Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 12:00 am on 16 November 1955.

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Mr. H. Wilson:

It may be convenient if I intervene at this stage, because so far no one has spoken from the Opposition Front Bench and the Chancellor will probably agree that, although no one would say we are at the beginning of the end in this debate, we are, to coin a phrase, at the end of the beginning. It has been a somewhat discontinuous debate for reasons of which the Committee will be aware. Some very important points have been raised and on a number we have had an answer from the Economic Secretary.

The main characteristic of the debate—indeed, the main characteristic of the tax range which we are now debating—is that this afternoon we have been away from the essentials, the necessities that we debated for a rather short time last night. We have been in the range of what some hon. Members have called luxuries and others have called conventional necessities. I rather like the phrase used by the hon. Member for Basingstoke (Mr. Freeth), who spoke an hour ago, although we have not seen much of him since, when he referred to "comforts." A number of the things which we are discussing may be regarded as comforts and I hope that when the Chancellor replies he will pay very careful attention to what was said by his hon. Friend the Member for Belfast, East (Mr. McKibbin), who put—quite apart from the interruptions—. some rather important points.

My hon. Friend the Member for Stechford (Mr. Roy Jenkins) began the debate with what I am sure all hon. Members will agree was a very fine speech. If I have any criticism of him—and I am sure my hon. Friend will take this in the spirit in which it is meant—it is that I thought he was rather narrow in his attack on the situation. My hon. Friend referred mainly to cars, as have a number of my hon. Friends, but I am sure that he would have liked to have taken a much wider view of the subject, and given equal attention to a number of other very essential items covered by this range of Purchase Tax. I think that my hon. Friend showed great forbearance and consideration to the Chancellor in confining his remarks to so narrow an aspect of the problem.

My hon. Friend made one comment which I think must have been in the minds of, at any rate, all hon. Members on this side of the Committee, when he said that we must balance every increase in Purchase Tax which we are now debating with the remissions of Income Tax given by the Chancellor last April. I am bound to say that that does affect the attitude of hon. Members on this side of the Committee when they consider whether these increases in Purchase Tax are necessary.

A great deal of the time we have so far spent on this Amendment—there is plenty of time to remedy this lack of balance—has been devoted to debating the Purchase Tax on cars and the wider problems of the motor car industry. I do not wish to go very deeply into the problems of the motor car industry. That has been done so very well by a number of my hon. Friends, including the hon. Member for Northfield (Mr. Chapman) the hon. Member for Edmonton (Mr. Albu), and, in a remarkable speech, my hon. Friend the Member for Westhoughton (Mr. J. T. Price), in addition to my hon. Friend for Stechford.

A point was made by the hon. Member for Basingstoke which, I think, calls for a reply. He said that we on this side of the Committee supported the increase in the tax on cars which was included in the Budget introduced by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) in 1951. The hon. Gentleman said that even though we must have realised that the cuts in the Australian import of cars were at that time imminent, yet we nevertheless supported the increase in the tax. The hon. Gentleman was very wide of the mark. He was not a Member of this House at that time, and I have not checked the details of this or the exact timing; but it was my impression that the import cuts took place in March, 1952, or thereabouts, almost twelve months after the Budget introduced by my right hon. Friend on 10th April, 1951. Therefore, the two situations are not in any sense parallel.

Today, the Committee is considering this proposal to increase Purchase Tax on cars from 50 per cent. to 60 per cent. at the very moment when there has been an announcement about a restriction on imports not only into Australia, but New Zealand as well. From what was said by the Economic Secretary in his, if I may say so, very helpful speech—helpful to this side of the Committee—I think it clear that one of the things that the Government had in mind in proposing this increase in Purchase Tax was the hope that it would drive more into exports, in general, increase exports. We may take it, since so much of the right hon. Gentleman's speech was related to cars, that he was referring to the effect on the export of cars as well as other goods. I presume we are right in assuming that from what he said.

The right hon. Gentleman gave some figures, some estimates of the yield from cars, which we might expect on the basis of Customs and Excise estimates as a result of the increase in tax from 50 per cent. to 60 per cent. It would be helpful if the Chancellor would give the Committee an indication of the basis on which those estimates were made. My hon. Friend the Member for Jarrow (Mr. Fernyhough) tried to get that information from the Economic Secretary, who did not have it readily to hand at the time. But if the Treasury experts made estimates of the yield from the increase in the rate of tax, they must, in the course of doing so, have made some assumptions about the proportions in which the motor car output is to be divided between the home and the export trade in the year that lies ahead—indeed, in the eighteen months that lie ahead.

I hope that the Chancellor will tell us what was estimated. Was it estimated that one result would be a further diversion to exports, or was it assumed that the increase in the Purchase Tax would not be sufficient to counteract the effect of further factors which are reducing our export trade in cars at the present time? We should like to know how much diversion to exports was assumed and how much would be due to the increase in Purchase Tax.

The Economic Secretary referred to the Chairman's statement made by Sir Leonard Lord at the annual meeting of the British Motor Corporation. The right hon. Gentleman said—I think he was quoting Sir Leonard—that the intention was to produce 2,000 more cars per week next year than had been produced this year. I think it important to know—perhaps the Chancellor or the Economic Secretary can tell us—what will happen to the 2,000 additional cars. Is it intended that there shall be an increase in exports, or will they all come on to the home market? If they come on to the home market, it would certainly improve the revenue position for the Chancellor, but it would also add to the congestion on our roads, and perhaps endanger our economic situation in other ways.

I suggest that it is important that the Chancellor give us some views about this proportion between home market and export market. At present, the motor car industry is a very heavy exporter and is earning some valuable foreign exchange, though not as many dollars as it was formally earning. At the same time, it is a very heavy consumer of dollar raw material. A couple of weeks ago we had figures given by the President of the Board of Trade in answer to a Question from my hon. Friend the Member for Rugby (Mr. J. Johnson). If I remember the figures correctly—the Chancellor will put me right if I do not—the President said on that occasion that we were spending about 59 million dollars a year on imported sheet steel. A great proportion of that must be consumed by the motor car industry, though the President did not have the remotest idea of how much. If that be the position, it is relevant to this Amendment to know what proportion of the cars to be produced out of this quantity of sheet steel—or perhaps out of an increased import of sheet steel, we do not know—will be diverted to export as a result of the proposal at present before the Committee, namely, an increase in the Purchase Tax on cars from 50 per cent. to 60 per cent.

We on this side of the Committee are very doubtful whether this proposed increase in the Purchase Tax will do the trick. I am sure that I should be ruled out of order were I to indicate to the Chancellor all the measures open to him by which he might ensure that increase in exports which hon. Members on both sides of the Committee desire to see. I have indicated one or two in the past, particularly in relating the sheet steel allocation to this question, but I do not propose to pursue this matter any further because, as I say, I am sure that I should be out of order were I to do so.

We on this side of the Committee who are not pursuing that kind of argument, are, I am bound to say, interpreting the Amendment extremely narrowly. We are conducting this debate within very narrow limits, Major Anstruther-Gray, as I tried to suggest to your predecessor in the Chair a few moments ago. Before they decide whether it is right to increase the Purchase Tax from 50 per cent. to 60 per cent. it is important that hon. Members should know whether any other measure might be more effective and achieve the same end more simply. I believe that if the Government sent for the motor car manufacturers and said that their continued use of sheet steel depended on still further efforts in the export market, it might do the trick much more successfully than this proposed increase in Purchase Tax.

6.30 p.m.

Of course, it may be that the main purpose of this increase in Purchase Tax is not so much to provide a simple incentive to increase exports as a means of dealing with the inflationary situation. Again, my hon. Friends have had some difficulty in knowing how far they were in or out of order on the question of inflation. As I understand, it will be out of order to discuss the inflationary situation in general and the reasons for it, though that would form a very interesting debate, but it will be in order to discuss how far this Amendment might relieve the inflationary situation. Of course, it is certainly in order, I would suggest with respect, for us to discuss how far the Government's proposals are adding to the inflationary situation by pushing up prices. A number of my hon. Friends have dealt with that point.

Before I leave the subject of cars, I wish to refer to the question of commercial vehicles, because most of my hon. Friends have referred to private cars rather than to commercial vehicles. The Economist last week gave some figures of the increased production of commercial vehicles. I think it said that about 112,000 vehicles were sold on the home market in the first nine months of this year. If we look particularly at the small delivery vans weighing under 15 cwt., those dreadful little vehicles which contribute far more than anything else to the congestion in our big cities, and which are generally responsible for most of the bad driving, and, particularly, most of the bad parking—[HON. MEMBERS: "Oh."] I think that is the experience of most hon. Members in this Committee.