Orders of the Day — Hydrocarbon Oil Duties (Temporary Increase) Bill

Part of the debate – in the House of Commons at 12:00 am on 10th December 1956.

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Photo of Mr Patrick Gordon Walker Mr Patrick Gordon Walker , Smethwick 12:00 am, 10th December 1956

Listening to the Chancellor of the Exchequer, who rather played down this tax, one would think that everyone would be better off, that it would bring benefits to all sorts of people, including even those who drive motor cars, because they will save money, and that the burdens, if he chops them up into sufficiently small bits, will be so small that no one will notice them. The fact is, however, that the right hon. Gentleman is making the greatest single increase in petrol duty ever made in its history. This he is imposing upon a product which is already overtaxed, and he is doing it in the context of one of the severest economic crises that the country has had to face.

The real question which we have to ask, and with which the Chancellor has not dealt, is how far this swingeing tax helps to meet the economic crisis. The Chancellor said that there was some public confusion about the scope and purpose of the tax, but I must say that the confusion has not been removed by the speech which he has just made. He has said certain things, and left other things unsaid, that make it very hard to understand what is the purpose of the tax.

For instance, the Financial Times, which is not normally a paper on our side in politics, asked a very pertinent question which the Chancellor did not mention either on 4th December when he made his first statement, or this afternoon. I want to draw this to his attention and to ask the Financial Secretary to answer it. The Financial Times said: A tax increase on petrol is wrong in itself, but it is absolutely indefensible except on the assumption that there is still an immediate inflationary threat. Is it the view of the Government that there is an immediate inflationary threat? Do the Government feel, for instance, that there is an urgent need to suppress an inflationary danger in the motor car industry? Is there or is there not a great inflationary danger, or has it decreased and declined? We really have to be told the Government estimate of that if we are to make a sound judgment on the economic merits or demerits of this tax.

The Chancellor said nothing about that and the explanations he has chosen to give have shrouded the question in great obscurity and ambiguity. He has given two reasons which are not connected and not even compatible. I do not think that either is right. He said that one of his aims was to raise revenue. For what purpose? Is he raising revenue to make up the shortfall in duty resulting from the drop in the consumption of petrol, or does he want to raise revenue to make good that saving of £100 million which he promised us, in his Budget, would be made in the course of the year?

Lately, the right hon. Gentleman has become very quiet about that £100 million, but he said at the time of the Budget that it was essential to the structure of his Budget. It is not enough for the Financial Secretary to say, as he said the other day, that the Chancellor will have a surplus at the end of the year, because the Chancellor told us that the surplus would be £100 million more, owing to savings in Government expenditure. Is the purpose of the increase in the tax to raise revenue to make good the loss of revenue, or to make up the £100 million? It cannot be both. The increase will yield about £90 million a year.

If the Government's prime intention is to use the duty to check purchasing power, then this is about the worst tax for that purpose. There are many fairer, less inflationary and wider spread taxes which the Chancellor could have used; and if we are considering ways of saving dollars there are matters such as the consumption of tobacco and the extra use of Commonwealth tobacco, and so forth.

The Chancellor gave us a second reason to explain the purpose of the tax. Although I have tried very hard to follow it, I find this part of his argument unintelligible. It is interesting to note that he has wrapped it in metaphor and has never told us what he means. He said on 4th December that oil must be guarded by taxation as well as by rationing. He went on, in a glorious mixed metaphor worthy of his predecessor, to say: … it is wise to buttress this precious liquid …"—[OFFICIAL REPORT, 4th December, 1956; Vol. 561, c. 1061.] Does that mean anything at all, or is it just a rhetorical flourish? Will the Financial Secretary try to translate these metaphors into intelligible terms which we can understand? Will he tell us how this duty will help us to recoup our gold and dollar reserves, one of the things which one would think would come within "guarding and buttressing"?

The Chancellor said that he thought that the country felt that there was common sense in this increased tax. It is, on the contrary, almost impossible to understand how any of this "guarding and buttressing" can be achieved by a petrol tax in the context of petrol rationing. If there were no petrol rationing, I could see an economic case for this, at any rate one which could be argued, but how can it be argued in the context of petrol rationing? Its only possible purpose can be to bring petrol consumption below the level of the ration. If that be the case, let us be honest and reduce the ration and face the thing properly.

It is a truism of all rationing that the total ration allocation is always taken up. If there are unused coupons, because people cannot afford to use them, or for some other reason, a black market develops. If the Chancellor succeeds in getting consumption below the ration allocation, consumption will be made equal to the ration allocation level through the black market. That will work in favour of rich people against ordinary people who now have all the added difficulties of getting to work by overcrowded public transport, and so forth.

Money should not be allowed talk in this way when it is a question of sharing burdens. Part of the reason why there is deep and increasing resentment about the petrol tax is that it makes the sharing of the burdens more unequal than before, burdens which have to be shared as a result of the closing of the Suez Canal. I therefore believe that the tax is both irrelevant to our economic needs and unfair.

Further, it is positively harmful to the economy, especially when it is considered with the price increase. I want to ask the Chancellor one or two questions about the price increase. I want once again to quote the Financial Times, which again asks a very pertinent question which I hope will be answered, because it is very important. The Financial Times said, on 5th December: What is perhaps most surprising of all is that the oil companies, after discussion with the Government, are putting a much heavier proportionate increase on fuel oil prices than on petrol. The apparent implication is that the steel industry is to pay over 30 per cent. more on its fuel costs, so that the Chancellor can take the main benefit from an excessively large price increase in petrol. Why was a disproportionate share of the increased cost put on fuel oil prices, after discussion with the Government and presumably, therefore, on the advice of the Government? Why was this deliberate extra burden put upon industry?

Do the Government anticipate prices will rise further? Is it already possible to say on the facts already known whether the price of petrol is likely to rise again in the near future? It is generally expected that world crude oil prices will rise in the next few weeks. Can the Financial Secretary give an estimate of what the total price of petrol per gallon will be in the New Year?

With these price increases, it is extremely unfortunate that the oil companies should make extravagant and provocative increases in dividends at this particular time. Indeed, on the very day on which these price and tax increases were announced, the Shell Transport and Trading Company put its interim dividend up by 25 per cent. and its shares rose substantially on the Stock Exchange, so that shareholders had capital gains as well as increased dividends.