asked the Secretary of State for Industry what would be the effect on the indigenous motor car manufacturing industry if preference was given to smaller cars and more economical consumers of gasoline as opposed to larger vehicles should the gasoline tax be increased by 20 pence per gallon; and what would be the impact on car imports.
If a 20p per gallon fuel tax were imposed at one time I would expect some trading-down to smaller cars and smaller-engined variants of model ranges. This would affect the British car industry's profit margins, which are low on such models. Import penetration is at its highest in small and medium-sized cars, and such an increase in fuel tax might well lead to extra demand for imported vehicles in this range alongside those manufactured in the United Kingdom, especially in current buoyant market conditions. Were any such decision taken, however, a phased changeover to enable the industry fully to adjust would be more probable.