I think the truth is that the hon. Member for Cornwall, North (Mr. Pardoe) believes that the Government are going through a certain amount of mid-term unpopularity, rather like Mr. Khrushchev in Russia.

    I am grateful to my hon. Friend. It would appear that not only the Government but also the Liberal Party is going through a certain amount of mid-term unpopularity. In the case of the Liberal Party it has lasted since 1922. It looks like going on for another 50 years.

    The hon. Member for Perth and East Perthshire (Mr. Crawford) argued that. although an alternative to the reduction in petrol duty might be required in the economy of England and Wales, it would not be required in the economy of an independent Scotland, because the massive revenues from North Sea oil as they would accrue to an independent Scotland would offset any losses that might occur as a result of a reduction in the petrol duty. The hon. Gentleman might have been slightly less modest and argued that the revenues from North Sea oil would allow an independent Scotland to abolish petrol duty altogether and perhaps income tax, corporation tax and all the other taxes and imposts upon which the Government insist.

    The simple fact is that the Scottish National Party has never quite been able to decide what function North Sea oil would have in the economy of an independent Scotland. At one time it was arguing that the revenues from North Sea oil would allow the pension of Scottish grannies to be doubled as soon as a nationalist government came to office. Then the hon. Lady the Member for Moray and Nairn (Mrs. Ewing) said that to get independence Scotland would be happy to give England and Wales all the oil. Since then there have been further variations of the argument. Notwithstanding the variations we hear in that proposal, the Government will either have to produce an alternative to account for the loss of revenue or give an extra fillip to the economy.

    I should like to welcome one point that the Chief Secretary made. He said that the Government were not absolutely determined to stick by the date of 5th August. He did not regard it as a rock solid date for the implementation of the reduction in duty. The Chief Secretary and other hon. Members will know that the choice of 5th August, which is a Friday, is not regarded as particularly auspicious by many of those in the trade.

    As we approach whatever date is chosen, many petrol stations will reduce their intake of new supplies in the hope that they can wait until the price has fallen and collect new supplies at the lower price. Equally, the public will try to wait until 6th August, or the day following whatever other date is chosen, to refill their tanks, knowing that they will then pay the lower price.

    The effect will be that on the night of whatever day is fixed for the reduction to take effect, supplies of petrol at most stations will be at a minimum and on the following morning the demand from the public will be at a maximum.

    As most suppliers to petrol stations do not supply at the weekend, there is a serious risk that severe problems will be created for the weekend beginning 5th August, which is likely to be a busy period as it is part of the holiday season in England and Wales.

    I therefore hope that the Chief Secretary will consider an alternative day—a day in mid-week, or perhaps a Sunday evening—for the implementation of the change. Of course I hope that he will accept the Conservative amendment. Even if he does not find that possible, I hope that he will accept that 5th August, which is Friday, will create extra difficulties. I hope that he will be flexible.

    I am delighted with the attitude taken to the increase by those on the Conservative Front and Back Benches, by the members of the Liberal Party, by those on the Scottish National Bench, and also by certain Labour Members. In the past, members of all parties have been a little remiss about this tax. There has been a tendency to regard motoring as a luxury, as it possibly was in the years between the two great wars. Government Departments have come to realise only reluctantly how much a car is an essential in many parts of the country—and perhaps some of them have not done so yet. I hope that this augurs well for the future.

    However, the Chief Secretary mentioned that the Government might return to this petrol tax. That was a regretable statement. I am sorry that the tax is to be removed purely as a result of the parliamentary situation. I should have liked to hear the Government come to the House to say "Yet, we suggested this tax but on reflection we realise that we were completely wrong". We have not heard that. The Government are simply saying that they must appraise the situation in the House. That suggests that at some time in the future, if the situation is different, a Labour Government might produce a similar impost. I certainly hope that it would not come from a Conservative Government.

    The hon. Member for Birmingham, Ladywood (Mr. Walden) covered a fairly wide argument about taxation on this amendment. I do not blame him for that. Many of us could agree with his general theme, that it is desirable that we should not rely so much on high rates of direct taxation and that we should find a broader base of indirect taxation. He also pointed out that indirect taxtion would hurt in many cases and that, therefore, when considering such taxation the Government should also consider the other side of the balance sheet. I agree with all that.

    However, in seeking alternatives the Chief Secretary was definitely wrong to suppose that this tax is comparable to the other taxes that he mentioned, such as the duty on tobacco and alcohol. The increase in petrol duty cannot be compared with the duty on those items. I suspect that the Government chose this form of taxation because they thought that it would be less unpopular than an increase in tobacco or alcohol duty. Certainly they are not comparable forms of taxation, and that is certainly not a fair comparison in relation to the impact on some parts of the country where people are less able to bear this tax. I know that the hon. Member for Ladywood does not limit his views to his own constituency and appreciates that conditions are different in other parts of the country, but he does represent a metropolitan constituency and that must slant his viewpoint.

    In Powys, in mid-Wales, the rate of ownership of motor cars is one of the highest in the country. The situation is probably the same throughout North Cornwall and also in some of the poorest counties in Wales. The people living in these areas do not have a lot of money to buy cars but they cannot live reasonably without them. If one increases the cost of running this essential service, the impact must necessarily be much harsher in mid-Wales, the Highlands of Scotland and parts of the country that already suffer from having fewer amenities and fewer of the things that are provided in the great cities. It must make life less possible in those parts where there has already been a tendency for people to leave the locality and to congregate in great cities.

    I am sure that the hon. Gentleman can see that my point was that the real rôle of the House of Commons ought to be to persuade the Government to leave people more of their own money in their pockets rather than for hon. Members to try to claw back certain concessions on tax levied. The people the hon. Gentleman has just mentioned would be much better off as a result of a 10p cut in their income tax than as a result of anything else that we are doing today.

    I do not dissent from that view, but we are not at liberty, in the amendment, to do that. We must consider the effect of the amendment. It is to the amendment that I am speaking and not about the wider taxation considerations to which the hon. Member has understandably referred. That does not deal with this point.

    Had the amendment not been put down today the parts of the country that would have suffered worst would have been those where it would have been least easy for people to bear the increased tax. That must be considered by future Governments, and I hope that they will do so. That is why I deplore the tone of the Government's statement—that the amendment has been put down simply because of the parliamentary situation. It should have been put down on its merits. This should be a red light to future Governments that they must not take the easy way and soak motorists as Governments of both parties have done in the past.

    The time has surely come when we as Back Benchers should say that this has gone far enough. Indeed the imposition of such a tax tremendously weakens our ability to object to oil price increases imposed by producer countries. How can we object to their proposals for increases if we ourselves are increasing taxes on petrol?

    In conclusion, I am delighted that so many hon. Members are now taking this attitude. I hope that they will persist and that the Government Front Bench will be truly converted.

    7.15 p.m.

    One is almost always impressed by points that are made by the hon. Member for Birmingham, Ladywood (Mr. Walden) when he takes part in such debates. Those of us who watched the sorry spectacle of the Government creeping from their original introduction of this legislation to the Chief Secretary—

    The Chief Secretary must not be too sensitive, because I am about to sympathise with, and almost praise him. I was about to say, "the Chief Secretary creeping towards the denouement this afternoon"; and those who watched it must share the concern of the hon. Member for Ladywood about this extraordinary system which, whatever else it does, succeeds in concealing from people outside the House and ourselves the link between the raising of taxes and the spending of money. However, it strikes one that we regard this method of government as sacrosanct and immune from change.

    Undoubtedly the hon. Member for Ladywood was right to stress, as we have repeatedly stressed, that the burden of public expenditure in this country is much too high and that certainly the extent to which that burden is reflected in direct taxation on the earnings of working people is also too high. In so far as the Government have taken that argument on board, I am delighted. We find an inching towards the implementation of that policy in some of the measures in the Bill, but the machinery that is used, combined with the Government's incompetence, has made it impossible for the Government to select a strategy—if indeed they have a strategy—in that direction.

    The matter is therefore being tossed backwards and forwards across the House and taxation is being imposed by Russian roulette with the hon. Member for Cornwall, North (Mr. Pardoe) having his finger on the trigger or whirling the barrel. That is not a good way of carrying through a change in taxation policy about which the majority of hon. Members are generally agreed.

    The Government have pre-eminently selected the wrong mix to bring before the House. We are not asking for motorists and petrol prices to be exempted altogether from the burden of indirect taxation. That would be to go back a long way. Nor do we ask that they should be exempt from the burden of taxation in a general switch from direct to indirect taxation. However the Government have brought forward a package in which motorists have been selected as the special victims of the switch. My hon. Friends the Members for Tiverton (Mr. Maxwell-Hyslop) and for Bedford (Mr. Skeet) pointed out the extent to which this was so.

    During the last three years VAT has come down in percentage terms of the cost of living—which has risen by about two-thirds—while the tax on petrol and car licences has doubled in that time. It is not a matter of the Government justifying moving petrol and car taxation along with the cost of living. The Government have deliberately shifted it in that direction at the same time as abating their yield from VAT. The Government actually makes the position a great deal worse even from the point of view of arguing for higher taxes on motorists in order to treat more generously public transport and country buses.

    As a result of their manoeuvres, the Government have ended with a reversion to the previous level of taxation on petrol and the motorist and a continuation of the additional 5 per cent. on derv which, even if it is not used by stage bus services, is used by school buses and many other forms of public transport. Having started with the wrong concentration on petrol and fuel oil, they have ended up with an even more wrong concentration, having helped the motorist in response to requests from all sides of the House but having maintained their determination to clobber rural school buses and the industrial user.

    The Chief Secretary said on Second Reading that the Chancellor of the Exchequer had produced a carefully selected and carefully balanced package in vital areas of policy. There was marvellous prose describing the process of the Treasury and the minds of Ministers, but it has now been cast away. Even from the Government's standards, we have ended up with the wrong result.

    I have considerable sympathy with my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and the hon. Member for Cornwall, North, who spoke about the curious ramshackle system of heaping subsidies on rural bus services with one hand while taxing other parts of their operation with the other being particularly disadvantageous.

    Preventing citizens who want to transport each other around the place for modest reward from doing so serves no useful purpose to them and very little purpose for the people who have to run the rural buses. They have to negotiate with sometimes as many as 10 or 11 local authorities on such matters as concessionary fares. They call it part of their political revenue, but they might be better off without it. It is an extraordinary situation.

    If we were a county council considering our budget, we could propose alternative taxes. We would have been considering the budget for six to nine months in committee and parties on both sides would be taking part. That is a supremely more rational approach to budget making than is our rather rambling way.

    I see the right hon. Member for Battersea, North (Mr. Jay) sitting opposite, and his presence is a baleful warning that even the most select of Select Committees do not always arrive at clear-cut, unanimous conclusions. It may be an advantage to consider changing the present system. We have the wrong method, and it is not surprising that we end up with random and haphazard results. The Government are not playing the present system in accordance with the rules under which it is expected to be played. We cannot carry on with this haphazard system of taxes being brought piecemeal to the Floor of the House to be rejected or accepted.

    The Chief Secretary comes down to us as if he were an air hostess with National Airlines bringing one tax package after another and saying "I'm Joel. Fly me." If we reject that, he will come back with a new package next week.

    The Chief Secretary has not answered the question of my hon. Friend the Member for Cirencester and Tewkesbury about the consequences of this addition to the Budget deficit. It is only £140 million which, in modern parlance, is scarcely here nor there, but I fear that it is the beginning of an unleashing of the proper control of Government expenditure and the Budget plan that will be washed away in the sands of summer with all sorts of consequences. The Chief Secretary said that the Government would have to come back to this tax. Is he intending to introduce another increase in petrol duty? What does he mean by those rather menacing words?

    Does the right hon. and learned Gentleman accept the argument of some of his hon. Friends that it would be a good thing to put the vehicle excise duty on to petrol? If so, that would mean a future Conservative Chancellor introducing very much higher taxes on petrol.

    This point was canvassed two years ago in the Finance Bill Committee. The Chancellor said that he had considered the option and the hon. Member for Cornwall, North himself reflected on the factors to be borne in mind. We should have to consider the balance of administrative convenience and the need to keep the burden off those who depend on road transport to travel to and from work. It is not a decision to be taken lightly, certainly not in the closing stages of a debate such as this. I should like the benefit of the views of a Committee of the whole House.

    The measures before us are not the fruit of the Lib-Lab pact. If anything, they are the fruit of the Lib-Lab disagreement—the Lib-Lab misunderstanding. They are a desperate attempt by the Liberal Party to reassert their virginity at this late stage and to return for the time being to the Opposition Benches where one thought they belonged.

    This camouflages the reality that within the system of government that has worked reasonably well up to now, this Government have lost their majority and cannot command support for the policies that they put before the House. They attempt to dignify what is happening as being halfway to the introduction of a European method of Budget making when it is nothing more than the Government's incapacity to command a majority here and a concealment of the total craven reluctance of the Government or the Liberals to place themselves before the judgment of the electorate.

    Our manuscript amendment would remove the duty not just from petrol, but from derv and other motor fuels. I am delighted to have the support of the Scottish National Party for it and I hope to have the support of the whole House.

    I beg to move, as a manuscript amendment to the Government amendment, to leave out from first 'shall' to the end and insert:
    'be at the rate of 0·3000 a gallon'.

    We have had an interesting debate. My hon. Friend the Member for Birmingham, Ladywood (Mr. Walden) made an interesting speech, as always, but it was particularly interesting on this occasion because he said that he loved us all. He thought that the Government Front Bench were doing a marvellous job, the Opposition Front Bench were very good, the Liberals were very good—everybody was very good. He loves us all. I was grateful for that favour even though my hon. Friend felt it necessary to go to talk about his deep suspicions of the Treasury and the Inland Revenue.

    My hon. Friend the Member for Tottenham (Mr. Atkinson) and the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) were worried about the way that we deal with tax matters on the Floor of the House and in Committee because there is no opportunity for anyone other than the Government to deal with alternatives when seeking to reduce a particular tax. I have some sympathy with that view.

    As always, my hon. Friend the Member for Ladywood was honest in his contribution. He supports a switch to indirect taxes and, unlike the right hon. and learned Member for Surrey, East (Sir G. Howe), he is not selective in his support. He supported the need to increase indirect taxes and was therefore in favour of increases in the petrol duty.

    I shall come back to the points raised by the right hon. and learned Member for Surrey, East in his winding-up speech. He made some remarks that will not endear him to his hon. Friends who spoke about not only never increasing this tax but actually reducing it. The right hon. and learned Member for Surrey, East said something quite different this evening. In his opening remarks he referred to his amendment relating to the date of 31st May, and asked why it was not possible to allow that date without incurring administrative problems.

    7.30 p.m.

    I sought to deal with that point in opening. The only way in which that can be done is to move a Budget Resolution before an amendment is carried. By Section 1(4) of the Collection of Taxes Act a resolution is required to precede amendment of a Bill. It cannot be validated by a resolution ex post facto. That is the reason why the date of 31st May 1977 in the amendment would cause serious problems. We should have to wait. The power of the Budget Resolution would still exist to collect the 5p right up to Royal Assent, and then repayment would have to be made. That would create enormous problems, and the benefit would not go to the motorist—and it is quite clear from the debate that everybody wants to help the motorist.

    Referring to the love for everybody displayed by my hon. Friend the Member for Ladywood, I hope that nobody will pretend that he or she loves the motorist any better than does anybody else. I am very fond of motorists, since I am one myself. Indeed, I am fond of all kinds of people. I am even fond of people with whom I do not necessarily agree. Therefore, I hope that nobody will seek to degrade the level of debate by pretending that he is fonder of the motorist than is anybody else.

    Since I am a little worried about the Chief Secretary being concerned about anybody degrading the level of debate, perhaps I may intervene in an effort to try to raise that level. Does the right hon. Gentleman admit that if the amendment related to the date of 31st May were to be accepted by the Committee, the Government could decline to collect the extra revenue subsequent to that date? Therefore, there will be nothing to refund and there will be no administrative problem.

    The hon. Gentleman always tries to raise the level of debate. Perhaps I should have included him among some of the people of whom I am fond, but I am sure the hon. Gentleman knows how fond I am of him. If the hon. Gentleman thinks about the matter a little more deeply, he will realise that the Budget Resolution would take precedence and we would be legally obliged to accept the tax. [HON. MEMBERS: "Oh".] That is a fact. We would be legally obliged to collect it. [Interruption.] It is true that we need not to do so, but do Opposition Members not appreciate the chaos that would ensue? We could be taken to court for not collecting the tax that we were legally obliged to take. [Interruption.] I assure the Opposition that there are characters around who would take us to court, and enormous uncertainty would be created.

    I was not merely resting my case on the time element, although there is a powerful administrative argument; I was basing it on the question of cost. The Committee should be aware that an extra £30 million would be incurred in borrowing requirement—a not unimportant figure.

    The right hon. and learned Gentleman and a number of his hon. Friends made an interesting case to the effect that we needed to reduce the amount of expenditure on public transport in rural areas. In other words, they were suggesting that we should not force people to use public transport but should help them to run their private cars. That was very different from the argument deployed by the Shadow Minister of Transport in the debate on transport on 2nd May. The hon. Gentleman then quoted the General Election of 1974 and said that the Labour Party wanted to develop public transport to make us less dependent on the private car. He suggested that whatever else one may disagree on, there was no disagreement on that.

    That is very different from what the right hon. and learned Member for Surrey, East said in today's debate. The impression given today was that the Opposition want to reduce the amount of money spent on public transport.

    No doubt the hon. Member for Barry (Sir R. Gower) will be able to turn up that debate a little later.

    I come to the main burden, if that is what it was, of the right hon. and learned Gentleman's argument—namely, to the alternative of VAT. I asked him a straight question at the opening of the debate. I asked whether, given his view as to the need to switch from direct to indirect taxes, he would never increase petrol tax, and the right hon. and learned Gentleman did not answer. In his concluding remarks he used a different phrase. He said that he would not exempt petrol from taxes, for the very good reason that if one were to switch to indirect taxes one would have to be selective and petrol tax would decline as a proportion of total taxes raised. The right hon. and learned Gentleman was honest enough to accept that result. But he is also arguing that it should happen not this year but another year. In that way he would not be hurting the rural motorist or those struggling to run a car. That was strange for the right hon. and learned Gentleman to advance.

    It was pointed out by the hon. Member for Cornwall, North (Mr. Pardoe) that a number of Opposition Members wish to see the abolition of vehicle excise duty and wanted to add that cost to the price of petrol in a petrol tax. The Committee must be aware that there is a cost in taking that course. It would mean an addition of 18½p to the price of petrol. But when the hon. Member for Cornwall, North asked the right hon. and learned Gentleman for his view he replied "Well we should not take these decisions lightly." But he has taken a decision lightly, to be thoroughly irresponsible on the subject of a 5p petrol tax.

    Does the Chief Secretary think that the petrol tax should be put up and motor tax abolished? Will he give the Committee a straight answer?

    We are now considering this matter—[HON. MEMBERS: "Oh."] My right hon. Friend the Chancellor of the Exchequer has already said that. If I may seek to answer the hon. Gentleman I do not think that at this moment we should do that, in view of the many problems faced by small car manufacturers in this country. There are other good reasons, too. I am not in favour of taking that step now, but that was not the view of the right hon. and learned Gentleman.

    Many fears were expressed, in the debate and elsewhere, about the possibility of garages running out of stocks of petrol on a particular date. A date of 5th August was mentioned, and the hon. Member for Cornwall, North referred to the problems relating to that date, because it fell on a Friday which, according to the hon. Gentleman, could cause difficulties. We set the date at 5th August because we wanted a specific date. But I said earlier, and I repeat now, that we shall be having discussions with the trading organisations with a view to seeing whether there is a more convenient date round about that time which would be more helpful to the trade generally. I cannot go further than that.

    Will the right hon. Gentleman now be kind enough to answer my question? What does he mean when he speaks about the Government's future intentions? Do they intend, if they last that long, to reintroduce these proposals to increase the tax on petrol? The right hon. Gentleman spoke in menacing words about that in his earlier remarks, and I should like to know where the Government stand.

    When do I ever sound menacing? I am not that kind of fellow, as the right hon. and learned Gentleman knows. I hope that I put the matter fairly. What I said—I think that the right hon. and learned Gentleman recognises it himself—was that if we do not come back, as a Parliament, to increase the petrol tax, it will decline as a proportion of total taxation, and I hope that none of us is in favour of that. When I say that we shall have to come back to it, that is precisely what I mean. All of us would need to come back to the question of increasing the petrol tax, and I am glad to see that the right hon. and learned Gentleman does not disagree, in contrast to the views expressed by some of his hon. Friends.

    In my opening speech I said that I should have preferred to keep the 5p tax. Indeed, the hon. Member for Edinburgh, Pentlands (Mr. Rifkind) took me to task about it, saying that he could not understand why, having convinced him of the argument—

    I said that I accepted that there was a majority in the House against it. The hon. Member for Pent-lands spelled it out. The truth is that even though I have almost convinced him, both he and many of his hon. Friends who know that the 5p increase was right would nevertheless have voted as they did on the Budget Resolution. They know that they would.

    No, I shall not give way. The House wants to come to a conclusion. I accepted the decision of the House, knowing the irresponsibility of the official Opposition. That is the reason.

    If the Chief Secretary believes that anyone who voted for the reduction in the proposed petrol tax would be guilty of irresponsibility, would it not be more sensible if he himself did not intend to vote for his own amendment in a few minutes?

    I know that the hon. Gentleman listened carefully and courteously to what I said earlier. I said that I should have preferred to keep the 5p. I made no bones about it. But I recognise that there is a majority in the House against it, so I have moved an amendment that will at least be considerably cheaper than losing the whole of the clause. The cost of the amendment is £140 million, in public sector borrowing requirement terms in 1977–78. The cost of losing the whole clause, for which the hon. Gentleman and his hon. Friends voted on the Budget Resolution, would be £365 million. That is why I am suggesting that the Committee should vote as I propose. There is no other

    Division No. 123]


    [7.44 p.m.

    Adley, RobertFisher, Sir NigelKnox, David
    Aitken, JonathanFletcher, Alex (Edinburgh N)Lamont, Norman
    Alison, MichaelFookes, Miss JanetLatham, Michael (Melton)
    Amery, Rt Hon JulianForman, NigelLawrence, Ivan
    Arnold, TomFowler, Norman (Sutton C'f'd)Lawson, Nigel
    Atkins, Rt Hon H. (Spelthorne)Fox, MarcusLester, Jim (Beeston)
    Awdry, DanielFraser, Rt Hon H. (Stafford & St)Lewis, Kenneth (Rutland)
    Bain, Mrs MargaretFry, PeterLloyd, Ian
    Baker, KennethGalbraith, Hon T. G. D.Loveridge, John
    Bell, RonaldGardiner, George (Reigate)Luce, Richard
    Benyon, W.Gardner, Edward (S Fylde)MacCormick, Iain
    Berry, Hon AnthonyGilmour, Rt Hon Sir Ian (Chesham)McCrindle, Robert
    Biggs-Davison, JohnGilmour, Sir John (East Fife)Macfarlane, Neil
    Blaker, PeterGlyn, Dr AlanMacGregor, John
    Body, RichardGodber, Rt Hon JosephMacKay, Andrew (Stechford)
    Boscawen, Hon RobertGoodhart, PhilipMacmillan, Rt Hon M. (Farnham)
    Bottomley, PeterGoodhew, VictorMcNair-Wilson, M. (Newbury)
    Bowden, A. (Brighton, Kemptown)Goodlad, AlastairMcNair-Wilson, P. (New Forest)
    Boyson, Dr Rhodes (Brent)Gorst, JohnMadel, David
    Braine, Sir BernardGow, Ian (Eastbourne)Marshall, Michael (Arundel)
    Brittan, LeonGower, Sir Raymond (Barry)Marten, Neil
    Brocklebank-Fowler, C.Gray, HamishMates, Michael
    Brooke, PeterGriffiths, EldonMather, Carol
    Brotherton, MichaelGrist, IanMaude, Angus
    Bryan, Sir PaulGrylls, MichaelMaudling, Rt Hon Reginald
    Buchanan-Smith, AlickHall, Sir JohnMawby, Ray
    Buck, AntonyHall-Davis, A. G. F.Maxwell-Hyslop, Robin
    Budgen, NickHamilton, Michael (Salisbury)Mayhew, Patrick
    Bulmer, EsmondHampson, Dr KeithMeyer, Sir Anthony
    Burden, F. A.Hannam, JohnMiller, Hal (Bromsgrove)
    Butler, Adam (Bosworth)Harrison, Col Sir Harwood (Eye)Mills, Peter
    Carlisle, MarkHarvie Anderson, Rt Hon MissMiscampbell, Norman
    Chalker, Mrs LyndaHastings, StephenMitchell, David (Basingstoke)
    Clark, Alan (Plymouth, Sutton)Havers, Sir MichaelMoate, Roger
    Clark, William (Croydon S)Hawkins, PaulMonro, Hector
    Clarke, Kenneth (Rushcliffe)Hayhoe, BarneyMontgomery, Fergus
    Clegg, WalterHenderson, DouglasMoore, John (Croydon C)
    Cockcroft, JohnHicks, RobertMore, Jasper (Ludlow)
    Cope, JohnHiggins, Terence L.Morgan, Geraint
    Cormack, PatrickHodgson, RobinMorgan-Giles, Rear-Admiral
    Costain, A. P.Holland, PhilipMorris, Michael (Northampton S)
    Crawford, DouglasHordern, PeterMorrison, Charles (Devizes)
    Crouch, DavidHowe, Rt Hon Sir GeoffreyMorrison, Hon Peter (Chester)
    Crowder, F. P.Howell, David (Guildford)Mudd, David
    Davies, Rt Hon J. (Knutsford)Hunt, David (Wirral)Neave, Airey
    Dean, Paul (N Somerset)Hunt, John (Bromley)Nelson, Anthony
    Dodsworth, GeoffreyHurd, DouglasNeubert, Michael
    Douglas-Hamilton, Lord JamesHutchison, Michael ClarkNewton, Tony
    Drayson, BurnabyIrving, Charles (Cheltenham)Nott, John
    du Cann, Rt Hon EdwardJames, DavidOnslow, Cranley
    Durant, TonyJenkin, Rt Hon P. (Wanst'd & W'df'd)Oppenheim, Mrs Sally
    Dykes, HughJohnson Smith, G. (E Grinstead)Page, Rt Hon R. Graham (Crosby)
    Eden, Rt Hon Sir JohnJones, Arthur (Daventry)Page, Richard (Workington)
    Edwards, Nicholas (Pembroke)Jopling, MichaelParkinson, Cecil
    Elliott, Sir WilliamJoseph, Rt Hon Sir KeithPattie, Geoffrey
    Emery, PeterKaberry, Sir DonaldPercival, Ian
    Evans, Gwynfor (Carmarthen)Kershaw, AnthonyPeyton, Rt Hon John
    Eyre, ReginaldKimball, MarcusPrice, David (Eastleigh)
    Fairbairn, NicholasKing, Evelyn (South Dorset)Prior, Rt Hon James
    Fairgrieve, RussellKing, Tom (Bridgwater)Pym, Rt Hon Francis
    Fell, AnthonyKitson, Sir TimothyRathbone, Tim
    Finsberg, GeoffreyKnight, Mrs JillRawlinson, Rt Hon Sir Peter

    reason. I do not go back on what I said. I believe that it was right, but obviously the House is not in favour of it.

    I hope, therefore, that the Committee will accept our amendment, not because I believe that it was right to make the reduction but because it is cheaper than the alternative suggested by the Opposition.

    Question put, That the amendment to the proposed amendment be made:—

    The Committee divided: Ayes 250, Noes 271.

    Rees, Peter (Dover & Deal)Speed, KeithVaughan, Dr Gerald
    Rees-Davies, W. R.Spence, JohnViggers, Peter
    Renton, Rt Hon Sir D. (Hunts)Spicer, Michael (S Worcester)Wakeham, John
    Renton, Tim (Mid-Sussex)Sproat, IainWalder, David (Clitheroe)
    Rhodes James, R.Stainton, KeithWall, Patrick
    Ridley, Hon NicholasStanbrook, IvorWalters, Dennis
    Ridsdale, JulianStanley, JohnWatt, Hamish
    Rifkind, MalcolmSteen, Anthony (Wavertree)Weatherill, Bernard
    Roberts, Wyn (Conway)Stewart, Rt Hon DonaldWells, John
    Rossi, Hugh (Hornsey)Stewart, Ian (Hitchin)Welsh, Andrew
    Rost, Peter (SE Derbyshire)Stokes, JohnWhitelaw, Rt Hon William
    Royle, Sir AnthonyStradling Thomas, J.Wiggin, Jerry
    Sainsbury, TimTapsell, PeterWigley, Dafydd
    St. John-Stevas, NormanTaylor, R. (Croydon NW)Wilson, Gordon (Dundee E)
    Shaw, Giles (Pudsey)Taylor, Teddy (Cathcart)Winterton, Nicholas
    Shelton, William (Streatham)Tebbit, NormanWood, Rt Hon Richard
    Shepherd, ColinTemple-Morris, PeterYoung, Sir G. (Ealing, Acton)
    Shersby, MichaelThatcher, Rt Hon MargaretYounger, Hon George
    Silvester, FredThomas, Rt Hon P. (Hendon S)
    Sims, RogerThompson, George
    Skeet, T. H. H.Townsend, Cyril D.


    Smith, Dudley (Warwick)Trotter, NevilleMr. Spencer Le Marchant and
    Smith, Timothy John (Ashfield)van Straubenzee, W. R.Mr. Michael Roberts.


    Abse, LeoDoig, PeterJenkins, Hugh (Putney)
    Allaun, FrankDouglas-Mann, BruceJohn, Brynmor
    Archer, PeterDuffy, A. E. P.Johnson, James (Hull West)
    Armstrong, ErnestDunnett, JackJohnson, Walter (Derby S)
    Ashley, JackEadie, AlexJohnston, Russell (Inverness)
    Ashton, JoeEdge, GeoffJones, Alec (Rhondda)
    Atkins, Ronald (Preston N)Ellis, John (Brigg & Scun)Jones, Barry (East Flint)
    Atkinson, NormanEnglish, MichaelJones, Dan (Burnley)
    Barnett, Guy (Greenwich)Ennals, DavidJudd, Frank
    Barnett, Rt Hon Joel (Heywood)Evans, Fred (Caerphilly)Kaufman, Gerald
    Bates, AlfEvans, Ioan (Aberdare)Kelley, Richard
    Bean, R. E.Ewing, Harry (Stirling)Kerr, Russell
    Beith, A. J.Faulds, AndrewKilroy-Silk, Robert
    Benn, Rt Hon Anthony WedgwoodFitch, Alan (Wigan)Kinnock, Neil
    Bennett, Andrew (Stockport N)Flannery, MartinLambie, David
    Bidwell, SydneyFletcher, Ted (Darlington)Lamborn, Harry
    Bishop, E. S.Foot, Rt Hon MichaelLamond, James
    Blenkinsop, ArthurFord, BenLatham, Arthur (Paddington)
    Boardman, H.Fowler, Gerald (The Wrekin)Leadbitter, Ted
    Booth, Rt Hon AlbertFraser, John (Lambeth, N'w'd)Lee, John
    Boothroyd, Miss BettyFreeson, ReginaldLestor, Miss Joan (Eton and Slough)
    Bottomley, Rt Hon ArthurFreud, ClementLever, Rt Hon Harold
    Bradley, TomGarrett, John (Norwich S)Lewis, Ron (Carlisle)
    Brown, Hugh D. (Provan)Garrett, W. E. (Wallsend)Lipton, Marcus
    Brown, Robert C. (Newcastle W)George, BruceLomas, Kenneth
    Buchan, NormanGilbert, Dr JohnLoyden, Eddie
    Buchanan, RichardGinsburg, DavidLuard, Evan
    Callaghan, Rt Hon J. (Cardiff SE)Golding, JohnLyon, Alexander (York)
    Callaghan, Jim (Middlelon & P)Gould, BryanLyons, Edward (Bradford W)
    Campbell, IanGourlay, HarryMcCartney, Hugh
    Canavan, DennisGraham, TedMcDonald, Dr Oonagh
    Cant, R. B.Grant, George (Morpeth)McElhone, Frank
    Carmichael, NeilGrimond, Rt Hon J.MacFarquhar, Roderick
    Carter, RayGrocott, BruceMackenzie, Gregor
    Carter-Jones, LewisHamilton, James (Bothwell)McMillan, Tom (Glasgow C)
    Cartwright, JohnHarrison, Walter (Wakefield)Madden, Max
    Castle, Rt Hon BarbaraHart, Rt Hon JudithMagee, Bryan
    Clemitson, IvorHattersley, Rt Hon RoyMahon, Simon
    Cocks, Rt Hon MichaelHatton, FrankMallalieu, J. P. W.
    Cohen, StanleyHayman, Mrs HeleneMarks, Kenneth
    Coleman, DonaldHealey, Rt Hon DenisMarshall, Dr Edmund (Goole)
    Colquhoun, Ms MaureenHeffer, Eric S.Marshall, Jim (Leicester S)
    Conlan, BernardHooley, FrankMaynard, Miss Joan
    Cook, Robin F. (Edin C)Hooson, EmlynMeacher, Michael
    Corbett, RobinHoram, JohnMellish, Rt Hon Robert
    Cowans, HarryHowell, Rt Hon Denis (B'ham, Sm H)Mikardo, Ian
    Cox, Thomas (Tooting)Howells, Geraint (Cardigan)Millan, Rt Hon Bruce
    Crawshaw, RichardHoyle, Doug (Nelson)Miller, Dr M. S. (E Kilbride)
    Crowther, Stan (Rotherham)Huckfield, LesMiller, Mrs Millie (Ilford N)
    Cryer, BobHughes, Rt Hon C. (Anglesey)Mitchell, Austin Vernon (Grimsby)
    Cunningham, G. (Islington S)Hughes, Robert (Aberdeen N)Molloy, William
    Cunningham, Dr J. (Whiteh)Hughes, Roy (Newport)Moonman, Eric
    Davidson, ArthurHunter, AdamMorris, Alfred (Wythenshawe)
    Davies, Bryan (Enfield N)Irvine, Rt Hon Sir A. (Edge Hill)Morris, Charles R. (Openshaw)
    Davies, Denzil (Llanelli)Irving, Rt Hon S. (Dartford)Morris, Rt Hon J. (Aberavon)
    Davies, Ifor (Gower)Jackson, Colin (Brighouse)Moyle, Roland
    Davis, Clinton (Hackney C)Jackson, Miss Margaret (Lincoln)Murray, Rt Hon Ronald King
    Deakins, EricJanner, GrevilleNoble, Mike
    Dean, Joseph (Leeds West)Jay, Rt Hon DouglasOakes, Gordon
    Dempsey, JamesJeger, Mrs LenaOgden, Eric

    O'Halloran, MichaelSedgemore, BrianTuck, Raphael
    Orbach, MauriceSelby, HarryVarley, Rt Hon Eric G.
    Orme, Rt Hon StanleyShaw, Arnold (Ilford South)Wainwright, Edwin (Dearne V)
    Ovenden, JohnSheldon, Rt Hon RobertWalden, Brian (B'ham, L'dyw'd)
    Owen, Rt Hon Dr DavidShore, Rt Hon PeterWalker, Harold (Doncaster)
    Padley, WalterShort, Mrs Renee (Wolv NE)Walker, Terry (Kingswood)
    Palmer, ArthurSilkin, Rt Hon S. C. (Dulwich)Ward, Michael
    Pardoe, JohnSillars, JamesWatkins, David
    Park, GeorgeSilverman, JuliusWeetch, Ken
    Parry, RobertSkinner, DennisWeitzman, David
    Pavitt, LaurieSmall, WilliamWellbeloved, James
    Pendry, TomSmith, John (N Lanarkshire)White, Frank R. (Bury)
    Penhaligon, DavidSnape, PeterWhite, James (Pollok)
    Parry, ErnestSpearing, NigelWhitlock, William
    Prentice, Rt Hon RegSpriggs, LeslieWilley, Rt Hon Frederick
    Price, William (Rugby)Stallard, A. W.Williams, Rt Hon Alan (Swansea W)
    Radice, GilesStewart, Rt Hon M. (Fulham)Williams, Alan Lee (Hornch'ch)
    Rees, Rt Hon Merlyn (Leeds S)Stott, RogerWilliams, Rt Hon Shirley (Hertford)
    Richardson, Miss JoStrang, GavinWilliams, Sir Thomas (Warrington)
    Roberts, Albert (Normanton)Strauss, Rt Hon G. R.Wilson, Alexander (Hamilton)
    Roberts, Gwilym (Cannock)Summerskill, Hon Dr ShirleyWilson, Rt Hon Sir Harold (Huyton)
    Robinson, GeoffreySwain, ThomasWilson, William (Coventry SE)
    Roderick, CaerwynTaylor, Mrs Ann (Bolton W)Wise, Mrs Audrey
    Rodgers, George (Chorley)Thomas, Jeffrey (Abertillery)Woodall, Alec
    Rodgers, Rt Hon William (Stockton)Thomas, Mike (Newcastle E)Woof, Robert
    Rooker, J. W.Thomas, Ron (Bristol NW)Wrigglesworth, Ian
    Rose, Paul B.Thome, Stan (Preston South)Young, David (Bolton E)
    Ross, Stephen (Isle of Wight)Thorpe, Rt Hon Jeremy (N Devon)
    Ross, Rt Hon W. (Kilmarnock)Tierney, Sydney


    Rowlands, TedTinn, JamesMr. David Stoddart and
    Ryman, JohnTomlinson, JohnMr. Joseph Harper.
    Sandelson, NevilleTorney, Tom

    Question accordingly negatived.

    Amendment agreed to.

    I beg to move Amendment No. 5, in clause 4, page 5, line 4, leave out subsection (2).

    With this we may take Amendments Nos. 6 and 7. We may also take Amendment No. 8, in page 5, line 26, leave out subsection (4).

    I intend, if I may, to speak to this group of amendments shortly and, indeed, almost formally. The House has just voted on the amendment in which we sought to lighten duty on derv or heavy oil used for road transport purposes, in the same way as the Government are lightening the duty on petrol, and the Government have persuaded the House to reject that. Even so, we now contend that the imposition of a higher duty on the small number of non-road transport oil products affected by the remainder of the clause would be quite wrong and quite damaging.

    Subsection (2) proposes to increase the duty on industrial fuel, and subsection (4) proposes to increase the duty on commercial fuel, and in each case to increase it by 150 per cent. from 1 p to 2—p per gallon. In our view, that is too large an increase and ought not to be allowed to stand now that the increase on petrol is being withdrawn by the Government.

    We believe that it is unfair to bring forward such a large increase on commercial and industrial users and on those who use oil for central heating and that the additionl tax revenue which would be lost by eliminating those increases would be more than made up by increasing value added tax, as we have argued throughout, to the standard rate of 10 per cent., which the Government ought to have done in the first place.

    We propose to vote for the deletion of this tax increase in subsection (2) and for the deletion of it in subsection (4). I shall be inviting my right hon. and hon. Friends to vote in support of Amendments Nos. 6 and 7 to fulfil those propositions.

    8 p.m.

    The right hon. and learned Member for Surrey, East (Sir G. Howe) wants the proposed increases in the oil duty for non-road fuels to be deleted. That we cannot accept. This is the first increase in oil duties since 1969. All we are doing is revalorising. We have given the concession that was debated at length previously. We feel that the argument for a change in this aspect of increases in oil duties is not made out. The increase in the retail price index can readily be understood by those concerned. Because of arguments adduced generally for the increased petrol duty, we believe that these amendments should be resisted.

    Amendment negatived.

    Amendment proposed: No. 6, in page 5, line 13, at end insert:

    'as respects the period ending at midnight on 31st May 1977; and thereafter of 1 p a gallon

    Division No. 124]


    [8.03 p.m.

    Adley, RobertGilmour, Rt Hon Ian (Chesham)Maudling, Rt Hon Reginald
    Aitken, JonathanGilmour, Sir John (East Fife)Mawby, Ray
    Alison, MichaelGlyn, Dr AlanMaxwell-Hyslop, Robin
    Amery, Fit Hon JulianGodber, Rt Hon JosephMayhew, Patrick
    Arnold, TomGoodhart, PhilipMeyer, Sir Anthony
    Atkins, Rt Hon H. (Spelthorne)Goodhew, VictorMiller, Hal (Bromsgrove)
    Awdry, DanielGoodlad, AlastairMills, Peter
    Bain, Mrs MargaretGorst, JohnMiscampbell, Norman
    Baker, KennethGow, Ian (Eastbourne)Mitchell, David (Basingstoke)
    Bell, RonaldGower, Sir Raymond (Barry)Moate, Roger
    Benyon, W.Gray, HamishMonro, Hector
    Berry, Hon AnthonyGriffiths, EldonMontgomery, Fergus
    Biggs-Davison, JohnGrist, IanMoore, John (Croydon C)
    Blaker, PeterGrylls, MichaelMore, Jasper (Ludlow)
    Body, RichardHall, Sir JohnMorgan, Geraint
    Boscawen, Hon RobertHall-Davis, A. G. F.Morgan-Giles, Rear-Admiral
    Bottomley, PeterHamilton, Michael (Salisbury)Morris, Michael (Northampton S)
    Bowden, A. (Brighton, Kemptown)Hampson, Dr KeithMorrison, Charles (Devizes)
    Boyson, Dr Rhodes (Brent)Hannam, JohnMudd, David
    Braine, Sir BernardHarrison, Col Sir Harwood (Eye)Neave, Airey
    Brittan, LeonHarvie Anderson, Rt Hon MissNelson, Anthony
    Brocklebank-Fowler, C.Hastings, StephenNeubert, Michael
    Brooke, PeterHavers, Sir MichaelNewton, Tony
    Brotherton, MichaelHawkins, PaulNott, John
    Bryan, Sir PaulHayhoe, BarneyOnslow, Cranley
    Buchanan-Smith, AlickHenderson, DouglasOppenheim, Mrs Sally
    Buck, AntonyHicks, RobertPage, Rt Hon R. Graham (Crosby)
    Budgen, NickHiggins, Terence L.Page, Richard (Workington)
    Bulmer, EsmondHodgson, RobinParkinson, Cecil
    Burden, F. A.Holland, PhilipPattie, Geoffrey
    Butler, Adam (Bosworth)Hordern, PeterPercival, Ian
    Carlisle, MarkHowe, Rt Hon Sir GeoffreyPeyton, Rt Hon John
    Chalker, Mrs LyndaHowell, David (Guildford)Price, David (Eastleigh)
    Churchill, W. S.Hunt, David (Wirral)Prior, Rt Hon James
    Clark, Alan (Plymouth, Sutton)Hunt, John (Bromley)Pym, Rt Hon Francis
    Clark, William (Croydon S)Hurd, DouglasRathbone, Tim
    Clarke, Kenneth (Rushcliffe)Hutchison, Michael ClarkRawlinson, Rt Hon Sir Peter
    Clegg, WalterIrving, Charles (Cheltenham)Rees, Peter (Dover & Deal)
    Cockcroft, JohnJames, DavidRees-Davies, W. R.
    Cope, JohnJenkin, Rt Hon P. (Wanst'd & W'df'd)Renton, Rt Hon Sir D. (Hunts)
    Cormack, PatrickJohnson Smith, G. (E Grinstead)Renton, Tim (Mid-Sussex)
    Costain, A. P.Jones, Arthur (Daventry)Rhodes James, R.
    Crawford, DouglasJopling, MichaelRidley, Hon Nicholas
    Crouch, DavidJoseph, Rt Hon Sir KeithRidsdale, Julian
    Crowder, F. P.Kershaw, AnthonyRifkind, Malcolm
    Davies, Rt Hon J. (Knutsford)Kimball, MarcusRoberts, Michael (Cardiff NW)
    Dean, Paul (N Somerset)King, Evelyn (South Dorset)Roberts, Wyn (Conway)
    Dodsworth, GeoffreyKing, Tom (Bridgwater)Rossi, Hugh (Hornsey)
    Douglas-Hamilton, Lord JamesKitson, Sir TimothyRost, Peter (SE Derbyshire)
    Drayson, BurnabyKnight, Mrs JillRoyle, Sir Anthony
    du Cann, Rt Hon EdwardKnox, DavidSainsbury, Tim
    Durant, TonyLamont, NormanSt. John-Stevas, Norman
    Dykes, HughLatham, Michael (Melton)Shaw, Giles (Pudsey)
    Eden, Rt Hon Sir JohnLawrence, IvanShelton, William (Streatham)
    Edwards, Nicholas (Pembroke)Lawson, NigelShepherd, Colin
    Elliott, Sir WilliamLe Marchant, SpencerShersby, Michael
    Emery, PeterLester, Jim (Beeston)Silvester, Fred
    Evans, Gwynfor (Carmarthen)Lewis, Kenneth (Rutland)Sims, Roger
    Eyre, ReginaldLloyd, IanSkeet, T. H. H.
    Fairbairn, NicholasLoveridge, JohnSmith, Dudley (Warwick)
    Fairgrieve, RussellLuce, RichardSmith, Timothy John (Ashfield)
    Fell, AnthonyMacCormick, IainSpeed, Keith
    Finsberg, GeoffreyMcCrindle, RobertSpence, John
    Fisher, Sir NigelMacfarlane, NeilSpicer, Michael (S Worcester)
    Fletcher, Alex (Edinburgh N)MacGregor, JohnSproat, Iain
    Fookes, Miss JanetMackay, Andrew JamesStainton, Keith
    Forman, NigelMacmillan, Rt Hon M. (Farnham)Stanbrook, Ivor
    Fowler, Norman (Sutton C'f'd)McNair-Wilson, M. (Newbury)Stanley, John
    Fox, MarcusMcNair-Wilson, P. (New Forest)Steen, Anthony (Wavertree)
    Fraser, Rt Hon H. (Stafford & St)Madel, DavidStewart, Rt Hon Donald
    Fry, PeterMarshall, Michael (Arundel)Stewart, Ian (Hitchin)
    Galbraith, Hon T. G. D.Marten, NeilStokes, John
    Gardiner, George (Reigate)Mates, MichaelStradling Thomas, J.
    Gardner, Edward (S Fylde)Maude, AngusTapsell, Peter

    less than the rate at which the duty is for the time being chargeable'.—[ Sir G. Howe.]

    Question put, That the amendment be made:—

    The Committee divided: Ayes 250, Noes 268.

    Taylor, R. (Croydon NW)Viggers, PeterWigley, Dafydd
    Taylor, Teddy (Cathcart)Wakeham, JohnWilson, Gordon (Dundee E)
    Tebbit, NormanWalder, David (Clitheroe)Winterton, Nicholas
    Temple-Morris, PeterWall, PatrickWood, Rt Hon Richard
    Thatcher, Rt Hon MargaretWalters, DennisYoung, Sir G. (Ealing, Acton)
    Thomas, Rt Hon P. (Hendon S)Watt, HamishYounger, Hon George
    Thompson, GeorgeWeatherill, Bernard
    Townsend, Cyril D.Wells, John


    Trotter, NevilleWelsh, AndrewMr. Peter Morrison and
    van Straubenzee, W. R.Whitelaw, Rt Hon WilliamMr. Carol Mather.
    Vaughan, Dr GerardWiggin, Jerry


    Abse, LeoFaulds, AndrewLyon, Alexander (York)
    Allaun, FrankFitch, Alan (Wigan)Lyons, Edward (Bradford W)
    Archer, PeterFlannery, MartinMcCartney, Hugh
    Armstrong, ErnestFletcher, Ted (Darlington)McDonald, Dr Oonagh
    Ashley, JackFoot, Rt Hon MichaelMcElhone, Frank
    Ashton, JoeFord, BenMacFarquhar, Roderick
    Atkins, Ronald (Preston N)Fowler, Gerald (The Wrekin)MacKenzie, Gregor
    Atkinson, NormanFraser, John (Lambeth, N'w'd)McMillan, Tom (Glasgow C)
    Barnett, Guy (Greenwich)Freeson, ReginaldMadden, Max
    Barnett, Rt Hon Joel (Heywood)Freud, ClementMagee, Bryan
    Bates, AlfGarrett, John (Norwich S)Mahon, Simon
    Bean, R. E.Garrett, W. E. (Wallsend)Mallalieu, J. P. W.
    Beith, A. J.George, BruceMarks, Kenneth
    Benn, Rt Hon Anthony WedgwoodGilbert, Dr JohnMarshall, Dr Edmund (Goole)
    Bennett, Andrew (Stockport N)Ginsburg, DavidMarshall, Jim (Leicester S)
    Bidwell, SydneyGolding, JohnMaynard, Miss Joan
    Bishop, E. S.Gould, BryanMeacher, Michael
    Blenkinsop, ArthurGourlay, HarryMellish, Rt Hon Robert
    Boardman, H.Graham, TedMikardo, Ian
    Booth, Rt Hon AlbertGrant, George (Morpeth)Millan, Rt Hon Bruce
    Boothroyd, Miss BettyGrocott, BruceMiller, Dr M. S. (E Kilbride)
    Bottomley, Rt Hon ArthurHarrison, Walter (Wakefield)Miller, Mrs Millie (Ilford N)
    Bradley, TomHart, Rt Hon JudithMitchell, Austin Vernon (Grimsby)
    Brown, Hugh D. (Provan)Hattersley, Rt Hon RoyMolloy, William
    Brown, Robert C. (Newcastle W)Hatton, FrankMoonman, Eric
    Buchan, NormanHayman, Mrs HeleneMorris, Alfred (Wythenshawe)
    Buchanan, RichardHealey, Rt Hon DenisMorris, Charles R. (Openshaw)
    Callaghan, Rt Hon J. (Cardiff SE)Heffer, Eric S.Morris, Rt Hon J. (Aberavon)
    Callaghan, Jim (Middleton & P)Hooley, FrankMoyle, Roland
    Campbell, IanHooson, EmlynMurray, Rt Hon Ronald King
    Canavan, DennisHoram, JohnNoble, Mike
    Cant, R. B.Howell, Rt Hon Denis (B'ham, Sm H)Oakes, Gordon
    Carmichael, NeilHowells, Geraint (Cardigan)Ogden, Eric
    Carter, RayHoyle, Doug (Nelson)O'Halloran, Michael
    Carter-Jones, LewisHuckfield, LesOrbach, Maurice
    Cartwright, JohnHughes, Rt Hon C. (Anglesey)Orme, Rt Hon Stanley
    Castle, Rt Hon BarbaraHughes, Robert (Aberdeen N)Ovenden, John
    Clemitson, IvorHughes, Roy (Newport)Owen, Rt Hon Dr David
    Cocks, Rt Hon MichaelHunter, AdamPadley, Walter
    Cohen, StanleyIrvine, Rt Hon Sir A. (Edge Hill)Palmer, Arthur
    Coleman, DonaldIrving, Rt Hon S. (Dartford)Pardoe, John
    Colquhoun, Ms MaureenJackson, Colin (Brighouse)Park, George
    Conlan, BernardJackson, Miss Margaret (Lincoln)Parry, Robert
    Cook, Robin F. (Edin C)Janner, GrevillePavitt, Laurie
    Corbett, RobinJay, Rt Hon DouglasPendry, Tom
    Cowans, HarryJeger, Mrs LenaPenhaligon, David
    Cox, Thomas (Tooting)Jenkins, Hugh (Putney)Perry, Ernest
    Crawshaw, RichardJohn, BrynmorPrentice, Rt Hon Reg
    Crowther, Stan (Rotherham)Johnson, James (Hull West)Price, William (Rugby)
    Cryer, BobJohnson, Walter (Derby S)Radice, Giles
    Cunningham, G. (Islington S)Johnston, Russell (Inverness)Rees, Rt Hon Merlyn (Leeds S)
    Cunningham, Dr J. (Whiteh)Jones, Alec (Rhondda)Richardson, Miss Jo
    Davidson, ArthurJones, Barry (East Flint)Roberts, Albert (Normanton)
    Davies, Bryan (Enfield N)Jones, Dan (Burnley)Roberts, Gwilym (Cannock)
    Davies, Denzil (Llanelli)Judd, FrankRobinson, Geoffrey
    Davies, Ifor (Gower)Kaufman, GeraldRoderick, Caerwyn
    Davis, Clinton (Hackney C)Kelley, RichardRodgers, George (Chorley)
    Deakins, EricKerr, RussellRodgers, Rt Hon William (Stockton)
    Dean, Joseph (Leeds West)Kilroy-Silk, RobertRooker, J. W.
    Dempsey, JamesKinnock, NeilRose, Paul B.
    Doig, PeterLambie, DavidRoss, Stephen (Isle of Wight)
    Douglas-Mann, BruceLamborn, HarryRoss, Rt Hon W. (Kilmarnock)
    Duffy, A. E. P.Lamond, JamesRowlands, Ted
    Dunnett, JackLatham, Arthur (Paddington)Ryman, John
    Eadie, AlexLeadbitter, TedSandelson, Neville
    Edge, GeoffLee, JohnSedgemore, Brian
    Ellis, John (Brigg & Scun)Lestor, Miss Joan (Eton and Slough)Selby, Harry
    English, MichaelLever, Rt Hon HaroldShaw, Arnold (Ilford South)
    Ennals, DavidLewis, Ron (Carlisle)Sheldon, Rt Hon Robert
    Evans, Fred (Caerphilly)Lomas, KennethShore, Rt Hon Peter
    Evans, Ioan (Aberdare)Loyden, EddieShort, Mrs Renee (Wolv NE)
    Ewing, Harry (Stirling)Luard, EvanSilkin, Rt Hon S. C. (Dulwich)

    Sillars, JamesThomas, Ron (Bristol NW)Whitlock, William
    Silverman, JuliusThorne, Stan (Preston South)Willey, Rt Hon Frederick
    Skinner, DennisTierney, SydneyWilliams, Rt Hon Alan (Swansea W)
    Small, WilliamTinn, JamesWilliams, Alan Lee (Hornch'ch)
    Smith, John (N Lanarkshire)Tomlinson, JohnWilliams, Rt Hon Shirley (Hertford)
    Snape, PeterTorney, TomWilliams, Sir Thomas (Warrington)
    Spearing, NigelTuck, RaphaelWilson, Alexander (Hamilton)
    Spriggs, LeslieVarley, Rt Hon Eric G.Wilson, Rt Hon Sir Harold (Huyton)
    Stallard, A. W.Wainwright, Edwin (Dearne V)Wilson, William (Coventry SE)
    Stewart, Rt Hon M. (Fulham)Walden, Brian (B'ham, L'dyw'd)Wise, Mrs Audrey
    Stoddart, DavidWalker, Harold (Doncaster)Woodall, Alec
    Stott, RogerWalker, Terry (Kingswood)Woof, Robert
    Strang, GavinWard, MichaelWrigglesworth, Ian
    Strauss, Rt Hon G. R.Watkins, DavidYoung, David (Bolton E)
    Summerskill, Hon Dr ShirleyWeetch, Ken
    Swain, ThomasWeitzman, David


    Taylor, Mrs Ann (Bolton W)Wellbeloved, JamesMr. James Hamilton and
    Thomas, Jeffrey (Abertillery)White, Frank R. (Bury)Mr. Joseph Harper.
    Thomas, Mike (Newcastle E)White, James (Pollok)

    Question accordingly negatived.

    Amendment proposed: No. 7, in page 5, line 26, leave out subsection (4) and insert:

    '(4) In section 12(1) of the said Act of 1971. at end add "except for the period from 29th March 1977 to 31st May 1977, when the

    rebate shall be at a rate of 2½ p a gallon less than the rate at which the duty is charged".'—[ Sir G. Howe.]

    Question put, That the amendment be made:—

    The Committee divided: Ayes 250, Noes 269.

    Division No. 125]


    [8.15 p.m.

    Adley, RobertEden, Rt Hon Sir JohnHunt, David (Wirral)
    Aitken, JonathanEdwards, Nicholas (Pembroke)Hunt, John (Bromley)
    Alison, MichaelElliott, Sir WilliamHurd, Douglas
    Amery, Rt Hon JulianEmery, PeterHutchison, Michael Clark
    Arnold, TomEvans, Gwynfor (Carmarthen)Irving, Charles (Cheltenham)
    Atkins, Rt Hon H. (Spelthorne)Eyre, ReginaldJames, David
    Awdry, DanielFairbairn, NicholasJenkin, Rt Hon P. (Wanst'd & W'df'd)
    Bain, Mrs MargaretFairgrieve, RussellJohnson Smith, G. (E Grinstead)
    Baker, KennethFell, AnthonyJones, Arthur (Daventry)
    Bell, RonaldFinsberg, GeoffreyJopling, Michael
    Benyon, W.Fisher, Sir NigelJoseph, Rt Hon Sir Keith
    Berry, Hon AnthonyFletcher, Alex (Edinburgh N)Kershaw, Anthony
    Biffen, JohnFookes, Miss JanetKimball, Marcus
    Biggs-Davison, JohnForman, NigelKing, Evelyn (South Dorset)
    Blaker, PeterFowler, Norman (Sutton C'f'd)King, Tom (Bridgwater)
    Body, RichardFox, MarcusKitson, Sir Timothy
    Boscawen, Hon RobertFraser, Rt Hon H. (Stafford & St)Knight, Mrs Jill
    Bottomley, PeterFry, PeterKnox, David
    Bowden, A. (Brighton, Kemptown)Galbraith, Hon T. G. D.Lamont, Norman
    Boyson, Dr Rhodes (Brent)Gardiner, George (Reigate)Latham, Michael (Melton)
    Braine, Sir BernardGardner, Edward (S Fylde)Lawrence, Ivan
    Brittan, LeonGilmour, Rt Hon Sir Ian (Chesham)Lawson, Nigel
    Brocklebank-Fowler, C.Gilmour, Sir John (East Fife)Lewis, Kenneth (Rutland)
    Brooke, PeterGlyn, Dr AlanLloyd, Ian
    Brotherton, MichaelGodber, Rt Hon JosephLoveridge, John
    Bryan, Sir PaulGoodhart, PhilipLuce, Richard
    Buchanan-Smith, AlickGoodhew, VictorMacCormick, Iain
    Buck, AntonyGoodlad, AlastairMcCrindle, Robert
    Budgen, NickGorst, JohnMacfarlane, Neil
    Bulmer, EsmondGow, Ian (Eastbourne)MacGregor, John
    Burden, F. A.Gower, Sir Raymond (Barry)MacKay, Andrew (Stechford)
    Butler, Adam (Bosworth)Gray, HamishMacmillan, Rt Hon M. (Farnham)
    Carlisle, MarkGriffiths, EldonMcNair-Wilson, M. (Newbury)
    Chalker, Mrs LyndaGrist, IanMcNair-Wilson, P. (New Forest)
    Churchill, W. S.Grylls, MichaelMadel, David
    Clark, Alan (Plymouth, Sutton)Hall, Sir JohnMarten, Neil
    Clark, William (Croydon S)Hall-Davis, A. G. F.Mates, Michael
    Clarke, Kenneth (Rushcliffe)Hamilton, Michael (Salisbury)Mather, Carol
    Clegg, WalterHampson, Dr KeithMaude, Angus
    Cockcroft, JohnHannam, JohnMaudling, Rt Hon Reginald
    Cope, JohnHarrison, Col Sir Harwood (Eye)Mawby, Ray
    Cormack, PatrickHarvie Anderson, Rt Hon MissMaxwell-Hyslop, Robin
    Costain, A. P.Hastings, StephenMayhew, Patrick
    Crawford, DouglasHavers, Sir MichaelMeyer, Sir Anthony
    Crouch, DavidHawkins, PaulMiller, Hal (Bromsgrove)
    Crowder, F. P.Hayhoe, BarneyMills, Peter
    Davies, Rt Hon J. (Knutsford)Henderson, DouglasMiscampbell, Norman
    Dean, Paul (N Somerset)Hicks, RobertMitchell, David (Basingstoke)
    Dodsworth, GeoffreyHiggins, Terence L.Moate, Roger
    Douglas-Hamilton, Lord JamesHodgson, RobinMonro, Hector
    Drayson, BurnabyHolland, PhilipMontgomery, Fergus
    du Cann, Rt Hon EdwardHordern, PeterMoore, John (Croydon C)
    Durant, TonyHowe, Rt Hon Sir GeoffreyMore, Jasper (Ludlow)
    Dykes, HughHowell, David (Guildford)Morgan, Geraint

    Morgan-Giles, Rear-AdmiralRoberts, Michael (Cardiff NW)Tebbit, Norman
    Morris, Michael (Northampton S)Roberts, Wyn (Conway)Temple-Morris, Peter
    Morrison, Charles (Devizes)Rossi, Hugh (Hornsey)Thatcher, Rt Hon Margaret
    Morrison, Hon Peter (Chester)Rost, Peter (SE Derbyshire)Thomas, Rt Hon P. (Hendon S)
    Mudd, DavidRoyle, Sir AnthonyThompson, George
    Neave, AireySainsbury, TimTownsend, Cyril D.
    Nelson, AnthonySt. John-Stevas, NormanTrotter, Neville
    Neubert, MichaelShaw, Giles (Pudsey)van Straubenzee, W. R.
    Newton, TonyShelton, William (Streatham)Vaughan, Dr Gerard
    Nott, JohnShepherd, ColinViggers, Peter
    Onslow, CranleyShersby, MichaelWakeham, John
    Oppenheim, Mrs SallySilvester, FredWalder, David (Clitheroe)
    Page, Rt Hon R. Graham (Crosby)Sims, RogerWall, Patrick
    Page, Richard (Workington)Skeet, T. H. H.Walters, Dennis
    Parkinson, CecilSmith, Dudley (Warwick)Watt, Hamish
    Pattie, GeoffreySmith, Timothy John (Ashfield)Weatherill, Bernard
    Percival, IanSpeed, KeithWells, John
    Peyton, Rt Hon JohnSpence, JohnWelsh, Andrew
    Price, David (Eastleigh)Spicer, Michael (S Worcester)Whitelaw, Rt Hon William
    Prior, Rt Hon JamesSproat, IainWiggin, Jerry
    Pym, Rt Hon FrancisStainton, KeithWigley, Dafydd
    Rathbone, TimStanbrook, IvorWilson, Gordon (Dundee E)
    Rawlinson, Rt Hon Sir PeterStanley, JohnWinterton, Nicholas
    Rees, Peter (Dover & Deal)Steen, Anthony (Wavertree)Wood, Rt Hon Richard
    Rees-Davies, W. R.Stewart, Rt Hon DonaldYoung, Sir G. (Ealing, Acton)
    Renton, Rt Hon Sir D. (Hunts)Stewart, Ian (Hitchin)Younger, Hon George
    Renton, Tim (Mid-Sussex)Stokes, John
    Rhodes James, R.Stradling Thomas, J.


    Ridley, Hon NicholasTapsell, PeterMr. Spencer le Marchant and
    Ridsdale, JulianTaylor, R. (Croydon NW)Mr. Jim Lester.
    Rifkind, MalcolmTaylor, Teddy (Cathcart)


    Abse, LeoDavidson, ArthurHoram, John
    Allaun, FrankDavies, Bryan (Enfield N)Howell, Rt Hon Denis (B'ham, Sm H)
    Archer, PeterDavies, Denzil (Llanelli)Howells, Geraint (Cardigan)
    Armstrong, ErnestDavies, Ifor (Gower)Hoyle, Doug (Nelson)
    Ashley, JackDavis, Clinton (Hackney C)Huckfield, Les
    Ashton, JoeDeakins, EricHughes, Rt Hon C. (Anglesey)
    Atkins, Ronald (Preston N)Dean, Joseph (Leeds West)Hughes, Robert (Aberdeen N)
    Atkinson, NormanDell, Rt Hon EdmundHughes, Roy (Newport)
    Barnett, Guy (Greenwich)Dempsey, JamesHunter, Adam
    Barnett, Rt Hon Joel (Heywood)Doig, PeterIrvine, Rt Hon Sir A. (Edge Hill)
    Bates, AlfDouglas-Mann, BruceIrving, Rt Hon S. (Dartford)
    Bean, R. E.Duffy, A. E. P.Jackson, Colin (Brighouse)
    Beith, A. J.Dunnett, JackJackson, Miss Margaret (Lincoln)
    Benn, Rt Hon Anthony WedgwoodEadie, AlexJanner, Greville
    Bennett, Andrew (Stockport N)Edge, GeoffJay, Rt Hon Douglas
    Bidwell, SydneyEllis, John (Brigg & Scun)Jeger, Mrs Lena
    Bishop, E. S.English, MichaelJenkins, Hugh (Putney)
    Blenkinsop, ArthurEnnals, DavidJohn, Brynmor
    Boardman, H.Evans, Fred (Caerphilly)Johnson, James (Hull West)
    Booth, Rt Hon AlbertEvans, Ioan (Aberdare)Johnson, Walter (Derby S)
    Boothroyd, Miss BettyEwing, Harry (Stirling)Johnston, Russell (Inverness)
    Bottomley, Rt Hon ArthurFaulds, AndrewJones, Alec (Rhondda)
    Bradley, TomFitch, Alan (Wigan)Jones, Barry (East Flint)
    Brown, Hugh D. (Provan)Flannery, MartinJones, Dan (Burnley)
    Brown, Robert C. (Newcastle W)Fletcher, Ted (Darlington)Judd, Frank
    Buchan, NormanFoot, Rt Hon MichaelKaufman, Gerald
    Buchanan, RichardFord, BenKelley, Richard
    Callaghan, Rt Hon J. (Cardiff SE)Fowler, Gerald (The Wrekin)Kerr, Russell
    Cellaghan, Jim (Middleton & P)Fraser, John (Lambeth, N'w'd)Kilroy-Silk, Robert
    Campbell, IanFreeson, ReginaldKinnock, Neil
    Canavan, DennisFreud, ClementLambie, David
    Cant, R. B.Garrett, John (Norwich S)Lamborn, Harry
    Carmichael, NeilGarrett, W. E. (Wallsend)Lamond, James
    Carter, RayGeorge, BruceLatham, Arthur (Paddington)
    Carter-Jones, LewisGilbert, Dr JohnLeadbitter, Ted
    Cartwright, JohnGinsburg, DavidLee, John
    Castle, Rt Hon BarbaraGolding, JohnLestor, Miss Joan (Eton and Slough)
    Clemitson, IvorGould, BryanLever, Pt Hon Harold
    Cocks, Rt Hon MichaelGourlay, HarryLewis, Ron (Carlisle)
    Cohen, StanleyGrant, George (Morpeth)Lomas, Kenneth
    Coleman, DonaldGrocott, BruceLoyden, Eddie
    Colquhoun, Ms MaureenHamilton, James (Bothwell)Luard, Evan
    Conlan, BernardHarper, JosephLyon, Alexander (York)
    Cook, Robin F. (Edin C)Harrison, Walter (Wakefield)Lyons, Edward (Bradford W)
    Corbett, RobinHart, Rt Hon JudithMcCartney, Hugh
    Cowans, HarryHattersley, Rt Hon RoyMcDonald, Dr Oonagh
    Cox, Thomas (Tooting)Hatton, FrankMcElhone, Frank
    Crawshaw, RichardHayman, Mrs HeleneMacFarquhar, Roderick
    Crowther, Stan (Rotherham)Healey, Rt Hon DenisMacKenzie, Gregor
    Cryer, BobHeffer, Eric S.McMillan, Tom (Glasgow C)
    Cunningham, G. (Islington S)Hooley, FrankMadden, Max
    Cunningham, Dr J. (Whiteh)Hooson, EmlynMagee, Bryan

    Mahon, SimonRadice, GilesTaylor, Mrs Ann (Bolton W)
    Mallalieu, J. P. W.Rees, Rt Hon Merlyn (Leeds S)Thomas, Jeffrey (Abertillery)
    Marks, KennethRichardson, Miss JoThomas, Mike (Newcastle E)
    Marshall, Dr Edmund (Goole)Roberts, Albert (Normanton)Thomas, Ron (Bristol NW)
    Marshall, Jim (Leicester S)Roberts, Gwilym (Cannock)Thome, Stan (Preston South)
    Maynard, Miss JoanRobinson, GeoffreyTierney, Sydney
    Meacher, MichaelRoderick, CaerwynTomlinson, John
    Mellish, Rt Hon RobertRodgers, George (Chorley)Torney, Tom
    Mikardo, IanRodgers, Rt Hon William (Stockton)Tuck, Raphael
    Millan, Rt Hon BruceRooker, J. W.Varley, Rt Hon Eric G.
    Miller, Dr M. S. (E Kilbride)Rose, Paul B.Wainwright, Edwin (Dearne V)
    Miller, Mrs Millie (Ilford N)Ross, Stephen (Isle of Wight)Walden, Brian (B'ham, L'dyw'd)
    Mitchell, Austin Vernon (Grimsby)Ross, Rt Hon W. (Kilmarnock)Walker, Harold (Doncaster)
    Molloy, WilliamRowlands, TedWalker, Terry (Kingswood)
    Moonman, EricRyman, JohnWard, Michael
    Morris, Alfred (Wythenshawe)Sandelson, NevilleWatkins, David
    Morris, Charles R. (Openshaw)Sedgemore, BrianWeetch, Ken
    Morris, Rt Hon J. (Aberavon)Selby, HarryWeitzman, David
    Moyle, RolandShaw, Arnold (Ilford South)Wellbeloved, James
    Murray, Rt Hon Ronald KingSheldon, Rt Hon RobertWhite, Frank R. (Bury)
    Noble, MikeShore, Rt Hon PeterWhite, James (Pollok)
    Oakes, GordonShort, Mrs Renée (Wolv NE)Whitlock, William
    Ogden, EricSilkin, Rt Hon S. C. (Dulwich)Willey, Rt Hon Frederick
    O'Halloran, MichaelSillars, JamesWilliams, Rt Hon Alan (Swansea W)
    Orbach, MauriceSilverman, JuliusWilliams, Alan Lee (Hornch'ch)
    Orme, Rt Hon StanleySkinner, DennisWilliams, Rt Hon Shirley (Hertford)
    Ovenden, JohnSmall, WilliamWilliams, Sir Thomas (Warrington)
    Owen, Rt Hon Dr DavidSmith, John (N Lanarkshire)Wilson, Alexander (Hamilton)
    Padley, WalterSnape, PeterWilson, Rt Hon Sir Harold (Huyton)
    Palmer, ArthurSpearing, NigelWilson, William (Coventry SE)
    Pardoe, JohnSpriggs, LeslieWise, Mrs Audrey
    Park, GeorgeStallard, A. W.Woodall, Alec
    Parry, RobertStewart, Rt Hon M. (Fulham)Woof, Robert
    Pavitt, LaurieStoddart, DavidWrigglesworth, Ian
    Pendry, TomStott, RogerYoung, David (Bolton E)
    Penhaligon, DavidStrang, Gavin
    Perry, ErnestStrauss, Rt Hon G. R.


    Prentice, Rt Hon RegSummerskill, Hon Dr ShirleyMr. James Tinn and
    Price, William (Rugby)Swain, ThomasMr. Ted Graham.

    Question accordingly negatived.

    I beg to move Amendment No. 9, in page 5, line 29, at end insert:

    'Provided that this subsection shall not apply after 6th August 1977 to gas oil supplied to local authorities for the purpose of supply fuel for domestic district heating schemes run by the authorities for tenants housed by them.'
    There is a substantial difference between gas oil supplied to council tenants for domestic heating and gas oil supplied to industry. That is why I thought it necessary to put down an amendment separate from those which have already been discussed.

    The amendment relates only to council tenants, defined as those who are committed to district heating schemes fired by oil. I make that distinction because they are at a particular disadvantage not only because of the recent increases in the cost of gas oil but because this increase in taxation is an unfair levy upon tenants who are prisoners of these schemes. They have no escape from such schemes. Once they are tenants of housing estates committed to the supply of heat by district methods and fired by oil, they are prisoners of those schemes. Until we can change that, possibly by changing to alternative fuels, they have to suffer those sorts of levies.

    8.30 p.m.

    Earlier in the Committee exchanges we heard comments from the Liberal spokesman about the condition of rural transport in Cornwall. The hon. Gentleman quoted some figures and said that living standards in Cornwall were considerably less than elsewhere in the country because people had to face quite sizeable transport costs on the basis of very low take-home wage averages. If we relate some of the hon. Gentleman's remarks to the problem suffered by Londoners I suggest that we find that Londoners, particularly those affected by heating costs of this sort, are possibly worse off than people in Cornwall. There is a remarkable regional argument to be made in favour of Londoners against people such as those in Cornwall and elsewhere in outer areas of the United Kingdom, where average take-home pay is possibly less than it is in London.

    The point that I am making is that if we take heating costs alone, brought about by oil-fired systems of the sort to which I have referred, in my constituency, which is part of Haringey—this also applies to five London boroughs—tenants of three-bedroom houses who are linked to district heating oil-fired schemes are charged about £335 a year. On top of that, for cooking, lighting and topping up the heating in the five months of the year when it is not available, they have to pay a further £150. That works out at a crude aggregate of about £485 a year for district heating, lighting and some cooking.

    When we add that amount to average rent and rates of about £12·50 a week for the sort of council tenants I am referring to, it means that their outgoings for heating, lighting, cooking, rent and rates are well above £22 a week, yet they have a take-home average not so much more than the figures quoted for Cornwall, Scotland and Wales. When we make that sort of deduction it can be argued that living standards in the London area could be less than those quoted for Cornwall and elsewhere.

    Real pressure is being put upon people who are having to pay these additional costs. The argument started some three years ago, about extractions of London weighting, was a result of consideration being given to heating schemes and the like. The argument was compelling at that time. We still have the same sort of problems. Additional taxes amount to only 1½p per gallon. That is nothing. It may amount to 20p or 18p per week per dwelling. That is nothing at all. But in principle it is totally wrong to impose this additional taxation on tenants who are prisoners of what is already a very expensive scheme.

    The point is that we must consider the morality of taxation when we are thinking of the arguments about the self-generation of funds within the gas and electricity industries and how to capitalise them from their own resources. That sort of argument, and the morality of doing that, must be placed alongside the morality of imposing further taxation of this sort, albeit only a small amount. I am not claiming that we are talking about back-breaking amounts, but possibly the small amount that really breaks the back will be this 1½p per gallon.

    Possibly in answer to the Government's case, I would say that it is not feasible to separate this argument from the general taxation question. In London, the GLC negotiates a contractual arrangement with the oil companies on behalf of the London boroughs and the London boroughs then receive gas oil at the price negotiated. By identifying those contracts by giving them a name, like blue contracts, yellow contracts, or whatever, the Government could ensure that these contracts were subject to a different level of taxation.

    It is possible for the Government to accept this amendment. It is technically feasible. All the contracts for district heating schemes are identifiable. They are negotiated on a bulk basis and they are subject to special conditions, all brought about because of the additional imposition of 8 per cent. VAT on the contracts. So it is possible to identify them quite clearly and to say that bulk purchase by the local authorities is subject to a different level of taxation and by that means to make the conditions quite different for district-heated tenants as against anyone else.

    When the hon. Gentleman refers to district heating schemes, does he include a block of council flats which may be in the same position of having one heating plant, however it is fired, thereby placing the tenants in the same position as the district-heated tenants to whom he is referring? If so, does he think that his amendment should also apply to tenants in a block of flats who rent from a private landlord, as opposed to a council?

    Taking the last point first, I should like to include the lot, but the question there is how to go about doing it. Very seldom are the oil supplies negotiated under special arrangements as they are with the GLC and other local authorities. Let me further complicate that answer by saying that I agree that all district heating schemes would be included, as should all those tenants of flats where there is a common source from which all the flats are heated. I say that because they, too, have had no opportunity in the last few years of bringing about conversions themselves. If they are council tenants, as distinct from private tenants, there are special problems. Under Section 105 of the local authority Acts, it is not possible for a local authority to provide money to bring about the conversion. It may be possible in the not-too-distant future to negotiate with the Government the means by which local authorities can convert.

    Private tenants are not so much tied prisoners of their systems because, possibly, they could gas-fire the boilers, as against using gas oil. They themselves could carry out fairly inexpensive conversions, and there is a great attraction to do that in current circumstances.

    I single out councils because they are subject to special problems. But I include flat occupiers in all district heating schemes. If I had any choice, I would exclude all domestic heating. As I said earlier, if I had been included in the discussions or negotiations that took place about the content of the Budget, I would have argued the case for their exclusion. However, that is another matter. My amendment is on the very narrow point of council tenants in schemes which I have defined as "district heating" or, as the hon. Member for Gloucestershire, South (Mr. Cope) made clear, the occupiers of blocks of flats as well.

    I hope that the Government can make a concession. We are not asking for much money. I understand that the total cost would be less than £1 million. The Government will probably say that district-heated schemes cover about 155,000 tenancies. The total is much bigger if one includes the blocks of tenancies which I have talked about and which the hon. Member for Gloucestershire, South mentioned. Even so, the total cost to the Exchequer would not amount to more than £1 million.

    I think that my amendment is feasible and absolutely just. The morality is unquestionable, and only small amounts of money are involved.

    My hon. Friend the Member for Tottenham (Mr. Atkinson) has put the case for his constituents with great clarity. We can understand the problems for my hon. Friend as the representative of council tenants who, to use my hon. Friend's words, are committed to using heating schemes over the choice of which they had little control. In a graphic phrase, he described them as prisoners of the scheme and we understand his point.

    The Haringey borough has oil-fired district heating schemes. My hon. Friend has examined the cost in some detail and has spoken of it tonight. I am pleased to note that my hon. Friend agrees that, even though it is difficult to accept any increases in heating costs at a time of pay restraint, the increase is not large, possibly amounting to about 20p a week. The extra cost will obviously vary according to the flat and the block in question.

    However, I accept the difficulties that arise from any sudden increase in a period of pay restraint. My hon. Friend's points need closer examination, and I shall be happy to go into them. If my hon. Friend will give us time to consider the matter, we can probably return to it on Report. I hope that with that assurance my hon. Friend will seek leave to withdraw the amendment.

    With that assurance, I shall willingly seek leave to withdraw the amendment. I look forward to the Report stage, when I hope that the Government will accept the logic of the case and make positive suggestions.

    I beg to ask leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Amendment made: No. 10, in page 5, line 31, at end add

    'but as respects the period beginning at that time and ending at 6 o'clock in the evening of 5th August 1977 the rate of the duty of excise charged by section 11 of the said Act of 1975 shall, notwithstanding subsection (1) above, be £0·3500 a gallon in the case of light oil as well as heavy oil and the provisions mentioned in paragraph (b) of that subsection shall have effect accordingly'.—[Mr. Denzil Davies.]

    Clause 4, as amended, ordered to stand part of the Bill.

    Clause 15

    Charge Of Income Tax For 1977–78

    I beg to move Amendment No. 15, in page 11, line 12, leave out '35 per cent.' and insert '33 per cent.'.

    With this amendment we may take Amendment No. 24A, in page 11, line 25, at end insert—

    "(2) Each individual shall be entitled to an allowance of 15/35 of the total income tax payable by that individual up to a maximum allowance of 15/35 of £416."

    We have now come to the main clause, which is concerned with rates of income tax. Earlier this evening some of us were privileged to hear an excellent speech by the hon. Member for Birmingham, Ladywood (Mr. Walden), in which he argued—I paraphrase—that the House would do better to concentrate on the great issues of the level of income tax, which he argued—with my full approval—was excessive, and the level of value added tax, rather than on minor matters. Therefore, I think that if he were present he would be pleased that we are now coming to this major issue.

    8.45 p.m.

    It is a quirk of our procedure that we come to this immensely important issue of the level of the standard rate of income tax just at the time when many hon. Members are heading towards a well-deserved dinner. Apparently, we shall be discussing it, at least for the next few minutes, in a not very crowded House, whereas the debate on the petrol duty was well attended. That is perhaps inevitable, because at one time it looked as though the Lib-Lab pact would be undermined, together with the possibility of getting the Government to back down. However, the pact was saved in the nick of time by the usual deal over the week-end, so that the matter was settled as it could have been settled in the House in the first place. But that does not apply to the issue of income tax, on which the various parties will no doubt make their positions clear.

    We have three main reasons for the amendment. First, we want to know what the position of the Government now is on the question of reflation and the Budget judgment. We have, in the last hour or so, accepted a Government amendment that will have the effect of reducing revenues in the current year by £140 million. Although that figure may be small by today's astronomical Budget arithmetic, it still affects the public sector borrowing requirement and therefore the overall assessment made at the time of the Budget.

    Secondly, we want to know what the position is on the proposed conditional tax cuts announced by the Chancellor in his Budget Statement. He told the House:
    "I have explained why it would not be prudent to commit myself absolutely to this decision"
    —the decision to make certain tax reductions, of which the reduction from 35 per cent. to 33 per cent. in the standard rate of income tax was one—
    "until a satisfactory agreement on a new pay policy has been reached, as I expect to happen well before the Finance Bill leaves the House."—[Official Report, 29th March 1977; Vol. 929, c. 283.]
    That was the Chancellor's clear position in his Budget Statement, when, in his own words, he was guided by prudence in stating that he would not commit himself to this position until a satisfactory pay agreement had been reached. There were no conditional "ifs" and "buts", but a clear statement of his position. That was rather over a month ago. What is the status of that undertaking now? Is the proposed cut from 35 per cent. to 33 per cent., as presented to the Committee in this amendment, still tied to the achievement of a satisfactory pay deal—leaving aside, for the moment, what the definition of "satisfactory" is meant to be? Or is the tax cut no longer tied to a pay deal? Is it a condition, or is it not? I shall elaborate on that in a moment.

    The third reason for the amendment is that we wish to register our strong feelings about this whole approach, which is being tried for the second year running, by which the Government put forward provisional proposals concerning the taxes that all the citizens of this country will pay and then explain to the House that the matter will be settled not by Parliament, not even by discussion with all outside representative bodies—if it is possible to establish full representation by outside bodies—but by discussions with the TUC, and it is argued that in the end Parliament will be dealing with it because it will be brought back to Parliament for approval. We do not like that procedure.

    The hon. Gentleman is contradicting himself. He said that this would not be settled by Parliament, and he then said that it would be. How else can this 2p reduction be made, except by a vote of the House? I do not understand the hon. Gentleman.

    I think that the Minister does understand, and that he is playing games. What he is arguing now, though he cannot be serious in putting this forward, is that because, ultimately, this has to come back to the House for approval, perhaps in this Finance Bill, we do not know, perhaps in another Finance Bill, it has to be passed by this House. But the reality is quite different. This happened last year, and apparently the proposal again this year, although we do not know and want to find out, is that the matter should be settled by agreement between the Government and the General Council of the TUC, which is only one outside body—I agree an important one—representing only one section of the many millions of working people who in the end would be paying, and perhaps will be paying, the new tax rate.

    We believe that these arrangements should be debated and settled in Parliament. We believe, too, that it is humiliating for a free Parliament to have these matters, as it were, taken from our hands for a time and discussed and traded on elsewhere, quite apart from the fact that this time round TUC leaders have turned the whole offer down flat anyway.

    Does the hon. Gentleman feel the same sense of humiliation when our financial affairs are canvassed by either the IMF or our Common Market masters?

    When certain propositions are put forward because, apparently, the matter is not within the power of this Parliament but is in the hands of the IMF as to how we behave, I do feel a certain sense of humiliation, but I do not share what I suspect is the hon. Gentleman's view about humiliation when dealing with the Common Market. I say that for the simple reason that we, as a democracy, decided, both in this House and by a referendum supporting that decision, to be an equal member of the EEC. We play our full part in that, though I, personally, would like to see us play a still stronger part. I hope that that answers the hon. Gentleman's question.

    I now come in more detail to the three issues behind the amendment, and I shall deal first with the reflation question. The Budget assessment was absolutely specific, and when the economic progress report of April, prepared by the Information Division of the Treasury, came out after the Budget, it stated categorically that
    "there is scope for a carefully controlled fiscal stimulus to the economy of £1½ million."
    Although the report says "million", it means "billion". What is the assessment now? Where do we stand on that carefully controlled fiscal stimulus? Is it still the belief of the Government that that is right? Or are they looking for something more, and will they be able to use their withdrawal of the petrol tax to reinforce that something more?

    The whole newspaper-reading world will have read about the Summit weekend that has just passed—an event that seemed to some of us to be rich in irony. One of the undertakings—it was practically at the top of the list—given by the leaders of the various nations was that an attack would be made on unemployment, which they and we consider to be of intolerable size throughout the whole of Europe. The statesmen gathered at the Summit agreed to take appropriate measures to overcome it, although at one Press conference President Carter said, with an excellent touch of realism, that making decisions is no guarantee that they will be consummated. Nevertheless, the undertaking has been given that appropriate measures will be taken to attack unemployment.

    How will Britain be attacking it? We on the Opposition Benches have a first, an almost instinctive, answer. It is that we must conquer inflation. We believe that inflation, as somebody once argued about certain motor cars, is unsafe at any speed. We believe that inflation is a destroyer of jobs and is an engine of unemployment, and we put the conquering of inflation as the first necessary step in the generation of new confidence, investment and jobs.

    What is the Government's answer? Is it, as we gather from various leaks in the newspapers, more reflation, of which the proposed cut in income tax from 35 per cent. to 33 per cent. is to form part? Is this greater reflation to begin from the base rate of about 13 per cent. current inflation?

    The hon. Gentleman is moving an amendment that seeks to reduce the basic rate of income tax from 35 per cent. to 33 per cent., which would amount to about £1,000 million of reflation. He is in favour of this now, presumably.

    I hope that the hon. Gentleman has been listening. I have explained our three purposes in moving the amendment. One of them certainly is to establish our dislike of having conditional income tax deals. Another, as I was very careful to point out, is to find out what is happening about reflation. We have heard not merely that this cut in the basic rate from 35 per cent. to 33 per cent. is being considered but that further cuts are being considered.

    Over the weekend there has been a great discussion about all the reflation that the United Kingdom is proposing to consider to overcome unemployment. Other countries whose Heads of State attended the Summit meeting may be able to do more. Indeed, they are already doing far more and achieving higher rates of growth, but in most cases that is precisely because they have not sought to reflate prematurely and have controlled their public deficits and public expenditure.

    Against that background, we need a restatement of the Government's position to allay fears that the Government may now be contemplating, from a level of inflation of between 13 per cent. and 15 per cent., more reflation of a kind that would greatly add to inflation.

    On top of that, and very germane to the question of the cut in income tax from 35 per cent. to 33 per cent. and the overall Budget assessment, there is the matter of the extra £½ billion of public expenditure cuts that were mentioned in the public expenditure White Paper and in the Chancellor's December statement, and which are apparently due for 1978–79. Therefore, if there is to be proper planning, which there was not last time, particularly for local authorities, these need to be worked upon and announced early in the autumn.

    Are those still on? Or are the £ ½, billion of public expenditure cuts off, in the light of further inflation? We want to know. It is not satisfactory for either the Committee or the wider public to be left in doubt about the Government's current position.

    I turn, secondly, to the timing of the proposed conditional deal. The Chancellor of the Exchequer said on 29th March that it would be before the Finance Bill leaves the House and that it would be impossible to make any commitment until a satisfactory arrangement had been reached. When will that be? The IMF letter to Dr. Witteveen in December last year talked about reaching an agreement in the early spring, before the budget. What has happened to that undertaking? Like other undertakings in the IMF letter, it has melted away with the warm spring weather melting the winter snow.

    9.0 p.m.

    We now have a new proposal and a new suggestion that was first aired authoritatively on the front page of The Sunday Times this weekend. That article stated that
    "Income tax is likely to be cut in August whether or not the Trades Union Congress has formally ratified a new round of wage restraint. This became clear yesterday when it was learned that Denis Healey, the Chancellor, hopes to lower the standard rate of income tax from 35 to 33 per cent at least in return for a satisfactory pay deal being agreed or being substantially in prospect."
    The story appears to have been written with great authority. It went on:
    "Some pump-priming by Healey in the next few months is regarded as imperative by Labour MPs if they are to regain electoral ground lost to the Tories."
    If this tax cut is no longer conditional it is essential that the Minister who will reply to tonight's debate should say so. It is not right for us to be left in further doubt about the matter. If the Chancellor has now abandoned his specific assertion of 29th March, and it is no longer conditional, we must know. That is one of the perfectly reasonable bases upon which we move the amendment. The Minister of State is fair, and I am sure that he will recognise that that is so and will give us a clear answer on where we stand.

    Another reason why we wish to remove this amendment is that we do not like the nature of such a deal. We do not like the approach. Of course we believe—this has been said from this Dispatch Box—that pay restraint is vital to curb unemployment and procure responsible bargaining. I am sure that the Minister of State will accept that. However, we say that that should be obtained through an open understanding and not through any deal. We say that the kind of deal that was done, supposedly in the interests of work people, under the social contract, has been immensely damaging. By the Chancellor's own admission, last year it involved taking risks with the public sector borrowing requirement, and that led to one of the most disastrous years in British economic history, certainly since the 1930s if not of all time. That is no deal for the British nation. It benefits no one, and leads to more inflation, not less.

    That is why we have repeatedly said that we should seek to secure proper pay restraint within overall monetary and budgetary restraint by an open understanding and not by a deal. We were even less impressed by the arguments that were used by the Chancellor in his Budget when he put forward the case for a deal. If I remember correctly, he argued that when all was said and done, if the trade unions would accept his conditional tax cuts in exchange for wage restraint that would be worth an additional 9 per cent.—with a further gross pay rise of over 4 per cent. it would make nearly 9 per cent. in all. That, he explained, would be the benefit that would flow from accepting this conditional tax cut.

    I am not sure that that argument is intellectually respectable. No one can predict what the Chancellor so blithely predicted, namely, that if a pay increase were accepted in the form of tax cuts rather than wage increases it would have the effect of cutting 2½ per cent. off the index of retail prices by the end of 1978. How can he tell? That is the kind of prediction that is made nonsense of by events and it adds to no one's confidence in Treasury figures when it is trotted out in that way. It does not inspire much confidence.

    There is an assumption in what the Chancellor said that higher wage claims would, if the additional tax cuts deal were not accepted, result in higher real wages plus a bit of inflation.

    In his Budget speech the right hon. Gentleman referred to tax reductions and said:
    "Moreover, this sort of increase in take-home pay would not add to wage costs and so to prices. So he would get further benefit from a lower rate of inflation. And this in turn will keep interest rates lower and the value of sterling higher than they would otherwise have been."
    He went on:
    "In fact, it is difficult to exaggerate the advantages of a satisfactory pay agreement which makes it possible for me to proceed with the full income tax package of £2¼ billion."—[Official Report, 29th March 1977; Vol. 929, c. 284.]
    There is an assumption there that if he does not get the conditional deal—which seems to be crumbling, anyway—higher wages will lead to higher real wages—which is questionable—and to a bit of inflation. Neither of these results is certain. If monetary policies are pointing in the other direction and other forces are at work, it is possible that higher wage claims will not lead to higher real wages, but rather to more unemployment. That is the sort of message that the Prime Minister was putting forward with great vigour and clarity a week or two ago, and I agreed with him at that time.

    That whole section of the Chancellor's Budget speech was a very shaky piece of argument. I am surprised that there is anyone left in the Treasury to draft such tendentious stuff, though not so surprised that there are still Ministers willing to put it forward.

    These, then, are the reasons why we do not like conditional deals. They are strengthened by the fact that the conditional status of the deal seems to be in extreme doubt, leaving the Committee and the House up in the air about the Government's economic policy. We do not know whether it is a conditional deal, whether there is to be some reflation, or whether the Government are discussing with the TUC a July Budget or an August package. A July Budget is the usual form. There is also an extra £500 million of public expenditure cuts to be introduced before the end of the year unless they have also been abandoned, despite the fact that it is in the public expenditure White Paper.

    We are entitled to more clarity on all these things. I hope that the Minister will not use the narrow argument—that would not do him justice—that because we are putting forward this proposal in the amendment we must be in favour of it in all circumstances. We are in favour, if it is the right thing to do, of having it in the Bill now. We are against setting up a conditional trade-off with wage restraint. That is not the proper way to approach the matter of pay policy or a deal or the horrendous problems lying ahead on the pay restraint front. A totally different approach is needed.

    The deal approach implicit in the social contract has run its course, and those who were the architects of the social contract have run their course. A new arrangement and understanding and a fresh approach are needed. The sooner the country has a fresh Government to carry through that approach, the better it will be for the national interest.

    Those are our reasons for putting forward the amendment. I hope that the Minister will give some explanations on the points that have been raised.

    I agree with my hon. Friend the Member for Guildford (Mr. Howell) that if taxation is to be reduced from 35 to 33 per cent. it should be done in Parliament. It should not be conditional. However, I do not go all the way with my hon. Friend, who seemed to place a certain amount of reliance on statements made by the Chancellor of the Exchequer. Everything the right hon. Gentleman has said in the past has always been proved wrong. I do not put much credence on the right hon. Gentleman's statements.

    It is humiliating that the Chancellor in seeking to run the economy has not taken the bull by the horns and said "We must reduce taxation from 35 to 33 per cent." The Chancellor should not leave the matter to some other body, such as the TUC, for ratification.

    One Labour Member asked whether the Opposition thought that the IMF episode was a humiliating one. If somebody is broke and has to go to his bank manager to borrow money, naturally the banker tells the person concerned what he has to do. One of the ironies of the present Labour Government, and indeed of previous ones, is that in the first two years of a Labour Government we see them trying to apply their economic remedies, and then we have IMF intervention. That is a trap into which all Labour Governments fall.

    The doubt about whether the figure will be set at 35 or 33 per cent. is causing a certain amount of administrative problems. For example, we do not know what will be the burden of ACT. Perhaps the Minister will tell the Committee. Then there is the subject of covenants for charities. Many administrative details are involved in the decision whether to opt for a figure of 33 or 35 per cent. Of course, one can juggle the allowances so as to affect ACT covenants and all the rest of it, and all that can be handled by legislation, but I believe that the Government are building up for themselves and for the Inland Revenue burdensome administrative problems because nobody yet knows what the rate will be.

    There are some sections of the community whose members should not be paying tax at all. I am not speaking of those who are in receipt of social security benefits, because they are untaxed. This gives rise to considerable anger among others who are working and who are heavily taxed. I have in mind the section of the community who give voluntary service for an honorarium or bounty, and they surely should not be subject to tax. In many parts of the country men who serve in lifeboat crews receive 70p an hour. That sum, for which they risk their very lives, is subject to tax. It is niggardly of the Government not to make that payment tax-free.

    I tabled an amendment, which was not selected, to exclude from taxation all honoraria or bounties up to a figure of £200. I do not wish to pursue that amendment, but it is a matter which the Minister may well have in mind. Many people are doing sterling work for the community whether they work in the life boat service or in the fire service. The fire services in rural areas are voluntary. Let me turn to sea rescue—

    Order. The hon. Gentleman a few moments ago gave the impression that he intended only to touch on his amendment. Amendment No. 16 was not selected because it was considered to be outside the scope of the Bill. Therefore, I cannot allow the hon. Gentleman to pursue the subject matter of that amendment.

    9.15 p.m.

    I am grateful, Sir Myer. May I then put the argument that, irrespective of what happens regarding the 33 per cent. or the 35 per cent. rate of taxation, the 33 per cent. rate should certainly be applied to those who receive an honorarium or a bounty. In view of what you say, Sir Myer, I shall not argue that they should be exempt from taxation. However, since the present general rate of tax is 35 per cent., I argue that those who do voluntary service—lifeboat men, fishermen, special constables, members of the Territorial Army—should be subject to tax only at 33 per cent. from 6th April this year.

    Or a lower amount. I am grateful to my hon. Friend, but I shall not argue for a lower amount because that would be out of order.

    I hope that the Minister now understands the point. Our taxation system is thoroughly niggardly, and especially so under this Government. I shall not pursue the point, but I draw attention to what happens to Service men. They are subject to tax at 35 per cent., and they have had an increase in pay, but in many cases Service men in Ulster are now receiving only about 50p a week extra because the Government have taken back their increase under the social contract through extra rent charges and food charges.

    I am sure, Sir Myer, that you do not wish me to go on to the other amendment which was not selected.

    No, I do not, but I was beginning to think that the hon. Gentleman was going on to include those who skilfully seek to get round the rulings of the Chair and was about to suggest that they also should be exempted from the payment of tax. The hon. Gentleman will see from the heading to Clause 15 that it does not deal with categories of people. The clause begins by providing, as he well knows, that the rate of tax shall be charged irrespective of what the individual taxpayer does. I hope, therefore, that he will bring that argument now to a close. I have allowed him to go some way on the question of exemption for those who give voluntary service, and I hope that he will say no more on that matter.

    I accept your ruling, Sir Myer, and I should not for a moment wish to give the impression that I was trying to circumvent your ruling. All I say is that those who give voluntary service and receive an honorarium or bounty for so doing should be charged only 33 per cent. If the Government cannot accept a reduction to 33 per cent. for all taxpayers, let them at least accept 33 per cent. for voluntary workers such as firemen, lifeboatmen and the rest.

    Order. Exemptions cannot be given under Clause 15. It would require a new clause. Otherwise, I think that I might be a candidate for exemption, too.

    I am glad to hear that I should have your support, Sir Myer. I end by pointing out that the whole of this clause should be examined under the Trade Descriptions Act. The heading to Part III is

    "Income Tax, Corporation Tax and Capital Gains Tax".
    The term "capital gains tax" is a misnomer. It is an inflation gains tax.

    However, having said that, I return to Amendment No. 15, which should be supported for the various reasons which my hon. Friend the Member for Guildford advanced. It is essential for the House of Commons to come to a decision. Whether we are to have 33 per cent. or 35 per cent. income tax, it is wrong for any Chancellor to keep the British taxpayer in suspense, not knowing whether his taxation will come down by two points or not.

    The hon. Member for Guildford (Mr. Howell) made the broad point that the level of taxation generally is far too high, and one inferred from his remarks that it got worse the higher a person's income rose. But that cannot be sustained against the background of economic fact which is relevant to this debate. Up to the levels of income referred to earlier, that is, up to £22,000 a year, there is no one paying more than 50 per cent. in total taxation on such income. I do not consider that to be punitive, where a person has a tax-free income of £11,000. I think it is a very generous income indeed, even though it may be from a total of £22,000. There are very few taxpayers in this country—the Treasury Ministers will confirm this —who pay anything like that amount of tax. They get so many exemptions from an income of £22,000 a year that the total percentage of tax paid is a good deal less than suggested. Even though on paper some of these figures of taxation look rather punitive, when we find out what people actually pay on an income of £22,000 a year it is clear that the amount of tax does not add up to more than half of the total figure at worst. In those cases where a good accountant is employed, it is very much less than that. That is the sitution.

    The hon. Gentleman is quite right to look at the answers to Parliamentary Questions on this matter. In this country, somebody with a gross salary of £20,000 a year would get a net income of rather less than £10,000. In no European country does anybody at that level get a net income of less than £6,000 above the figure that would be received in the United Kingdom. This applies also to the United States and Japan. At every level of tax we consider, whether it is on a salary of £10,000, £5,000 or £2,500, there is not a single country in the world in which people are not substantially better off than people here.

    That is on the assumption that the people in this country on such incomes are claiming no more than minimum allowances. We have a far more generous arrangement than in other countries, whereby people can claim for all kinds of things which are not permissible on the Continent.

    All sorts of things. The most convoluted insurance contracts of one sort and another qualify for tax relief and so on. It is possible to purchase property via insurance, and there are insurance offsets of one sort and another available. This can be done with a good accountant. There are professionals on the Opposition Benches, and I should very much appreciate being their student if they could teach me some of the ways in which they are able to advise clients on reducing the level of taxation. This is done very successfully in many cases. The Treasury, in giving its final figures, is able to show that the level of payment of tax in aggregate is not as high as the figures suggested by Opposition Members.

    I can give an example from my own experience. Comparing the salaries paid to executives by a company in this country and by another company in France, where they are doing the same job and getting £15,000 or its equivalent in each case, the man in this country would, after tax and all allowances receive a little under £8,000. The man in France, after tax and all allowances, would get about £11,500. The figure of £8,000 is after taking into account all the allowances available to a British taxpayer in this country. It is a fundamental difference. I have never been able to explain it satisfactorily to my own executives if I have wanted to switch them from one country to another.

    It may be that there is a Christian millenium waiting in some of these overseas countries, where people can enhance their incomes in this way. That may well be the case, but I am not impressed with criteria of that kind. Who says that it is moral that these people should have an income of that sort? I certainly do not. I am not arguing that we ought to try to equate our position with what is happening on the Continent. Total taxation is no higher in this country than it is on the Continent, although I agree that there is a difference between direct and indirect taxation.

    My argument is that we have not reached the point of excessive taxation among these upper income groups. I think that there is excessive taxation down the scale, and certainly right at the bottom of the scale taxation is punitive. There has been reference already to the take-home pay in Cornwall and elsewhere. Even people on fixed incomes and pensioners are paying taxation. It is outrageous that people are being soaked dry—[Interruption.] Well, soaked in this way. At least I am original. When I mix my metaphors, I do so in an original way. The point is that people are being soaked in a punitive way, certainly at the lower levels.

    I turn now to the argument about the reduction in taxation being conditional. I am referring to the 2 per cent. reduction and the agreement which is to trigger off this taxation relief.

    It is curious that the hon. Member for Guildford, in moving the amendment, should refer to reflationary arguments. I support the amendment. However, the effect of the amendment would be to increase the borrowing requirement. If revenue is reduced as a result of a reduction in income tax, the borrowing requirement must increase unless something is done about spending.

    If the hon. Gentleman wanted to continue his argument about further expenditure cuts, he could argue arithmetically that the borrowing requirement would not be increased by a reduction in taxation, but he went the other way. The hon. Gentleman asked whether the Treasury intended to honour its pledges about expenditure cuts. That is another argument with which I agree. But I do not think that in that respect the borrowing requirement is important. I do not accept the monetarist concept that there must be an absolute reduction in borrowing and that the money supply is related to the rate of inflation. It is not, and there is no evidence to suggest that it is. The IMF—the Institute of Milton Friedman—has never come up with any evidence to suggest that there is a correlation here. There is no substantiation for the Opposition's argument about the borrowing requirement and relating it to their amendment. The immediate effect of releasing £1,000 million into the economy is, of course, reflationary, but at the same time it increases the borrowing requirement.

    A point was made about the relationship with the trade unions and the tax reduction being conditional. There is a moral argument here with which I agree. It is wrong to say that the nation's taxation should await the outcome of an agreement with a certain section. But that has always been the case. Even Lord Barber, as he now is, related taxation to prices. He used to say "If there is stability in the index, it makes it permissible for me to reduce taxation by a certain amount." In other words, he was referring to demand levels and economic management and using taxation or fiscal methods for managing the economy and saying "Yes, there is a relationship between prices and the amount of tax that can be released." He was making it conditional. Conservative Governments have always made it conditional. If they have used fiscal methods for the management of the economy, they have always said "The rate of inflation determines the amount of taxation that the Chancellor is able to concede to the nation. He raises or lowers the level of taxation according to the state of the economy and the level of demand." That is what the amendment is about.

    It is not new for the Chancellor to argue that his additional relief of 2 per cent. is conditional upon an agreement being made. But even that is contradictory. Ultimately the Chancellor will defeat his reflationary intention in management terms by not conceding the 2 per cent., because he concedes that it is, in itself, retroactive and goes back to the beginning of the financial year. He has agreed to inject about £1,000 million into the economy, assuming that the voluntary agreement between the TUC and its constituent unions, does not set too high targets in the negotiations over phase 3.

    9.30 p.m.

    The weakness of that is that the trade unionists have criticised the situation in the past because they say that non-union workers have possibly done better than they have and have thus contributed to price rises. This has been self-defeating for the trade unions because they have stood by the agreement.

    Hon. Members on the Opposition Benches have claimed that the TUC does not represent the whole nation. Of course it does not, but that argument goes both ways. The TUC represents between 10 million and 11 million of the total work force. Trade unionists ask themselves why they should be bound by a wage agreement to which they have stuck rigidly, when an equal number of people are finding a hole in the netting and getting increased earnings far in excess of those the trade unionists can get because of the restrictions imposed upon them.

    One of the difficulties in negotiating phase 3 will be re-establishing confidence that the agreement will mean something to these people. That is the dilemma facing us.

    The contradictory aspect is when the Chancellor says that if wages go too high he cannot possibly afford to give away taxation. He is saying, in effect, that if the rate of reflation is higher than that agreed by wage bargaining, he will not assist that reflation by giving another 2 per cent. on top of it. That is a contradictory and self-defeating argument in the final analysis, because that is the situation at which he wants to arrive. The Chancellor should say now that, in the process of reflating the economy, the workers can have taxation cuts but the Government hope that there will be some sense in the wage bargains that they strike in phase 3. That is the sensible way of going about this.

    I should like to see the Chancellor putting another point of view to the TUC, to the General Council and the NEDC negotiators—the NEDC Five, as it is not six any longer because the AEUW has contracted out. He should say that if there are to be any conditions at all these should have the objective of reducing the amount of overtime. Workers should be told that they can have a reduced working week and the Government will try to make sure that they do not lose out on average earnings as a result of the reduction in hours.

    In the final analysis that is the only way in which we can be job creative. It is the only way in which the Treasury can use tax relief and use it constructively in terms of job creation. The Government must talk about conditions of that sort so that the reduction in the working week does not add directly to prices and push up the rate of inflation.

    If as a result of reducing the working week and being truly job creative, unit costs go phenomenally high, it would mean that the extra amount on the price index would defeat all the ideas of job creation and the hopes of finding an additional 10 per cent. of jobs in manufacturing industry.

    If we talked about the conditions and timing of the 2 per cent. relief in that way, we should achieve two things. We could have freely bargained wages against a price ceiling agreed by a tripartite arrangement among the trade unions, the employers and the Government, and we should be able to use taxation to reduce the working week and allow job creativity. That is not as complicated as it might seem. No matter what has been said at the Summit conference this week or agreed among world leaders, no Western nation will start to get to grips with the dreadful unemployment problem unless people can reduce their working week and we use modern technology to employ people and to raise general standards and the level of demand. Taxation should be used for that kind of demand management. We should have a general comprehensive approach and use these methods retrospectively.

    I agree that if any message should go to the Chancellor from these debates it is to start talking freely to the unions, using neither stick nor carrot, in an attempt to approach reflation sensibly. If we can convince people of that by injecting this £1,000 million, plus another £500 million—the promised £1,500 million—into the economy as the basis of reflation, that will stimulate confidence and the kind of climate within which it may be possible to come to the sort of realistic arrangement that I have described.

    But the Government should not wait for the last possible moment. They know that they cannot in the end tell the unions that there will be no tax relief, simply because living standards have declined so fast and so far that the only way that we can salvage anything politically is to start talking about the 2 per cent. now. Let the Government concede that readily. The Chancellor should now say that he calculates that it can be done before long. The concession will be retrospective anyway. Let us get on with it and tell the TUC that the Government are determined to do something not only about unemployment but about the biggest problem of all—the rate of inflation.

    I did not agree with everything said by the hon. Member for Tottenham (Mr. Atkinson), but I did agree with his comments about the effect of the tax system on the lower income groups. Your predecessor in the Chair, Sir Myer, said that we might discuss also Amendment. No. 24A. That amendment was on the Order Paper earlier this week, but because of the printing problems it has erroneously been omitted.

    The amendment would simply introduce a low rate band of tax at 20 per cent. for the first £416 of taxable income. The reason for the sum of £416 is that it is divisible by 52. We should start talking about our tax allowance and tax bands in weekly terms. It is much easier for most wage earners to understand that the first £8 of their income is taxed at 20 per cent., the next slice at 35 per cent., and so on.

    At this stage, I am not arguing the question of conditionality. I am not joining the hon. Member for Guildford (Mr. Howell) on this point. What I am trying to ask is whether we should not think in terms of a lower rate band as an alternative to a reduction in the standard rate of income tax whenever that takes place. The cost of these two things is approximately the same. That is why I asked for these two amendments to be bracketed together, because it seemed to me that it would give the Committee a chance to discuss—if we have just under £1,000 million at this stage of the game to play with—whether it would not be better to do it this way rather than by reducing the standard rate of tax.

    What effect will this have? Perhaps more important, upon whom will it have that effect? Obviously, one of the arguments put forward for the reduction in the standard rate is that it will help middle management. There is no doubt in my mind that middle management needs help. The incentives for middle management are very few. This case has been accepted by the Chancellor, and obviously by the Government. That is a good thing. By introducing a lower rate band of 20 per cent., one would not, of course, improve the lot of middle management as much as by reducing the standard rate of tax. That is fairly obvious. But, on the other hand, middle management are not the only people in our economic scale who are affected by disincentives.

    What I said in the last debate about incomes in Cornwall, and what the hon. Member for Tottenham has said in his speech, indicates that the disincentives at the lower end of the income scale are now so great as to be utterly scandalous. It is not a question of people having 50 per cent., or 60 per cent. or 70 per cent. of their extra pounds earned. They are losing more than 100 per cent. on their extra pounds earned. A very large number of my constituents are in what we therefore call the poverty trap. They know that if they declare every other pound extra that they earn they will not get that pound, because they will lose a substantial amount both in terms of taxation and lost benefits.

    Of course, one answer would be to raise thresholds. The danger about raising thresholds this year is that it is hideously expensive to do. We know that minor changes in the thresholds that have been made in this Budget—and they are minor changes—will cost £1,000 million. To increase these thresholds any more would cost a great deal of money indeed. For that reason, if for no other, the 20 per cent. rate band is a good possible alternative.

    But there are other arguments. Thirty-five pence in the pound is a ridiculous rate at which to come into income tax. When we add social security tax, the national insurance contribution, it means that one is paying 41 per cent., or something of that sort. There is no country in the Western world—I do not know whether there is a country anywhere else in the world, but I would not think so—that introduces its citizens to income tax at this high rate. It would be better to have a lower rate for that reason alone.

    The arguments for dispensing with the lower rate at the time of the Budgets in the late 1960s, when Mr. Roy Jenkins was Chancellor of the Exchequer, were largely administrative arguments of the Inland Revenue. It took the view that the lower rate band was expensive to collect. It may be expensive to collect by the techniques that we use for collecting income tax. That may be one good reason for changing the way that we collect income tax and for going in for a more sensible system. I would advocate that on all sorts of grounds. But I believe for all these reasons that the lower rate band has very much to be said for it.

    9.45 p.m.

    If, later in the year or next year, we find that we have some more money to play with, that it is possible to make reductions because the forecasts of the public sector borrowing requirement were not accurate, which is very possible, and that there is more money to give away, the lower rate band should be given a very high priority—I think the top priority—for the reasons that I have already adduced.

    Even at this stage I am, on balance, in favour of the reduced rate band rather than the 2p off the standard rate of income tax. Some hon. Members may say that that is a constituency point, because I represent a very low income area. Indeed, I do. They do not come any lower than North Cornwall in terms of income per head. Earnings in the whole of Cornwall, according to the abstract of regional statistics, are just about the lowest of all the 63 sub-regions in the United Kingdom.

    It is almost impossible for me to find a constituent for whom it is worth while going to work at all. I venture to say that there is not a single person in North Cornwall, including the Member of Parliament, who should be working for 12 months in the year from the point of view of tax advantage. But, then, 14 weeks off work would be very advantageous to everyone financially. In respect of about 85 per cent. of my constituents, one would have to say that they would be better off if they were out of work 52 weeks of the year. This is exceedingly depressing and debilitating, and it makes life almost impossible for the Member of Parliament having to give advice about whether people should go to work. One can never be put in the position of saying to a constituent "Do not go to work." So one does all the calculations on a Saturday morning across the desk and leaves one's constituent to make the decision, aware that one has argued him into the feeling that it is not worth going to work at all. Frankly, I do not think that this should be allowed to continue. I believe that the lower rate band would be a step in the right direction here.

    I move on briefly to the arguments of the hon. Member for Guildford. I disagree with his main argument that this 2p reduction should not be conditional. After all, everything that a Chancellor of the Exchequer does in a Budget is or should be conditional upon the state of the economy, and pay is one of the most important economic indicators in the economy. The level of a pay settlement has to be taken into account in deciding how much fiscal stimulation can be made and how much demand should be injected into the economy.

    If the hon. Gentleman takes that view and there is no stage three pay settlement until September, does he believe that this reduction from 35p to 33p should be scrapped?

    I shall be coming to that in a moment.

    There is a necessary link between taxation and a pay settlement. The level of a pay settlement is an important item in the Chancellor's decision about the appropriate level of demand and, therefore, of his Budget judgment.

    If the Government are responsible for managing the economy—and most of us who live in the post-Keynesian age believe that, anyway—[Interruption.] I am not, but hon. Members will have heard the right hon. and learned Member for Surrey, East (Sir G. Howe) say that taxation was now fixed like a game of Russian roulette, and he said that I had my finger on the trigger. It is a splendid quote. It will go all over my election literature. I hope that the right hon. and learned Gentleman does not excise it from the record. That will be a splendid quote, especially when the taxes start to come down. It will he even better then.

    If the Government are responsible for the management of the economy, they cannot fail to take a view about the level of pay settlements. Even if one says that that is a bit vague overall, nevertheless in the public sector it is essential because the level of the public sector borrowing requirement depends to a large extent on how much the Chancellor pays public servants, which is now such an enormous part of the total of public spending. Clearly any Government will have to take a view on that.

    It is very unfortunate that the pay settlement year does not happen to be the same as the beginning of the tax year. Otherwise, the Chancellor could accomplish his negotiations with the TUC and the public sector unions before the Budget. He would know what was in store in terms of pay increases and would be able to take that into account in deciding his Budget judgment. At present he has to make his Budget judgment several months in advance of the pay settlement year. It might be very advantageous if we could move towards synchronisation of the two.

    I come now to the point raised by the hon. Member for Norfolk, South (Mr. MacGregor). The Liberal Party has advocated for many years the concept of a tax on inflation. The idea is that if a company undertook to abide by certain pay limits it would not have to pay the tax on inflation. If it were unable to abide by this pay limit it would have to pay the tax, but if it subsequently honoured the agreement during that year the tax would be repaid.

    That leads me to say that the Government could approach this conditionality in two ways. They could reduce the tax now by 2p. They could have said so in the Budget. The conditional part would be that unless a pay policy of X per cent. was achieved, or even a vague "satisfactory pay policy", the Government would claw it back.

    I think that both of these ways are unsatisfactory, but for a different reason than that advanaced by the hon. Member for Guildford. The reason came out in the speech of the hon. Member for Tottenham, who says that the trouble with pay policy is that if one is a good boy, behaves well and keeps to the policy, as many unions have, one suffers, because many people do not keep to it.

    That has always been the argument that we have put forward for having a tax on inflation, a selective tax which would not fall on the just and unjust alike but only on the unjust. Such a tax would be a penalty on a company or bargaining unit which did not stick to whatever the pay policy was. Here I am not arguing for a pay policy which is a fixed norm across the economy. We have to move to far more sophisticated ideas than that. Value-added methods of measurement might well be the best way forward.

    Therefore, because I believe in a tax on inflation—and I am convinced that sooner or later, if we are to get inflation under control, we shall have to introduce one—I accept the conditionality. But I am very open on the question whether we should lower the tax first and claw it back or whether we should do it in the way that the Government have proposed. What I do not believe is that, with the negotiations as they are now, the Government should simply hold up their hands and say to the trade unions "We surrender. You can have anything you like. You can do any kind of deal you like, and it will not make any difference to taxation." Clearly, the level of pay increases that is agreed in the pay settlement is enormously important to how much money the Government feel they can put back into the economy. There I part company with the hon. Member for Tottenham and the Conservative Party, who seem to be in an unholy alliance, a new sort of Tribune-Tory pact. They say that this tax should be reduced willy-nilly, whether we achieve a satisfactory pay settlement or not. I believe that we should wait and see.

    I know that some Conservatives will ask me "What about what your leader said about a constitutional outrage?" At that time, my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel) was not my leader. The official statement from the Liberal Party at the time was wholeheartedly in favour of the conditionality in the Budget last year. The instant comment was made by me on television while the Budget speech was being made. My then leader, my right hon. Friend the Member for Devon, North (Mr. Thorpe), put out an official statement welcoming it on behalf of the Parliamentary Liberal Party. I must say that I do not believe that this conditionality is a constitutional outrage, and I have some reason to believe that my right hon. Friend the Member for Roxburgh, Selkirk and Peebles does not think so now, either. [Interruption.] All of us are open to persuasion. Men of reason have open minds. I can only say that persuasions have been taking place.