Orders of the Day — Finance Bill.

Part of the debate – in the House of Commons at on 5 July 1935.

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Photo of Mr David Evans Mr David Evans , Cardiganshire

I do not desire to follow my hon. Friend the Member for Westhoughton (Mr. Rhys Davies) to any extent, but I think that probably he unconsciously paid a compliment to the Government when he said that they were not doing what he thought would be the best thing to catch votes. He was probably right in thinking that there are other and better means of catching votes than a Budget or any constructive work of that character. Rather the Government's strength lies in the weakness and the conflicting policy of hon. Members of the Labour party. So long as they constitute the regular Opposition to which the country has to look for an alternative Government, I think the strength of the Government's position is due, not to their own merits but rather to the demerits of those who sit opposite to them. I do not agree with my hon. Friend in his excursion into the question of the incidence of taxation, particularly direct taxation and its results on the trade and industry and general prosperity of the country. I think it is now agreed by all economists and by all who have given any study to the question that high taxation and a high National Debt are detrimental to progress and reconstruction. When we say that these factors are detrimental to a real policy of reconstruction, we do not mean that only a certain class of the population is affected.

My hon. Friend referred to the National Debt and said that it ought to be reduced. For precisely the same reasons, taxation ought to be reduced at the earliest possible opportunity. We know that those who conduct industries in this country, especially those who have not taken any part in great rationalisation schemes and great combinations of industry—private individuals who have carried on industries in our large cities with success and who are still to some extent successful—are being hampered, prejudiced and injured by the fact that Income tax and Super-tax remain at their present level. Taking an extreme case, if it were possible, by some means or other, to reduce Income tax to the pre-War standard, it would be an immense aid to reconstruction and to the return of prosperity throughout this country, not only among industrialists but among workmen, affecting not only profits but also wages.

I do not often intervene in the Debates in this House, and I have no intention of speaking at length, but I should like to say something about the present situation as I see it. There is one aspect of the Government's taxation which calls for attention and that is what amounts almost to discriminatory taxation in respect of certain commodities as against another commodity, a form of taxation which penalises certain industries and those very often the most progressive. It will be agreed that it is an unwise policy to levy a tax upon the raw material of an industry if it can be avoided by any means at all. I agree with the Chancellor when he says that he is prevented from doing certain things because the means are not at his disposal. We all understand that, but there are many ways of raising money. I think, however, that the worst of all ways is to tax a commodity which is vital to a progressive industry in order that that industry may compete against foreign producers.

I refer to one tax which has been discussed in this House many times. The right hon. Gentleman has closed his ears to all the appeals made to him from various quarters in regard to that tax. I understand that that is not so much because he wants the money which is derived from it, but because he thinks that by penalising a certain type of fuel he is going to give a better chance to fuel derived from coal. I have some personal knowledge of the result of that tax upon one industry with which I am familiar. I am not, however, dealing with this matter from any personal point of view, because I know other industries which are less able to compete against, this handicap than the industry to which I refer. In the case of the industry which I have in mind the tax has not driven us back to the use of coal or any fuel derived from coal. In that case the tax does not help the coal industry directly or indirectly, because we will not go back—we cannot afford to go back—to coal. But the tax does mean that we are less able to compete with foreign producers. In one particular plant or factory it adds £1 to the cost of production of every ton of metal. That is one type of taxation which I suggest ought to be avoided and it is a tax which ought to be removed as soon as the Chancellor can see his way to do so. I refer to the tax on fuel oil.

Another form of taxation to which I wish to refer is the taxation on the motor car industry. I have considerable experience in other countries, including the United States and Canada, and I have been struck by the position of the motor car industry in this country compared with motor car industry abroad. I know that the right hon. Gentleman will point to the protection which has been given to the motor car industry in this country, but I submit that the whole system of the taxation of the motor industry in this country is not conducive to the expansion of that trade. We have failed to secure for this country what I consider to be a fair share of the export market in that industry. I know that things have been considerably better during the last few years, but, even so, in 1934 the number of cars exported from this country, including commercial cars, was only 37,000 as against 237,000 exported from the United States. That is to say that America, admittedly with a larger population and a larger production, exported seven times as many cars as we exported. If we go back to the year 1929 the proportion is ridiculous. In fact, the United States have captured a modern industry. They could to-day in my submission if they had less tariffs, if they adopted a freer system of trade, have a grip and hold upon the export trade of the world in motor cars against which the motor ear industry of this country could not, in present circumstances, possibly compete.

Then take the case of other countries. Italy in 1934 exempted all new cars from taxation for six months, and in 1935, in order to stimulate the production of cars—thereby reducing costs and enabling manufacturers to compete in foreign markets—they extended that exemption for nine months, while the maximum horse-power tax in Italy is far less than the maximum in this country. In Germany in 1933 all new ears were exempted from horse-power tax. Of course, that was the act of a dictator, and it seems to me that sometimes a dictator is able to act very rapidly. When he wanted to stimulate the production of cars in Germany, he exempted all new cars completely from horse-power tax, and, as we know, in America the horse-power tax is negligible, with the results that I have pointed out, not because of any greater engineering ability than we have in this country, but because of a policy which stimulated an infant and comparatively new industry as compared with the policy adopted here, which was penal in its character.

Then there is that feature of this Budget, the taxation on heavy oil. If I may, I will quote from an address by Sir John Cadman on this matter. Referring to the promises made by the right hon. Gentleman in this matter, he said, speaking at the Institution of Petroleum Technologists: The general policy of placing high taxes on the raw material of transport appears to me to be one of doubtful wisdom in view of the very substantial percentage of overhead costs represented by transport charges. High taxes on motor fuel must inevitably handicap the industrialist in his efforts to capture foreign markets, and perhaps the position will be clearer if I state that every time a petrol-driven lorry of 6–7 tons un-laden weight travels seven miles the Government takes 8d. in fuel tax alone. It is perhaps of little value to point out"— I want the right hon. Gentleman to pay particular attention to this— that, when the last two increases in the petrol tax were made in 1931 the Chancellor of the day gave a pledge that they would be removed when the financial crisis was past. We gather that the financial crisis has passed, and indeed, in the right hon. Gentleman's speech to-day, he said he was aiming at returning to the taxpayer those extra taxes which were imposed as a, result of the financial crisis. When is the right hon. Gentleman intending to complete that aim? If the financial crisis is past, why not do it now? The aim of the right hon. Gentleman seems to me to be somewhat on the modest side, because I gathered that his aim was to return to the 1931 position, and that he had no aim beyond that, but surely—