Clause 1. — (TERMINATION OF SURCHARGE UNDER FINANCE ACT, 1961, s. 9, AND RELATED INCREASES IN DUTIES.)

Part of FINANCE (No. 2) BILL – in the House of Commons at 12:00 am on 1 June 1967.

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Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North 12:00, 1 June 1967

Although the hon. Gentleman is consistent in the campaign which he has always waged against any form of taxation of fuel, very many of his hon. Friends are urging us to change our indirect taxation system in a way which would model it on that prevailing in the E.E.C. countries.

All I am pointing out is that in this respect what we do is already in line with what is being done in the E.E.C. countries. Whereas up to now it has been a general article of taxation faith in this country that we should not tax food or fuel—and there have been rare exceptions to that, of which this is one—this is something which we shall have to review if we are asked to bring our indirect taxation into closer harmony with the systems which apply on the Continent—unless on entry into the E.E.C. we are able to persuade others to our way of thinking.

On the Amendment of the hon. Member for Barkston Ash (Mr. Alison), dealing with the effect of the duty on electricity generation; I begin by confirming his figure. The burden of this duty on the industry amounts to about £13½ million. He is arguing that, whatever be the position in relation to the duty as a whole, this industry ought to be relieved of that burden. Purely from a revenue point of view, our objection is that in what is basically a taxation standstill year, we would not feel able on those grounds to accept an Amendment which would involve a reduction in revenue of £13½ million.

If it were to be argued that some concession should be given, but at the price of recoupment elsewere in taxation, then a very strong case in these circumstances has to be made for singling out this industry for preferential treatment compared with other possible candidates for tax reduction, including, in particular, other users of heavy oil. The elimination of heavy oil duty in this respect would in itself undermine to some extent the protection afforded to the coal industry; but, more important, it would give rise to claims for exemption by other users of heavy oil and oil subject to duty leading ultimately to a complete extinction of that protection.

To give an example. It would be argued that there is really no reason why oil burned to generate electricity to provide domestic heating should go free, when oil burned to provide central heating in the home should continue to be taxed.