In section one hundred and one of the Income Tax Act, 1952, there shall be inserted after subsection (1) the following subsection:
1(A). For the purposes of this section 'maintenance' shall include the purchase and installation of a domestic solid fuel appliance of a type certified by the Minister of Fuel and Power as reaching a prescribed standard of fuel efficiency."—[Mr. Crosland.]
I beg to move, "That the Clause be read a Second time."
This new Clause has as its object an amendment of the Schedule A provisions of the Income Tax Acts, its purpose being that we should allow expenditure incurred on the purchase and installation of approved solid fuel appliances to be offset against Schedule A tax payments. It seeks to do this by so defining the word "maintenance" in the Schedule A provisions of the Income Tax Acts as to include expenditure incurred on such approved appliances.
We submit this new Clause in order to follow up the recommendations of the Ridley Committee. Hon. Members who are concerned with this subject will remember that the Ridley Committee discussed in some detail the financial assistance which might be given to encourage people to instal solid fuel appliances in their homes, and, among the recommendations in paragraph 150 on page 37 of the Ridley Report, there are two—(a) and (b)—which urge that consideration should be given to conces- sions in Schedule A of the kind which this Clause seeks to provide.
The present position so far as Schedule A and the installation of these appliances is concerned is rather obscure. The hon. Member for Kidderminster (Mr. Nabarro), earlier this year, asked the Chancellor why it was that some tax inspectors allowed such expenditure against Schedule A and others did not. The Chancellor gave an answer defining the conditions under which expenditure could be set against Schedule A, and it is clear from that answer that only a very small proportion of such appliances when they are installed are now eligible for the relief which, in this new Clause, we seek to make general.
The case for encouraging the installation of these appliances is by now well known and generally accepted. About a third—over 60 million tons—of our coal supplies is consumed either directly or indirectly in the home. Any discussion of fuel efficiency in the home is thus clearly a discussion of a matter which is quantitatively important. I think it could be agreed that there are three very important advantages which would follow if such appliances were generally installed in the homes of Great Britain.
The first advantage is that it will lead to the saving of some coal. This is not a point on which there is general agreement. Everyone agrees that the thermal efficiency of these appliances is very much greater than the appliances they would be likely to replace, but it is commonly argued that, in spite of this fact, there would be no saving of coal following their installation on a wide scale because the extra efficiency would be taken up in extra warmth, extra comfort, and a higher standard of living.
Even after the installation of these appliances, it is argued, people would consume the same amount of coal as in open grates and the only consequence would be that they would be warmer and more comfortable. So much the better. That is a desirable end in itself, but it seems to me most unlikely that their general installation would not save some coal. I cannot believe that those who install these appliances, and get so much extra efficiency and greater comfort, will not spend less money on coal. People will spend some of their potential saving on other things, and burn less coal.
Would the hon. Gentleman not agree that the appliances would not only save coal, but their users would be able to burn breeze, slack and small coke, which would replace the coal and would be a saving as well?
That is certainly an important incidental advantage.
I should like to try to establish the fact, which is often denied, that it would save some coal in overall terms. I support my contention by a very interesting sentence in this year's report of the National Coal Board. In page 35, paragraph 124 of their annual report, they say:
Merchants' sales of coal to domestic consumers were lower than in 1951. This may have been due in part to consumers running down their stocks and in part to the use of more efficient heating appliances.
So the Coal Board take the view that the installation of more efficient heating appliances will save coal even if part of the extra efficiency goes in increased comfort, increased heat and an improved standard of living. It is, therefore, very hard to deny that no saving of coal will occur.
In the sort of coal situation that we are likely to have in this country for about 10 years ahead even a small saving of coal might be important and might make the difference in future between having and not having a fuel crisis. So it is not enough to dismiss this case on the ground that the proposal will save no coal or will only save a small amount.
The second advantage is the great improvement in the abatement of smoke pollution which would result. One of the most desirable consequences of installing these appliances more widely is that we should have far less smoke in our cities. In terms of health that is a very important thing which is in everybody's mind as a result of having a winter with a particularly bad fog which caused a very large number of deaths. In addition, the cost of combating the effects of pollution is enormous. If we had a system of domestic heating which caused less pollution there would be a considerable saving in measures required to deal with smoke pollution at the present time.
A third important consequence would be a saving in terms of capital cost where these appliances replace electric fires and other electric domestic equipment. If electric fires and all domestic electric equipment were used only at other than peak hours this would not be a very strong or significant argument. But a proportion of them is used at peak hours, not only in all-electric houses but even in houses which have open grates, where it is very common for electric fires to be used at the early morning peak hours before the fire has been lit for the day.
Where electric fires or other equipment are used at peak hours the capital cost to the country of having electric appliances in the home is obviously enormous. It leads to capital expenditure of a serious nature and enormous magnitude on generating plant. A general switch-over from electric equipment to solid fuel burning appliances in the home might mean a very great saving in terms of capital cost in the electricity investment programme.
It would be possible to maintain quite seriously that, taking into account these three possible forms of saving—and others can be adduced—a direct saving of coal, a saving on expenditure in combating smoke pollution and a saving on capital cost in electricity investment, it would pay the Government or the community to give away solid fuel appliances free. The cost would be a great deal less than the value of the resources saved in terms of coal, smoke pollution and investment programmes.
It may well be said that even though this case is an undeniable one and we ought to encourage the installation of these appliances one must ask why a special incentive of any kind is needed, because I do not think that any householder who has installed one of these appliances would deny that there is a saving to his or her purse. Why, then, is a special incentive needed?
Almost everybody who has discussed this topic, or who has written about it. agrees that some special incentive is needed if the appliances are to be installed in large numbers; and the Ridley Report is quite clear in its claim that they will not be installed on a sufficiently wide scale without incentive. In paragraph 150, the Report lists a number of financial incentives which should be given, and among those is the incentive that we are discussing this evening.
Furthermore, the Coal Utilisation Council has a view on the subject in its survey into the domestic use of solid fuel and solid fuel appliances in Great Britain. On page 25 of the survey, it is stated, in discussing why these appliances are not installed more widely, that one of the reasons is cost. It states that that is an important factor operating against each appliance, and is mentioned by roughly one person in four willing to consider installing a modern appliance. It is hardly surprising that this is something of a deterrent because the more efficient of these fires cost a substantial sum, and the actual installation may cost as much as the appliance itself.
That is why we have moved this Clause tonight; and, speaking of the actual clause, it may be asked why we say:
… certified by the Minister of Fuel and Power….
We should have liked a more definite phrase, but there is difficulty here. The phrase "approved appliances" is considered to be much too broad, and among such would be those whose efficiency is not too great. We were tempted to define the appliances by saying whether they fulfilled one function or more, and should have liked to have confined the concession to dual or triple purpose appliances; but we have used the phrase which appears in the proposed Clause, which carries with it the need for the Ministry of Fuel and Power to produce a narrower definition of appliances to be approved, which is what the Ridley Report suggests.
I appeal to the Chancellor to consider this Clause most carefully, for there is nothing else in the Budget to encourage domestic fuel economy. Indeed, the right hon. Gentleman has given a sort of negative incentive in the form of Purchase Tax reduction on electric fires. That is something pulling in the wrong direction. Little has been done to carry out the recommendations of the Ridley Report. The Chancellor has made a small concession on industrial fuel appliances, and, despite the obvious difficulties, I appeal to him to make a concession tonight for domestic appliances.
I would not disagree with any of the principles which the hon. Member for Gloucestershire, South (Mr. Crosland) has just enunciated in his remarks, and I rise at this late hour only to make one or two observations, particularly from the fiscal point of view.
There was one omission from the speech to which we have just listened in regard to stimulating a greater flow of these modern solid fuel appliances to the domestic market; and that is, that in every year which goes by, we suffer more and more difficulty in meeting the specialised demand of the house coal market. It demands large coal, and every year that passes the seams in our pits are tending to become more remote from the bottom of the shaft, they are often becoming thinner and dirtier, and what we have been accustomed to in the form of large, clean house coal is no longer always a practicable possibility; at least, not on the scale and to the standards which we enjoyed in pre-war years. These modern solid fuel burning appliances generally burn smaller coal, and coal of a lesser quality.
It is important as mechanisation of the pits steadily proceeds—and it is reaching, I must say, almost saturation point now— that the complementary factor should be carried in mind, and that is that these appliances in our homes should be installed upon as widespread a scale as possible. The domestic market is starved of coal. In the South of England only 34 cwt. a year is allowed; in the North of England only 50 cwt.; and the Coal Utilisation Council Report, from which the hon. Gentleman quoted, draws attention to the fact that were there a free market in coal there would be a considerably enhanced demand.
There are several great difficulties in tackling the matter in the way the hon. Gentleman suggests. As I am sure he has not omitted to notice, a Parliamentary Question to the Chancellor of the Exchequer on this matter was asked in April last year. It made the very point to which the new Clause is directed. On that occasion I asked the Chancellor:
Whether he is aware that certain of Her Majesty's inspectors of taxes admit as a permissible charge for purposes of calculating liability to Schedule A Income Tax main-
tenance allowances, the cost of purchase and installation by householders of modern approved solid fuel burning appliances when fitted as replacements for old grates whereas other inspectors of taxes do not so admit the charge; and whether, in the interests of solid fuel conservation he will instruct the Inland Revenue to admit such charges in all instances as a permissible item of cost when calculating liability to Schedule A tax.
That is precisely the purpose of this new Clause. The Chancellor's reply was rather illuminating, because since that date I have carried out a good deal of research as to whether his reply—with great respect to him—was strictly accurate. This is what my right hon. Friend said:
The admissibility of the cost of these appliances in a maintenance claim depends on the facts of the case. If the new appliance and the appliance it replaces are both part of the building the cost of replacement is admitted in so far as it does not exceed the cost of repairing or renewing the old appliance. Any excess is, in law, inadmissible as maintenance, as is the cost of appliances that are not part of the building."—[OFFICIAL REPORT, 8th April, 1952; Vol. 498, c. 199.]
That is really the reply to this new Clause.
My researches in the matter covered nine sample cases taken from all parts of the United Kingdom, and this is what I discovered, after consulting chartered accountants who had had negotiations with various inspectors of taxes. In three cases the inspector admitted the whole cost of installation of the modern solid fuel burning appliance and the structural cost of altering the building as a charge for purpose of the maintenance claim under Schedule A. In three other cases the inspectors, in different parts of the country, completely disallowed the claim. They would have nothing to do with it. In the other three cases they went exactly half-way and admitted the structural alteration of the building only, but not the cost of the new appliance.
I have said enough to demonstrate, I think, that what is wanted is not new legislation on this subject, not further Clauses added to the Finance Bill, but a request from the Chancellor of the Exchequer to the Inland Revenue that there shall be consistency throughout all branches of the Inland Revenue, in their treatment of modern solid fuel burning appliances for this particular class of relief, under Schedule A maintenance.
I think it would be a dangerous precedent indeed if we added a Clause to the Bill on this particular point, because it would lead in future years to similar Clauses being added to Finance Bills covering a whole range of other items coming within the general description of domestic hereditaments or private dwellings. I have always advocated Schedule A relief as an incentive, in the way the Ridley Committee recommended, to get these modern appliances installed in large numbers; but the real way to get that incentive is to persuade the Inland Revenue to be consistent and apply in all cases what they have applied in the three successful sample cases, out of nine, which I have mentioned.
I hope that my right hon. Friend will resist this new Clause but will, by administrative action, instruct the Inland Revenue to show a greater degree of consistency.
I am sure that no hon. Member would express surprise at the research which the hon. Member for Kidderminster (Mr. Nabarro) has made into a subject in which he is so interested. I ought, perhaps, to declare a personal interest, because I have recently acquired one of the solid fuel high efficiency boilers, and I am wondering if one of the inspectors of taxes who takes a favourable view is the one in Ty Glas Road, Cardiff.
The point I want to make on this subject, in the hope of getting a favourable reply from the Economic Secretary, is that provision can be made without a shadow of doubt for allowances such as are proposed in the new Clause so that people will be certain, and will be encouraged to instal apparatus of this type.
It never does any harm, whatever the hour, to discuss fuel economy. It is a subject on which public education has still a great deal further to go. The hon. Member who moved this new Clause said that there is some dispute whether these new types of apparatus are likely to lead to real fuel saving. From personal knowledge of my Agamatic I can say that they do. The evidence in the Ridley Report, and in the earlier Simon Report, makes clear that real saving can be obtained.
It is worth noting that the 40,000,000 tons of solid fuel burned in houses are responsible for half of the smoke pollution. It is most objectionable pollution, because there is more tarry substance in the domestic smoke than in other smoke. The problem of sulphur, into which I do not intend to enter, is more complicated. It is clear that there will also be some reduction of sulphur in the atmosphere through using the new types of appliance.
Many people feel that the Ridley Report was a poor document, and that it did not go far enough; but it has been made worse by the failure of the Government—and I am not trying to make a political point—in this matter. It really must try to give more of a lead. The Simon Committee recommended subsidisation of these appliances. I realise the difficulty of doing this, and that there are real objections to the introduction of a subsidy in this field; but something fairly strong is needed. The proposal in this Clause is not very revolutionary, and it will give some encouragement to many who are working to solve this problem, and who are depressed by the lack of a positive lead by the Government.
On the question of the difficulty of defining the efficiency of these new types of stove, there is in this country elaborate equipment for establishing standards. We have Dr. Parker, at the Fuel Research Station, and men like Hales, Gunn, and Dr. Townend working continually on this problem at the British Coal Utilisation Research Association. I urge the Government to give a lead tonight, if possible by accepting this new Clause and, if not, by clarifying the position along the lines which the hon. Member for Kidderminster proposed. In the installation of high efficiency plant which will produce better combustion—it is improved combustion that will give greater fuel efficiency—there must be a greater attention paid by builders and others to the installation of more efficient plumbing, including more efficient water boilers. I hope that we shall have a favourable indication of the Government's view on this matter tonight.
I want to support what has been said by my hon. Friends. I think they have made an unanswerable case. We feel very strongly about this matter. We do not propose to divide the Committee, but we shall certainly take the opportunity of returning to the question on some other occasion. We think it of the utmost national importance that the Chancellor should do everything in his power to secure investment by the nation for the conservation of coal as well as investment through the National Coal Board for the production of coal.
My hon. Friend spoke of smoke pollution. It has been estimated by Dr. Parker and other scientists that the cost to the nation—which, of course, does not appear in the accounts with which the Chancellor has to deal—is £50 million a year. Most of it is due to house smoke, or in any case a large proportion. The Pilkington Report said that the potential saving to be made by industry, which was discussed the other night, was 9 million tons a year. I think the Report came out since the debate. That is over £60 million a year on our balance of payment accounts. Yet the Chancellor could not find it in his heart to make available to industry the loans for fuel-saving equipment at the favourable rates of interest which the Ridley and Pilkington Committees both recommended.
I hope that the Chancellor will do better over domestic coal. In their Report, the Ridley Committee say that it is in house coal appliances that an improvement in efficiency will be most rewarding since house coal is the fuel most commonly used by householders and is mostly used in old-fashioned appliances or relatively low efficiency. Here we face a double problem. There is not only the danger that in the early future the total coal supply of the nation will be grossly insufficient to meet our needs, but there is also the problem of the declining output of large coal while the demand for it keeps up.
In their Report this year, the National Coal Board say that large coal is scarce and has been a declining proportion of the total output. It is also wanted by the railways and for bunkers. They say, as my hon. Friends have said, that the modern inset grates work well with smaller coals. Just look at the figures of large coal: in 1951 63·6 million tons, in 1952 62·2 million, a decline of 1·4 million tons in a single year. In the first 21 weeks of this year there was a decline of 922,000 tons. If this rate is maintained the decline this year will be much greater than in 1952. That means that the housewife cannot get the quantities of large coal she wants. Large coal is urgently required for export and other things, but with a modern efficient appliance the housewife, with much less trouble to herself than with large coal, can get a better result with small coal, and very often using a smaller quantity.
I want to support what my hon. Friend said about what coal savings would probably be made. We could quite easily standardise our new appliances, to which the Government give their approval, at the 40 per cent. efficiency the Ridley Committee proposed. If they did that there is no doubt, if people had grates of 40 per cent. efficiency, broadly speaking you could get with 19½ cwt. the same heat as you get from 34 cwt. with the old-fashioned stool bottomed grates. Some consumers will use the same fuel and get more heat, and good luck to them, but there are many people who affirm they get more heat but save coal as well.
I do not want to exaggerate what can be done but the 16 million householders who take solid fuel do use between 35 million and 40 million tons a year, and I believe that there is a potential saving here of at least 10 per cent., or something like 3 million or 4 million tons, and I think if all the recommendations of the Ridley Committee were carried out that saving could be made. Much the most important is the recommendation we have embodied in this Clause. I am sure that inspectors of taxes could go far towards achieving our purpose if they were given the instructions the hon. Member for Kidderminster asked for, but much the best way to give the instructions is to insert a Clause like this, and then people will know where they are. Bigger measures are now required, and I hope that the Government will agree to what we now propose.
The hon. Member for Gloucestershire, South (Mr. Crosland), in moving this new Clause, put forward some serious and cogent arguments on the subject of fuel economy, smoke pollution, and the comparative virtue of solid fuel appliances and electrical appliances, and in the course of the discussion we have had further interesting arguments from other hon. and right hon. Members.
In some ways I feel that to pursue in detail many of the points would be more appropriate to a general debate on the subject of fuel and power than to a debate on the Finance Bill. Indeed, my hon. Friend the Member for Kidderminster (Mr. Nabarro) made the point that it was one thing to talk about encouraging supplies, and quite a separate thing to say it should be done through the medium of the Finance Bill. I am sure we all agree about the desirability of the widespread usé of these modern appliances, but the question here is whether it is a good thing to stimulate their use by the device proposed in the new Clause.
As I have said before during the passage of the Finance Bill, wherever possible it is important to avoid the introduction of new discriminations and new complications into the administration of the Income Tax law. I am sure the hon. Member for Sowerby (Mr. Houghton) will agree with that. Our Income Tax law is complicated enough now, and each new complication introduced makes for more difficulties, while each new discrimination introduces a need for further requirements and further claims to be put forward. I do not think that the Committee should accept any proposal for a new specific discrimination in the Income Tax law without having the very strongest arguments before it for doing so.
I was proposing to indicate in the next part of my remarks that I thought the arguments advanced, eloquent as they are, nevertheless are not strong enough to justify this discrimination.
What is being asked is that the normal conception of a maintenance claim should, in the case of these fuel burning appliances, be extended to cover not only maintenance, but also improvements. There is a very clearly established principle on which the calculation of these maintenance and repair claims is based —that is, the distinction between the replacement of a particular part of a building and an improvement.
My hon. Friend the Member for Kidderminster has referred to the inconsistencies, as he calls them, of the administration of the Income Tax law. I am quite certain that it will always appear to the taxpayer that from time to time there are inconsistencies in this type of administration, because it is very difficult always to be certain about what is a replacement and what is an improvement. That applies as much to industrial equipment as to domestic fuel burning appliances. But the principle is certainly the same, and the Inland Revenue do their best to administer it equally throughout the country. I am certain that my right hon. Friend will consider the evidence of inconsistencies which is sent to him.
The principle, therefore, is that in so far as the task of installing one of these appliances represents the replacement of a worn out grate—replacement, not improvement—it is allowable, but in so far as it represents an improvement as new capital outlay, it is not admissible. That is the principle to which we adhere. It is proposed in the new Clause that we should go further and also set off an element of improvement for Income Tax purposes.
The arguments advanced are three-fold, and perhaps I may deal with them in reverse order. First of all, there is the point about the relative efficiency in coal consumption of electricity burning appliances and solid fuel appliances. Here, I think it is fair to say that whatever we do in particular provisions in the Finance Bill there is still a very substantial discrimination in favour of the solid fuel appliance, which bears no Purchase Tax, against the electric fire, which will continue to bear Purchase Tax at the very heavy rate of 75 per cent. There is already a large discrimination in existence, and, of course, there is the added point that solid fuel appliances are not affected in any way by hire purchase restrictions.
I will come to that in a moment. At present, I am dealing with the comparison between the solid fuel appliance and the electric appliance.
Next there was the point about smoke pollution, to which the right hon. Gentleman also referred and which obviously is of great importance. I am advised by my hon. Friend the Parliamentary Secretary to the Ministry of Fuel and Power, who has been listening to the debate and who, incidentally, later this morning is to visit the fuel research station, where he will recount to the officers and others there what has been said in this discussion, that it is arguable to what extent these new appliances contribute to the prevention of smoke pollution, because they are capable of burning lower grade fuels. I am informed that it is arguable on technical grounds—disputable—to what extent the smoke pollution problem will be eased by these new appliances when compared with the old grates.
Finally, there is the first point which the hon. Member made, the question of the saving of coal. So far as I know, it has never been extensively urged before, and was not urged by the Ridley Committee, that there would be any substantial saving of fuel as a result of the widespread installation of these appliances.
The principal effect, as I understand, of a more extensive use of these domestic fuel appliances is that people get more heat and greater comfort in the home. Hon. Members opposite have quoted their personal experience. My own personal experience of installing one of these appliances is not a saving of fuel, but the fact that one does not have to get up in the morning and light the fire. I believe that that is the main advantage which people draw from them.
Unless it can be shown—and I do not believe it can—that there are substantial fuel benefits to be derived from the appliances, the only benefit will be the greater comfort which people will enjoy in their homes from their use. That, as the hon. Member said, is no doubt a good thing, but not a good reason for introducing a new principle of taxation to encourage people to buy appliances to make them more comfortable.
I will end by informing the Committee that, as a matter of fact, there has been a very substantial increase in the sale of these appliances. I am informed that the sale of these improved, recognised and certified appliances in the first quarter of this year reached the record total of 630,000, which is more than double the total sales in 1951. That is a good thing, but, on the other hand, I do not think that my right hon. Friend would feel justified in introducing a new discrimination of this kind into the Income Tax structure, with all the objections which would inevitably arise, unless the arguments put forward for it are stronger than those which have been advanced this evening.
I have tried to indicate why, in the Government's opinion, the arguments advanced, important as they are, are not of sufficient weight to lead them to the conclusion that they ought to accept this new Clause with all the difficulties of Income Tax administration to which it would inevitably lead.