The Committee consisted of the following Members: Mr. Richard Crawshaw and Sir Stephen McAdden (Chairmen)
Barnett , Mr. Joel (Chief Secretary to the Treasury)
Bates , Mr. Alf (Bebington and Ellesmere Port)
Boothroyd , Miss Betty (West Bromwich, West)
Cope , Mr. John (Gloucestershire, South)
Davies , Mr. Denzil (Llanelli)
Dunnett , Mr. Jack (Nottingham, East)
Fairgrieve , Mr. Russell (Aberdeenshire, West)
Gilbert , Dr. John (Financial Secretary to the Treasury)
Graham , Mr. Ted (Edmonton)
Hall , Sir John (Wycombe)
Hamling , Mr. William (Woolwich, West)
Harper , Mr. Joseph (Pontefract and Castleford)
Hayman , Mrs. Helene (Welwyn and Hatfield)
Hordern , Mr. Peter (Horsham and Crawley)
Howell , Mr. David (Guildford)
Hoyle , Mr. Douglas (Nelson and Colne)
Hughes , Mr. Mark (Durham)
Jackson , Miss Margaret (Lincoln)
Lamont , Mr. Norman (Kingston-upon-Thames)
Lawson , Mr. Nigel (Blaby)
MacGregor , Mr. John (Norfolk, South)
Newton , Mr. Tony (Braintree)
Page , Mr. Graham (Crosby)
Pardoe , Mr. John (Cornwall, North)
Parkinson , Mr. Cecil (Hertfordshire, South)
Rees , Mr. Peter (Dover and Deal)
Ross , Mr. Wm. (Londonderry)
Ridley , Mr. Nicholas (Cirencester and Tewkesbury)
Sedgemore , Mr. Brian (Luton, West)
Shaw , Mr. Arnold (Ilford, South) Thatcher, Mrs. Margaret (Finchley)
Tomlinson , Mr. John (Meriden)
Ward , Mr. Michael (Peterborough)
Wiggin , Mr. Jerry (Weston-super-Mare)
White , Mr. Frank R. (Bury and Radcliffe)
Mr. R. S. Lankester (Committee Clerk). [column 3] First extract
(Except Clauses 5, 14, 16, 17, 33 and 49)
STANDING COMMITTEE AThursday 23rd January 1975
[Mr. Richard Crawshaw in the Chair]
Motion made, and Question proposed,
That during the proceedings on the Finance Bill (except Clauses 5, 14, 16, 17, 33 and 49) the Committee do meet on Tuesdays, Wednesdays and Thursdays at Four o'clock.—[(Mr. Joel Barnett.]
Mrs. Margaret Thatcher
I think that that will be convenient, but as we are meeting consecutive nights, I hope that we shall be allowed one night off in the middle, leaving at a reasonable time. Three nights all night would be rather much week after week.
The Chief Secretary to the Treasury (Mr. Joel Barnett)
I certainly hope that we shall be able to comply with the right hon. Lady's suggestion. I thought it admirable.
Question put and agreed to.
I should like to make one or two announcements before we commence the Bill proper. The Bill is founded on a Ways and Means Resolution, of which copies are available in the room. I should like to draw attention to the fact that adequate notice of amendments should be given and normally I would not accept manuscript amendments. Notice of Division, we hope, is to be shown on the annunciators. I hope that the difficulties that occurred last time will not occur this time.
As is customary on this Committee, boxes are available at the back of the room for papers, which may be left here overnight for they will be stored in cupboards. During the break for dinner, the room will be locked, so there is no need for hon. Members to put papers away.
That the provisions committed to the Standing Committee be considered in the following order: Clauses 1 to 4, Clauses 6 to 10, Schedules 1 and 2, Clauses 11 to 13, Clause [column 4]15, Schedule 3, Clause 18, Clauses 20 to 27, Schedules 6 and 7, Clauses 28 to 32, Schedule 8, Clause 34, Schedule 9, Clauses 35 to 41, Clause 19, Schedule 5, Schedule 4, Clauses 42 to 46, Schedules 10 and 11, Clauses 47 and 48, Clauses 50 to 53, new Clauses, new Schedules, Schedule 12.—[Mr. Joel Barnett.]
Clause 1 VAT: EIGHT PER CENT. RATE
Question proposed, That the clause stand part of the Bill.
Mr. David Howell
I shall not detain the Committee long on this first clause, but it is appropriate to raise one or two aspects of this clause and perhaps probe the Chief Secretary's thinking about the issues surrounding it.
I think that I am right in saying that the clause replaces the temporary job done by the order under the VAT regulator as contained in Section 9 of the 1972 Finance Act, which came into effect on 29th July following the Chancellor's statement on 22nd July that he was to reduce the rate of VAT from 10 per cent. to 8 per cent. The Committee will recall that at that stage the Chancellor said he was doing that to attack inflation at its source. Some of us who would question whether he was attacking the right source, or whether he was more attacking the measles spots instead of the measles, but that was his intention.
Therefore, it is right to ask the Chief Secretary to comment on the success with which that objective was achieved. It was the view at the time of many informed commentators, both inside and outside the House, that it would have a short-term effect on the cost of living. Looking back on it, I think that most would agree that that is what it did have—a short-term effect. The more cynical and suspicious amongst our colleagues, perhaps on both sides of the House and those outside, would wonder why it was that a short-term effect on the cost of living was so needed at that time.
The questions that arise now are whether there is any question of any further change; whether the Financial Secretary feels that the attack on inflation at its source had the intended success on the economic front, and the many other considerations, if there were any, and I am sure there were. What other changes are now required to [column 5]attack inflation at its source? We must bear in mind that the source has swollen rather vigorously since the high hopes of the Chancellor in July, and we are now dealing with an inflation rate, not of 8.4 per cent., as claimed in the autumn, but of 19.1 per cent. over the last 12 months, with dire predictions of still more price increases in the pipeline.
We want reassurance on this matter in the light of the Chancellor's, some would say, a shade over-optimistic statements in July and his determination to attack inflation at its source. We would be grateful to have the Financial Secretary's thoughts on the subject.
The Financial Secretary to the Treasury (Dr. John Gilbert)
The hon. Gentleman has raised a few general questions, but I shall deal with the clause before I answer them.
The clause consolidates the 8 per cent. standard rate which was introduced on 29th July last year. It establishes the 8 per cent. as the standard rate which can be varied by the use of the regulator so that, at any rate in theory, the new range within which the standard rate can be varied is from 6.4 per cent. on the down side to 9.6 per cent. on the high side.
Without the clause it would still have been open to my right hon. Friend to increase the rate to 12 per cent., that is, 20 per cent. on the old standard rate of 10 per cent. which, without the clause, would not be changed, but my right hon. Friend would not have had any freedom to vary the rate downwards. The entire band by the operation of this clause, taken with the regulator, is to change the old range of 8 per cent. to 12 per cent. downwards to 6.4 per cent. to 9.6 per cent.
The hon. Gentleman asked whether my right hon. Friend's measures were a success. Clearly they were in so far as he was able to say that the inflation rate was temporarily running at a lower level. One recognises that prices have continued to go up, but those prices that have been affected by value added tax are still that much lower than they otherwise would have been by virtue of the fact that the rate is 8 per cent. instead of 10 per cent.
The hon. Gentleman asked whether my right hon. Friend proposed to bring any further measures before the House. [column 6]I can only say what he would expect me to say—that we must all wait for the not-too-distant future when my right hon. Friend will be introducing the traditional spring Budget.
Mr. Nicholas Ridley
I am sure that the Committee is grateful for the Financial Secretary's comments. In addition, is he happy with the 8 per cent. rate of VAT? It seems to me that it has caused more annoyance than joy and it has certainly made things much more difficult for shopkeepers and all those who must administer the tax without, as far as I can see, having a significant impact on the level of prices. If anything, it will add to the rate of inflation, because the money that the Chancellor forwent has had to be printed and included in the £6.3 billion deficit, which will make inflation worse. Does the Financial Secretary at all rue the fact that he has made this decision? Would it not have been more sensible to leave the rate at a straight 10 per cent? If he wanted to make concessions for electoral reasons, there might have been other ways he could have spent the money. But 8 per cent. is a very awkward rate.
Will the Financial Secretary also give us an undertaking that he is not going to introduce variable rates for VAT? The whole House, and certainly the Committee, is grateful that that was not included in the November Budget. I do not know when the next Budget will be—will it be this month, or next? I do not know when we are to expect the next Budget from the present Government, who are permanently budgeting and taking Finance Bills through Committee. Will the Financial Secretary give an assurance that the Government are persuaded that it would have been a great mistake to have introduced variable rates for VAT?
Mr. Norman Lamont
I should like to follow some of the points made by my hon. Friend the Member for Guildford (Mr. Howell). Finance Bill debates are by tradition at least partly, about the balance of demand within the economy. That was one of the main justifications given by the Chancellor when he announced the adjustments.
Some of us are concerned about whether the predictions made by the Chancellor so confidently only a few [column 7]months ago look as if they are likely to be fulfilled to any extent at all. To many of us the economic landscape now looks very different from what it looked at that time. The Financial Secretary actually summed up the effect of the reduction in VAT candidly when he said that at least it allowed the Chancellor to claim that there had been a temporary reduction in the rate of inflation. We remember when the Chancellor made that claim. But he omitted the word “temporary” , now put in realistically by the Financial Secretary.
At the time the reduction was made, a number of us made the point that it was likely to have a temporary effect on inflation, but that over the longer term it was likely to make it more difficult to arrest the rise in the cost of living. What has happened makes those forecasts look an understatement.
I ask the Financial Secretary what impact he thinks those measures are having, or are likely to have, on the level of employment. At the time of which I am speaking the Chancellor made specific references to the effect on the level of employment by putting forward figures in tens of thousands for the end of next year. Those figures, he said, represented the effect that his measures would have on the level of employment.
Many of my colleagues and I are sceptical about that type of fine tuning, but, operating on the premises chosen by the Chancellor, we should like to know whether those assumptions remain. Everything that has happened to the level of employment since then indicates that the Chancellor has yet again made serious miscalculations in his second Budget.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) mentioned difficulties with the 8 per cent. rate. We recognise that that rate produces a somewhat difficult fraction to handle if one is trying to do it without the aid of a ready reckoner, but, for that matter, the 10 per cent. rate produces a difficult fraction to calculate if it is taken on the VAT-inclusive price. I am sure that the hon. Gentleman is aware of that. I have taken up the matter with Customs and Excise and asked that the Department to send out ready reckoners with the notice for changing the rate. [column 8]
I cannot give the hon. Gentleman any assurance, should the rate be changed in the future, whether Customs and Excise could make available to traders a ready reckoner in a more distinguishable form than that incorporated in the notice of the change of tax. The hon. Gentleman mentioned several times what he called variable rates. I take it that he means multi-rates, because the rate is itself variable—it has no regulator attached to it.
I can give the hon. Member no assurance whatsoever as to whether there will be in my right hon. Friend's next Budget or any subsequent Budget an introduction of multi-rates. We are well aware that representations have been made to us in this respect, but no decisions have been taken on that score at this stage.
Mr. Jerry Wiggin
Some of the substantial concern expressed to me by smaller retailers, particularly chemists and village shopkeepers, who stock a wide range of products, arose because the Customs and Excise sent round a circular—the number of which escapes me—briefing them on how to handle multi-rate VAT. While I fully accept that the Financial Secretary can make no promises about the next Budget, I hope that he will bear in mind that multi-rate VAT would cause a substantial extra load to be placed on these people in what is already a complicated and difficult matter.
I certainly take the point. I was well aware of it before the hon. Member raised it, having signed—I have lost count of how many—answers to chemists who have written to me on precisely that subject. We recognise that that branch of the retail trade has quite legitimate concern about the possibilities of a multi-rate VAT, and that concern will be taken into account in any decision that may be reached. But my right hon. Friend said a long time ago that he saw advantages in having a more flexible system than a single rate VAT, but he was not prepared then, and is still not yet prepared, to come to a final decision on the matter.
The hon. Member for Kingston-upon-Thames (Mr. Lamont) tried to tempt me into a whole series of judgments as to what my right hon. Friend was likely to do in his conjunctional judgments in the [column 9]next Budget. They would, of course, be based on conclusions as to the effect of his last Budget and the measures he introduced in July.
Mr. Norman Lamont
If it is said that the reduction in the rates was justified by reference to its effects on the level of demand, it is justifiable to ask the Government how those reductions have worked out in terms of unemployment and the effect on demand. The Opposition are not asking the Financial Secretary to give any indication of or to give his support to any course of action than that which might follow from a knowledge of how those reductions have actually worked out. We should simply like to know what the state of play is now.
I take the point, which is only a modest extension of the hon. Gentleman's original case. I have to ask the hon. Gentleman, as I did his hon. Friend the Member for Guildford (Mr. Howell), to be a little patient. All these matters are being considered by the Chancellor of the Exchequer at this moment and when he brings in his spring Budget, he will review precisely those matters.
Question put and agreed to.
Clause 1 ordered to stand part of the Bill.
VAT: SPECIAL RATE FOR LIGHT HYDROCARBON OIL, ETC.
Mr. Norman Lamont
I beg to move Amendment No. 195, in page 2, line 20, at end add:
“(3) Any person registered as disabled will on satisfying the Commissioners of Customs and Excise be entitled to claim refund of value added tax paid under this section where the tax is paid after the passing of this Act” .
The effect of the amendment would be to enable registered disabled persons to receive a refund of VAT paid on light hydrocarbon oil at the new rate imposed under this subsection. I shall propose the amendment extremely briefly.
The Committee will have had some representations from the disabled on this matter and I hope that it will not be just a question of the Opposition putting forward amendments about it. Knowing the eloquence of the legal correspondent of [column 10]Private Eye, I hope that he, too, will join in these debates. It would be a sorry day, particularly in debates on the disabled, if the subject failed to arouse some support from Government back benchers.
They, as we have, will have had many representations about the effects of the new rate on the disabled. It does not need emphasising or labouring, but the disabled, dependent upon special vehicles or motor cars for getting around, are particularly badly hit. Many of my hon. Friends who represent rural constituencies where public transport is not always of the standard that it might be have found this to be a particular problem, and I am sure that they will make this point with greater emphasis than I could.
It may be said that the way to deal with this matter ought to be to increase the social security benefits that help the disabled. My reply is that we know perfectly well that very many registered disabled do not receive social service benefits. Such are the gaps in our treatment of the disabled that that would not be a satisfactory answer.
It is true that in recent years knowledge of the problems of the disabled and the desire to deal with them have shown a marked increase, and a number of steps have been taken by Governments of both parties. But we still know that for many disabled people there are financial problems, but, because of the gaps in our social system, they are not adequately covered.
The answer is not simply to say that this matter is better left to the social security system rather than introducing a refund system, as proposed in the amendment. I hope that the Financial Secretary will toss away the brief that he has underlined in red and will consider this suggestion carefully.
There will from time to time be amendments that I shall have to advise hon. Members are defective in drafting. That does not mean that I am resting my case as to how I advise my hon. Friends on that. It is merely to be of assistance to hon. Gentlemen if they should wish to come back at a later stage, so that should they try to persuade the House on Report, their amendments will not suffer from drafting defects. [column 11]
I must tell the hon. Member for Kingston-upon-Thames (Mr. Lamont) that his amendment is technically defective in so far as it refers to satisfying the Commissioners of Customs and Excise, but does not say what they have to be satisfied about. It does not specify whether they should be satisfied that a person is on a register of the disabled; nor does it specify that the claimed amount of value added tax has in fact been paid, nor that both requirements must be met. I say that for the enlightenment of the Committee and for the assistance of any hon. Member who wishes to return to the matter.
I am grateful to the hon. Member for putting his point in so calm away. It is often one of our difficulties in discussions about the disabled that because hon. Members' emotions and sympathies are so strongly engaged, they are unable to consider these matters dispassionately. But the hon. Gentleman amendment contains quite serious difficulties other than the technical defects to which I have referred.
The intention of the amendment is to allow persons on the register of disabled to reclaim value added tax on petrol purchased after the date on which the Finance Bill becomes law. The first thing I must point out to the hon. Gentleman is that it makes no reference to the requirement that the petrol itself has been used either by, or for the benefit of, a disabled person. So there is considerable scope for abuse there. It does not even say that it could be available to people who are driving cars specially constructed for the disabled, or persons entitled to be passengers in cars available for the disabled. So there is no restriction on how petrol is used. The amendment merely says that the refund shall be available for purchases of petrol by disabled individuals.
The hon. Gentleman said that if I were to resist this relief—which I am afraid I shall have to advise my hon. Friends to do—I should not rely on saying that the remedy should come in the social security system and that there were a great many gaps in the social security system. Of course he is right. He is aware, as I am aware, of those gaps.
But we have provided already a measure of relief from the increased rate of value added tax on petrol by doubling—from [column 12]£5 to £10—the petrol allowance paid to disabled drivers in receipt of that allowance, and, moreover, by extending that allowance to all drivers of petrol-driven invalid vehicles provided by the various health departments. As hon. Members will know, that £10 allowance is tax free.
Furthermore, one of the long-standing gaps in our provision for the disabled will be filled in the not-too-distant future in that those disabled people whose walking ability is impaired and who do not have Ministry vehicles, will benefit from the new mobility allowance of £4 a week, which will become payable on a phased basis from 1975–76, as has already been announced by my right hon. Friend the Secretary of State for Social Services.
Although I accept the need to try to help to protect the disabled as much as possible from both the increased price of petrol and the effect of increasing the tax on petrol. I must say that the Government have already gone as far as they can in that direction. Therefore, I cannot advise my hon. Friends to accept the hon. Gentleman's amendment.
Mr. Peter Rees
The Financial Secretary has tried to convince the Committee that his heart is in the right place by listing the various things that his administration has done for the disabled. It would be churlish not to recognise that his Government have done a little for the disabled, though not perhaps as much as the previous administration did.
The kernel of the Financial Secretary's argument for resisting this amendment seems, as always, to be administrative difficulties. We realise that there would be certain administrative difficulties in implementing the amendment of my hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont). Speaking for myself, perhaps unburdened by the cares of office, I am never over-impressed by the plea of administrative difficulty. No doubt the Financial Secretary can pick holes in the amendment, but the principle strikes me as a sound principle. The least that the Financial Secretary can do, if his heart is indeed in the right place—as he would have us believe—is to promise to have a further look at this problem from the fiscal point of view to see whether, before Report, he cannot devise a provision that could reassure our legitimate concern for the disabled. [column 13]
It is trite, perhaps, to observe that the political balance is such that the Opposition members of the Committee are more prone to represent country constituencies than are Government members of the Committee. That is not universally true, but it is a general observation that we are entitled to make. I am particularly concerned about the registered disabled in my constituency, who often live 10 or 15 miles from shopping centres such as Dover, Deal or Canterbury.
The increase in VAT, necessary though we recognise it to be as a general impost on the community, none the less will bear heavily on them. I wonder whether the Financial Secretary, who represents an entirely urban constituency, appreciates the dimensions of this problem.
I ask him to raise his eye a little from his administrative brief and allow his natural flow of sympathy to come unchecked across the floor of the Committee and to go back a little on the rather pat answer that he has given. After all, he may have been over-impressed by administrative convenience. I hope that he will have a further look at this matter and come back on Report with a generous and worthwhile provision for a section of the community about whom both sides of the Committee feel keenly.
Mr. Tony Newton
I want briefly to support what my hon. Friends have said. I think that the Financial Secretary has very fairly answered some of the points that were made, and I think he has made it clear that we could not press the amendment as at present drafted. I should certainly be reluctant to vote for it on that basis.
On the other hand, I very much hope that the Financial Secretary will think more about this matter during the next few weeks and will respond if a different amendment is put down on Report. Any Member on either side of the Committee who is at all in touch with the Disablement Income Group, or any of the other bodies representing sections of the disabled, will know that at present the disabled feel very much that they are being neglected by the Government. I do not make this as a party point. They regret—as I do—the fact that they are not getting many things that we should all like them to have. One may argue about whether it is practicable at the moment, but at any rate they are not getting these things. [column 14]
The latest increase in petrol prices has been a very heavy blow indeed to those who greatly rely on their vehicles for getting about. I do not believe that it will by any means be met by the additional allowances and so on that the Financial Secretary has mentioned.
Moreover, if I may briefly make a rather wider comment, which may not be fully acceptable to this side of the Committee, personally I have become increasingly convinced that we should be going more for helping groups such as the elderly and the disabled in kind rather than by indiscriminate general allowances. I know that the Opposition have conventionally argued that we should not go for help with telephones and television licences for old people and so on. My experience with my own constituents, however, has convinced me that there is a very strong case for specific help with key items of this kind on which people depend. I would certainly include in that category petrol for the disabled.
Of course, there are administrative problems about the whole register for the disabled and a great argument is going on about that. But in this case the principle is already accepted in one key respect within the tax system itself. Indeed, it was extended in the Finance Bill that we debated in this very room six months or so ago in relation to the vehicle excise licence for groups of the disabled. Surely it would not be beyond the wit of the Government to devise some system whereby those disabled people who already qualify for tax relief on the vehicle excise licence for their vehicles might simultaneously qualify for special help with their petrol. There must already be a means of identifying a significant group of these people. Why should we not now use it to help with petrol?
Sir John Hall
I appreciate from what the Financial Secretary has said that it is difficult to press the amendment, not only because of its defective wording, but perhaps for some of the other reasons he mentioned. But it might be of some help to the Committee if he could give us some idea of how the Government are thinking about the problem of providing special facilities for those who live in rural areas. This applies not only to the disabled, of course, but to all those who [column 15]live in rural areas where there are no adequate public transport services.
In my own constituency, although it is only 30 to 40 miles from London, there are many areas where the public transport services are either non-existent or extremely inadequate. That bears very hardly upon disabled people who happen to live in those areas—that is one of the reasons why I wish to support the amendment—but it also bears hardly upon all those who, in order to get to their place of work or for some other reason, have to move daily from where they live in that rural area to somewhere else.
I think that the Government already have in mind some way of helping people of this kind. It might be of assistance to the Committee if we could know what they have in mind to help those who are finding that the additional cost of petrol is imposing a severe financial handicap upon them. This applies not only to the disabled, but to everyone living in those areas.
That might be of help to the Committee in drafting an amendment for Report. The Financial Secretary was good enough to say that he gives advice to the Committee to help it in that respect, to make it possible for us to think of suitable amendments for Report. It would take us a step further if we knew how the Government were thinking. That would give us an indication of how to approach this subject on Report.
Mr. Norman Lamont
I must confess to being extremely disappointed by the response to this amendment. There has been not a cheep from the Government back benches. The campaign to improve the conditions of the disabled has for many years been bipartisan under successive Governments and both Opposition and Government back benchers have continually pressed Governments to push forward the frontiers of provision for the disabled. Even if they are not prepared to vote for the amendment, it is surprising that we should not have had a single word said in support of an amendment which tries to deal with a problem which is of considerable concern to many people.
I am disappointed also by the objections the Financial Secretary made. He made fair points about the drafting of the amendment—the word “satisfying” is not entirely clear as to what it refers—but he knows as well as I do that that could be simply amended by either side of the [column 16]Committee. If his objection to the amendment was purely on drafting, that could very simply be amended. We should be prepared to amend it in the way he wants. Would he indicate whether, if such a change were made, he would consider the amendment further? If his answer to that is “no” , I wonder why he made the objection in the first place.
As regards the administration of refund of tax being open to abuse, I wonder whether that possibility is any greater than, say, that the petrol allowance may be open to abuse already. One could write in all sorts of safeguards, restricting it to people who have cars, or vehicles for the disabled, restricting it to a given mileage for a period of time. All these problems are overcome with the petrol allowance as it is. I cannot feel that they are insuperable, as regards a refund of VAT. Therefore, I ask the Financial Secretary to keep an open mind on the issue and think again.
I thought I had made clear—and I apologise to the Committee if I did not—that I was not resting my case on any drafting defects in the amendment. I was merely drawing attention to them to try to be of assistance to the hon. Member for Kingston-upon-Thames (Mr. Lamont) should he wish to return to the matter at a later stage of our proceedings.
It is uncharacteristic of the hon. Gentleman to suggest that we on this side are not as concerned as he is about the problems of the disabled, and I am sure that, on reflection, he will recognise that. I am not seeking to make any political point. I seek merely to redress the balance slightly.
The hon. and learned Member for Dover and Deal (Mr. Rees) and the hon. Member for Wycombe (Sir J. Hall) said that the disabled in their constituencies were additionally disadvantaged by the problems of living in rural constituencies where distances from shops and places of employment were greater, and they asked whether the Government would take that into account in their future dealing with this whole problem. This matter is under consideration.
As I said in reply to an Adjournment debate raised by a colleague of the hon. Member for Cornwall, North (Mr. Pardoe), the hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel), the difficulties involved in introducing differential vehicle excise duty licences would be great—I think I carry the hon. Member for [column 17]Braintree (Mr. Newton) with me here—and such a system would be open to abuse. I remind the hon. Gentleman—this fact has had considerable publicity in the past day or two—that the Government are considering the introduction of a two-tier pricing system for petrol, and the question is being reviewed at the highest level, as was announced by my right hon. Friend the Prime Minister just before Christmas.
I come now to the constructive suggestions made by the hon. Member for Braintree. He and I are possibly closer than he has recognised, because we take the view that the best way to make progress is through improvement in the social services rather than by operating through the fiscal system. When one operates through the social services, one is trying to see that the greatest benefit goes to those who have the greatest financial need. The hon. Gentleman said he thought that help in kind was rather more appropriate than the giving of indiscriminate allowances, if I quote him correctly, and he gave the example of telephones and the sort of direction in which we could move. The provision of telephones, as he knows, is not a matter for me to discuss with the Committee, but I have a lot of sympathy with that view.
I put it to the hon. Gentleman that when we are considering the relative advantages of giving fiscal relief or giving a direct benefit, whether in kind or in cash, of the sort that I was describing to the Committee, there is not that much difference between the direct benefit being in the form of kind, telephones or the like, or in cash, in the form of the new mobility allowance that my right hon. Friend has announced she is introducing. Those could be regarded as a package on one side of the balance, and fiscal relief of the sort contemplated by this amendment is on the other side. Therefore, I hope that the hon. Member and I are much on the same lines here.
Of course we wish that we could do more for the disabled. Every Treasury Minister who says that is accused of being hard-hearted, because he cannot always provide greater reliefs. Of course, it is appropriate that hon. Members should constantly press for greater reliefs for the disabled. That is perfectly understood. But I have to say that again we are not resting on the technical problems here. We think that the best way to make advance is through further progress on social security benefits, and for those reasons I cannot [column 18]advise my hon. Friends to accept the amendment.
I must make quite clear to the John GilbertFinancial Secretary that we are not accusing him of lack of sympathy or understanding, but we think that perhaps he is putting too much stress on the administrative problems and also, perhaps, too much stress on all help coming through social security. There is a good case for helping through the fiscal system. It is a well understood case and has been acted on by Governments over the years. That is why we have special tax allowances in the tax system for it.
I should have thought that some of the problems that one often encounters in asking for relief are not present in this case. First, the need is clear. A disabled person has a much more restricted choice in how to get about than does the ordinary person, and a private car is one of the means which would be most popular if it could be afforded. I know that everyone is grateful for all the extra help which the Government have given, but the need to help them with cars is obvious. They have cars, and, although those of us here understand the need for extra charges on petrol, and it is a shock to our pockets, it is an even greater shock to the more limited resources of the disabled person. So the need is obvious.
The other matter to consider here is that disabled persons often have to work in a lower standard of occupation if the disability has come to them by an accident, either an industrial accident or a private accident during life. Thus, they have increased costs, and are often in a lower standard of occupation. There is no difficulty about showing the need.
Second, there is no difficulty in identifying the group of persons who should benefit. Frequently, there is a difficulty of definition when we raise the problems of the disabled. But there is no difficulty of definition here. These people are registered, they have already been defined, so there is no administrative difficulty on that score.
The third matter raised by the Financial Secretary—I am glad he did not dwell on it because it is an insignificant point really—is that there would be scope for abuse. The amount of abuse would be minimal, and I for one should be prepared to take the risk. It could be dealt with very simply by putting something on the claim form [column 19]that it shall be an offence to claim if it is not for a disabled person. I do not think that there would be many problems.
The Financial Secretary made a fourth point that we have already increased the petrol allowance from £5 to £10, and he referred to the weekly mobility allowance. I am not certain when the petrol allowance was put up from £5 to £10—this month? Yes. It is rather good being here, because we can hear some of the messages which come over rather better than we can when we are in the Chamber. I know that the Financial Secretary will be the first to agree that it is still rather small. If he could choose the method of putting it up a little higher, most of us would be very pleased and would be prepared to take on our shoulders any costs that it might imply.
Would my right hon. Friend think it relevant to the argument that the price of petrol has more than doubled in the past year alone? Therefore, the disabled are still worse off than they were a year ago. I too, have been provided, happily, with a copy of the statement by the Secretary of State for Social Services on the weekly mobility allowance of £4 a week. The statement says specifically that this will replace the existing private car allowance of £100 a year, but that, unlike the private car allowance, it will not depend on the ownership, or ability to drive, a car. Therefore, the matter does not appear to be particularly relevant to the argument in which we are now engaged.
The note goes on to say, too, that it will be taxable. That fact could further reduce it in a number of cases, particularly if personal allowances do not keep up with the rate of inflation.
We are trying, and we shall press the matter to a Division, to give the Financial Secretary more strength to his elbow when he deals with the Denis HealeyChancellor in asking for a little bit more for the disabled. We hope that our vote added to his sympathy will result in a little extra for the disabled when we come back on Report. I urge my hon. Friends to press the amendment to a Division.
I am grateful to the right hon. Lady for the temperate way in which she put the case. Naturally, there is always a need to do more for the disabled. I should not for a moment resist that proposition. [column 20]One of the reasons is that put by the right hon. Lady, that the disabled suffer from increased costs apart from unhappiness—and often embarrassment—in addition to the general difficulties of living, that the rest of us are spared. They suffer, too, from lower incomes. The right hon. Lady is absolutely right. That is why the need is recognised on both sides of the Committee.
I beg leave to differ with the right hon. Lady on one small point. I do not rest my case on it. She said that it was easy to identify the disabled in this case because they are on the register. I am advised that it is often the case that someone suffers from a handicap so great that it is unlikely that he or she would obtain employment. Such persons are then not placed on the register. That is a category, therefore, that would not necessarily benefit from extending a relief of this sort.
Mr. William Hamling
In such cases, might not those people hire private cars and not be covered by the amendment?
I am much obliged to my hon. Friend. That brings me back to the matter I raised earlier, namely, that my right hon. Friend's proposal for the introduction of a mobility allowance for people who might not have cars is a much more imaginative way of dealing with the subject than the relief contemplated in the amendment. The fact that it is taxable means that the greatest benefit will go to those whose incomes are so low that they do not attract tax. I hope that that principle will commend itself to the right hon. Lady. I take her point that the Government, as a priority, should give consideration to trying to raise the petrol allowance. I undertake that I shall convey her representations to my right hon. Friends.
At this stage, I cannot advise my hon. Friends to go further than the Government have already gone, and as they have announced that they will go.
There are a lot of disabled people who have cars and who will have to face the vastly increased petrol charges. They are the people we are trying to help. They are readily identifiable. They could be readily helped. If we do nothing more, they will have to bear a substantially increased cost. I submit that it would be possible to help them, particularly as this may not be the last VAT increase that we face.[column 21-22]
Question put, That the amendment be made:—
The Committee divided; Ayes 16, Noes be made:— Division No.1]
Cope , Mr. John
Fairgrieve , Mr. Russell
Hall , Sir John
Hordern , Mr. Peter
Howell , Mr. David
Lamont , Mr. Norman
MacGregor , Mr. John
Newton , Mr. Tony
Page , Mr. R. Graham
Pardoe , Mr. John
Parkinson , Mr. Cecil
Rees , Mr. Peter
Ross , Mr. Wm.
Ridley , Mr. Nicholas
Thatcher, Mrs. Margaret
Wiggin , Mr. Jerry
Barnett , Mr. Joel
Bates , Mr. Alf
Boothroyd , Miss Betty
Davies , Mr. Denzil
Dunnett , Mr. Jack
Gilbert , Dr. John
Hamling , Mr. William
Harper , Mr. Joseph
Hayman , Mrs. Helene
Hoyle , Mr. Douglas
Hughes , Mr. Mark
Jackson , Miss Margaret
Sedgemore , Mr. Brian
Shaw , Mr. Arnold
Tomlinson , Mr. John
Ward , Mr. Michael
White , Mr. Frank R. [column 30] Second extract
I beg to move Amendment No. 239, in page 2, line 20, at end add:
“(c) shall apply to the first five gallons purchased in each week by the owner of a registered vehicle” .
This is, of course, about the two-tier price of petrol. When I tabled the amendment I had no idea that Ministers were about to launch a trial by media of their ideas, and I am well aware that it was the mere sight of this amendment on the Paper that sparked off the whole controversy and debate in the national Press.
What I want to get out of the Financial Secretary—he has already said that he cannot say much, and I understand his difficulties—is this. The suggestion that has been launched in the Press, presumably emanates from somewhere within the Government, is that every car owner shall be able to buy up to, say, eight gallons a month at a price of, say, 50p a gallon, and then pay a much higher price of around £1.20 for every gallon above that amount. My amendment specifically states five gallons a week. I should not go to the stake for that figure, but the principle is the same as that in the Government's kite which has been flown this week.
The intention of the scheme is clear, to try to take some of the pain out of cutting down sharply on our consumption of petrol. Most of us agree to some extent—I more than the Chancellor I think—that this country cannot continue importing our present huge quantities of oil at the present price. We have no way of paying for it other than by borrowing from other countries, which we are doing to a monstrous extent, at obscene rates of interest, and it must stop somewhere. I do not know whether it will stop next week, but it must stop.
Mr. John Tomlinson
Provided it stops for North Cornwall.
This is not specifically about Cornwall. It is about the country as a whole. We must cut down on our oil consumption, and so far we have not been very successful. Large savings could undoubtedly be made in petrol consumption. We are all convinced of that. There have been various reports, one recently by the [column 31]NEDC. I believe we could cut down considerably on our consumption of petrol, and although petrol represents only 15 per cent. of our total consumption of oil, that would nevertheless be worth doing. Every little helps.
Petrol consumption is, therefore, one part of the problem, and it ought to be quite easy to do something about it. Yet in spite of the price increases we have experienced since October 1973—we heard in a previous debate just how much petrol prices have increased since then—petrol consumption in the past year has fallen by only 4 per cent.
Mr. Peter Hordern
It is 3 per cent.
Give or take 1 per cent.—we shall not quarrel about that. It depends what month one takes it to. It is too early to say whether the price increase and the extra VAT imposed in November and December which substantially jacked up the price has had much effect. I do not suppose it will have shown in the figures. But the signs are that rationing by price is not a good way of cutting petrol consumption. That is another way of saying that it is not a very elastic supply and demand situation that we face. It also has a severe effect on those least able to afford it.
I have always believed that one way to solve the problem that these oil and petrol prices cause, without distortions in the economy, is to jack up the price to the full market price and make people pay for it; otherwise, we get the most appalling distortions throughout the economy. I remind the Financial Secretary that, just after the October 1973 increase, the Prime Minister, then in opposition, told the country, pressing it very hard on the Conservative Government, that it was necessary to reduce the tax on petrol by exactly the same amount as the Arabs were increasing their basic oil prices to us. We have not heard much of that since the Labour Party came to power. It is a good thing that we have not heard much of it as it would not have been very helpful.
The two-tier price scheme is an attempt to find a way out of our present difficulties and to make the situation less painful. Of course, the motoring organisations—the AA, of which I am a member, and the RAC, of which I am not—[column 32]have hit the roof. But then, to adapt what Mandy Rice-Davies once said, “They would, would not they?” That is what they are there for, and we do not have to pay very much attention to them. [An hon. Member: “Who was that?” ] I shall not tell younger Members who have led a more sheltered life who Mandy Rice-Davies was; but we all know what she said and what she did. [An hon. Member: “Did she have a two-tier rate?” ]
One of the main criticisms of the two-tier scheme is that it would cause a black market in petrol coupons for the cheaper petrol. But there is a perfectly simple way out of that. We shall have not a black market but a white market. We can simply allow people to market their cheap coupons freely. That is by far the best way of going about it. Then at least we can get rid of that part of bureaucracy. Anyone who did not need his monthly allocation would be perfectly free to sell them to someone else. [Hon. Members: “Oh” .] He would sell them at somewhere above the price, if we are talking about a cheap allocation at 50p. The trouble is that Members on the Government side always want to encompass themselves round with unnecessary bureaucracy. They want to create a black market. It gives them marvellous romantic overtones about the war, when we all had ration books, and that lovely feeling that it was all tough and rough and we knew who the enemy was, and so on.
I do not want to go back to that kind of bureaucracy again, and I am simply telling the Government that, if they are to accept my amendment—if the Financial Secretary will not accept it tonight, the Government will accept it tomorrow, as they always do—this is really the best way to solve their problems. I am giving them a way out of a difficulty which the motoring organisations have raised.
I fully understand that there will be many difficulties for petrol retailers. If they have to pay for petrol at the high price and then claim back the discount when they have received the coupons from their customers, they will run into an appalling cash shortage problem and would probably all quickly go broke. There would also be a difficulty on the garage forecourts. There would have to be two sets of pumps for every grade, one at the high price and one at the low price, and at the moment no petrol pumps in [column 33]this country, I understand, can actually cope with a price of more than £1 a gallon. But, no doubt, we shall get used to that. It will have to happen sooner or later even if my scheme is refused tonight.
I do not deny—and I am sure that the Government do not—that the scheme has snags. There is no fool-proof way of cutting our oil consumption. But the important matter is that all hon. Members, of whatever political persuasion, must realise that we have to cut petrol consumption. Whether the country realises it or not, we have a duty to realise it. We have to do it, and we have to do it in such a way as to ease the pain for our constituents as best we may. Certainly, the Government will have to change their views on what is an allocation of cheap petrol. Eight gallons will not get one very far in Cornwall each month. They will certainly have to accommodate themselves on that.
I believe that the scheme deserves a try. Unless anyone has a better suggestion for how we could substantially cut back the use of petrol, which we have so far significantly failed to do, I commend this scheme to the Committee.
I beg to differ with the hon. Member for Cornwall, North (Mr. Pardoe) on practically every argument that he has advanced.
A maverick of the worst sort.
He first told us that rationing of petrol by the price had not proved very effective, but only 10 minutes earlier he told us that his constituents had been deterred from going to work by the high price of petrol. It is clear that Cornishmen have been severely restricted by the price of petrol in their enthusiasm for burning the stuff on the way to and from work. Would the hon. Gentleman like to make up his mind which amendment has his heart behind it before we decide the question?
I could suggest an easier way of doing what the hon. Gentleman seeks. He complained about excessive bureaucracy. Surely, the issue of ration books and five coupons per week to all of us, and extra double pumps at every petrol station, with, presumably, civil servants supervising that it is done properly, would be a somewhat bureaucratic adventure to embark upon. [column 34]
One of my constituents wrote to me pointing out that a rebate of X gallons at a lower price for each car is exactly the same as an alteration in the motor tax licence. If the motor tax licence were abolished, each car owner would be receiving a rebate of £25. It is as simple as that. The hon. Gentleman's scheme would cost approximately £125 per car per year, if 5 gallons are given cheap at a differential of 50p from the high price. What the hon. Gentleman suggests, therefore, is giving every motorist a bonus of £125. The way to do that is to put up the price of petrol and then pay £100 to each car owner instead of charging him £25. If that is not an easier way of achieving what the hon. Gentleman seeks, I should like to know what is.
Mr. William Hamling
Put them all on social security.
I do not quite see the relevance of that. I differ from the hon. Gentleman's fundamental premise that we need to do something to discourage the use of petrol. It seems to be an extraordinary proposition. If a barrel of crude oil is imported, 14 per cent. is converted into petrol spirit and roughly 86 per cent. is fuel oils and other derivatives of the crude. For some extraordinary reason, the Government are setting out on a policy of taxing heavily petroleum spirit and subsidising heavily the crude. The electricity subsidies, for instance, are now running at over £1,000 million a year. Most of that goes on oil out of imported crude. Why should the private motorist subsidise the Central Electricity Generating Board? It may or may not be a good policy in terms of domestic arrangements, but it has absolutely no effect on the import of crude oil.
Perhaps the hon. Member for Cornwall. North, did not see that point. I was a member of the Select Committee on Estimates Sub-Committee which produced a report last year pointing out with crystal clarity and, I think, convincing proof that the trade gap is a direct derivative of the Government's domestic deficit. If we were to save £100 million on petrol imports by such crude methods as those put before the Committee, all we should have done would have been to say to people who possess £100 million, “You are not allowed to spend that money on petrol” , in which case they would spend it on [column 35]something else, the import of caviar or other fancy goods from another part of the world. By containing one import, purchasing power is released for a separate and different import.
What on earth can be the reason for this endless talk about increasing the price of petrol? It is irrelevant in terms of the import of crude oil, which is the figure that troubles the hon. Gentleman. I understand his concern about the import of crude oil, which is only just bigger than the import of crude timber. Yet the Government are gaily proposing in later parts of the Bill utterly to destroy the home timber industry, thereby causing even greater imports of timber. Our whole attitude in the matter is crazy.
There is no point in the argument that timber or oil imports are damaging and must be stopped. If we do not want a trade gap, we must not run a domestic deficit. The Government must raise taxes or reduce expenditure to abolish that deficit. That is all there is to it. It is horribly simple, and horribly painful.
The kind of device which the hon. Gentleman is suggesting is just fiddling about, and it has one unfortunate consequence. The motor car has become essential for many people. It has become essential in country districts. My constituents have equally big distances to travel as his have. I have just as rural a constituency as he has but I do not make a special plea for rural dwellers. The car is essential for the disabled, for doctors, for Members of Parliament doing their “surgeries” in country constituencies, for a large number of people. On top of that, driving is a pleasure for many people. They like driving their cars into town to shop, and I see no reason why they should not.
It is time that this Committee and Parliament stop treating the private motorist as a sort of social pariah, an anti-social person who must be clobbered whatever the excuse we devise for clobbering him, being it the rise in oil prices, the demonstrably empty nature of our public transport services, the cost of building roads, road accident figures, or whatever it may be. Let us for once realise that the people of this country like using cars, they find them highly convenient for their business and pleasure, and the sooner the House stops [column 36]singling them out for thrashing after thrashing and allows them to use their cars, the sooner the gulf between Government and governed will be reduced.
I utterly reject any part of this two-tier nonsense, which seems to me to be the worst form of bureaucratic bumbledom. I dislike intensely this clause as a whole. I cannot see why, of all people in the country, the private motorist should be the one singled out to be taxed higher in this way. If we wish to deal with our trade gap, we must tax all citizens and all commodities higher, not just the private motorist. We cannot right our economic difficulties by taking it out on those who have the need or the pleasure of using their cars. So much nonsense has been talked about this subject that it might be better if this clause were not in the Bill.
One last word. For the rural dweller trying to get to work, or the rural housewife trying to get to the shop or to the doctor in her car, it must be very annoying to see business cars with chauffeurs racing past on the road, knowing that this clause does not apply to them. It seems quite wrong, if we are to hit motoring, to exempt business motoring. Many people are much less well off than business men, and I hate the discrimination involved in saying that, because one is a VAT payer, one does not have to pay the price of petrol which non-VAT payers have to pay.
I hope that hon. Members will realise that this clause is not good. I do not wish to deny the Government the revenue that it will bring in, but I should be happy to see it taken out of the Bill and an increase in VAT as a whole replace the revenue lost thereby, or an increase in petrol excise duty, whichever is preferred. Those alternatives would be better than this clause.
I repeat that to try and blame the private motorist for the trade gap or any of the macro-economic problems which Government after Government have brought upon themselves by profligate overspending and rotten financial management is again to seek scapegoats, and is not worthy of this country's politicians.
Mr. Nigel Lawson
May I say how agreeable it is, Mr. Crawshaw, to be back in this cosy room discussing a Finance Bill in Committee under your Chairmanship. I am glad also to have this opportunity to speak on the first occasion—and [column 37]probably the last—on which, I suspect, I take a view similar to that of the Chief Secretary.
I, too, like my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), am totally unconvinced by the arguments put by the hon. Member for Cornwall, North (Mr. Pardoe) in support of his amendment.
Then it must be right.
There is, curiously enough, one argument and one only, in favour of a measure of this kind, and that is the argument which he omitted to make. I do not believe that it is convincing in this case, but the sort of view of the economy, or, rather the political economy, expressed by my hon. Friend the Member for Cirencester and Tewkesbury, is a trifle mechanistic. There is, and should be, a psychological dimension to the management of the economy, and the only conceivable argument in favour of a measure such as this is that the motor car is a symbol, it has become a symbol, and it is, as the late Lord Crowther said in the preface to his report, the monster we love. Because it means so much, an attack on private motoring might bring home to people, in a way it certainly has not been brought home to them yet, the real gravity of the economic situation in which this country finds itself. Some psychological move of this type is needed, but I do not believe that the bureaucratic monstrosity proposed by the hon. Member for Cornwall, North, is the psychological answer we need. It is to be hoped, too, that we shall have the pleasure of seeing the Government today shoot down the kite flown by them only a few days ago.
It is right, first, to acknowledge that, in so far as we have an import problem, that is an import problem, and the distinction between the oil deficit and the non-oil deficit is nonsensical. If we want to reduce our deficit, let us look to reducing it. Because it has come about through an increase in the price of oil, it does not follow that oil imports must be cut back. That approach is archaic mercantilism of the worst sort. It makes no sense.
The refining process refines the oil for various different functions, from the heaviest bitumen through fuel oil to petrol and aviation spirit, and petrol can be only a certain proportion. The refineries [column 38]cannot change that very much, though, perhaps, by not using the catalytic crackers they may reduce slightly the proportion that is petrol and increase the amount that is fuel oil, but not very much. It is absurd to look at only one of the fractions that the refineries produce from a barrel of crude.
Let us look at the consequences of this proposed device. Would the coupons for the cheaper rate petrol be non-transferable? I do not believe that is possible. If they were—the hon. Member for Cornwall, North, is right—there would either be a white market or black market, and somehow they would be transferable. But let us suppose that they were non-transferable. Far from reducing the market for petrol, they would increase it because everyone who had his allocation of coupons would feel that he must use them to the full. When the Labour Government many years ago introduced a £50 travel allowance, many people who never thought of going abroad for their holidays because it was too expensive suddenly discovered that they could go abroad for £50, and more was taken up. If they were strictly non-transferable, and if the North Cornwall police force were drafted to ensure that no one transferred any of these coupons, that would be the result—if anything, a greater consumption of petrol.
But I think that the hon. Member for Cornwall, North, is right in saying that the coupons would be transferred. What does that mean? It means, that on the figures quoted of £1.20 for the non-coupon price and 50p per gallon for the coupon price, that the coupons would be worth slightly less than 70p per gallon. They would not be worth the full 70p because of the complications of using them. But let us say that they would be worth 65p per gallon. At 10 gallons a month, it would be handing out to every motorist £6.50—roughly, £1.50 a week tax-free. From those who used petrol like this, overall the Government would get much more from the increased taxation. But many people who did not use their cars very much would certainly take the £1.50 a week bonus.
Yet many people, poorer people, who do not have cars—pensioners, in particular, and many elderly people—would not get £1.50 a week. It would be the biggest [column 39]nonsense. There would be no justice in that whatsoever.
Then, too, there would be a great boost, which, I am sure, cannot be intended, for the bottom end of the second-hand car market. A lot of people would get clapped-out vehicles from the scrapyard for next to nothing just to qualify for the £1.50 a week bonus that the Government were handing out.
Is my hon. Friend aware that it really would be worth it—on the hon. Gentleman's amendment—which is for five gallons a week at a 50p discount? That is £125 a year subsidy offered on an extra car.
That is right—£125 year subsidy a year on a car. One can get a clapped-out car for considerably less than that. Who would be the real beneficiaries? They would be the Sunday motorists, because they do just about that amount of motoring. They would be subsidised—totally non-essential cheap motoring. Whereas other people who, because of the great distances they have to travel, perhaps in North Cornwall if they are so unfortunate as to be there rather than in more desirable parts of the country such as Cirencester and Tewkesbury or Blaby, would be paying more. I have constituents who are obliged to go very long distances to work, and they complain very much about this impost. They would have to pay more in order to give a subsidy to the Sunday motorist who does not really need to travel by car at all. Not that I have anything against the Sunday motorist, but that is the fact of the matter. The hon. Member for Cornwall, North, should withdraw his amendment. It has not been thought out.
Perhaps I should declare an interest—although it has nothing particularly to do with the amendment—as a director of a United Kingdom subsidiary of an international oil company.
I was very interested in the speech of the hon. Member for Cornwall, North (Mr. Pardoe). I cannot say that I agree with the amendment for the reasons so ably given by my hon. Friends the Members for Cirencester and Tewkesbury (Mr. Ridley) and for Blaby (Mr. Lawson). In his amendment, the hon. Gentleman has drawn attention to what the [column 40]Government's proposals are supposed to be. There is a fog at the moment over the Government's intentions. They have pronounced some intentions about conserving fuel, but, so far as one can see, there is kite-flying at present about a possible two-tier structure for petrol. I understand from a remark made by the Financial Secretary on a previous amendment that that is being considered at the highest level. I assume that, sooner or later, it will percolate to the Cabinet. We shall have the Ayes on the right and the Noes on the left, and we shall eventually get some sort of division.
On a point of order, Mr. Crawshaw. I want not to inhibit the hon. Gentleman's remarks, but only to inquire whether you contemplated a debate on the Question, That the clause stand part of the Bill, and whether we are sticking strictly to the amendments. The hon. Gentleman's remarks seem more applicable to a “stand part” debate. I do not want to inhibit your decision, Mr. Crawshaw, nor do I want to prevent a “stand part” debate, because some of us might want to intervene on the wider questions.
I take the hon. Member's point. It will depend on how extensive this debate is.
I do not want to repeat all the arguments so ably made by my hon. Friends, but if it is the Government's intention to introduce a two-tier price system, whether along the lines of the amendment moved by the hon. Member for Cornwall, North, or not, the consequences will be very severe and, possibly, unexpected to the Government. A great many people put their cars in their garage, or put them out of the way, for the entire winter. The trade in these supplementary coupons—or whatever they will be—will be very large. People will certainly use their cars, when, possibly, they may not wish to use them, for marginal purposes. They will make sure that they use their allotment for the week, or they will pass it on to the market and somebody else will. It is certain to give a general increase to motorists who do not require it, whether or not they live in a rural area. [column 41]
As for the practical problems of having more expensive petrol at the top end—I believe a figure of £1.20 has been mentioned—there are technical reasons why this will be very difficult, as the oil companies have stated. One reason is that there is no figure of £1 on any petrol pump dials. This will cause administrative problems—which the Financial Secretary is always so keen to tell us about—for the oil companies as well.
Next, there is the problem of who is to pay the difference between the 50p a gallon and £1.20 a gallon while the arrangement is being sorted out. I assume, again, it will be the oil companies that will attend to it.
Some Minister from the Department of Energy ought to be attending this debate to help us in our considerations I do not know how we can consider the matter properly without the assistance of the Department of Energy, which can help us and many people outside the confines of the Committee on the Government's proposals for a two-tier price system and on the whole of their conservation programme.
The hon. Member for Cornwall, North, said earlier that he thought the effects of VAT on the consumption of petrol had not been great so far. I believe that is right. The consumption of petrol declined by only 3 per cent. during 1974.
Another matter of some importance is that the consumption of fuel oil has not declined as much as was hoped by the Government, and not as much as it has declined in other countries. Happily, the weather has been temperate and consumption has not gone up as fast as it normally does at this time of the year. With any luck, the January figures should be rather better, which would be fortunate for the Government.
But the point about their conservation programme is this. It is wrong to isolate one part of the oil market, as the Government appear to be doing in concentrating on petrol alone. Petrol accounts for only 25 per cent. of our oil consumption.
With respect to my hon. Friend, the figures show that petrol accounts for 14 per cent. of consumption of energy but for 25 per cent. of the consumption of oil.
I put a Question the other [column 42]day to which the answer was that between 85 per cent. and 90 per cent. of a barrel of crude oil cannot be made into petrol. Petrol is between 10 per cent. and 15 per cent.
I am sure that my hon. Friend is right, and I am happy to hear that he is, for that supports my argument even more. The Government must pay more attention to the consumption of fuel oil and the heavier oils and not try to isolate one aspect of it, as they are with petrol.
The CEGB, which uses fuel oil, gives considerable discounts to large consumers, whereas the emphasis should be the other way. If we are really serious about the need for conserving energy, there ought to be a higher price, not a lower, for extra consumption of energy.
I was fortunate to have a debate on the Adjournment on conservation last month, and I shall not repeat the arguments I then used. The truth is that we do not as a country take nearly so seriously as other countries do the importance of energy conservation. The French, for example, have carefully limited the amount of oil they are prepared to import in 1975. We are not, so far as I can see, making any such arrangements.
Furthermore, the waste of energy through lack of good thermal insulation is considerable. I am glad the Government have a clause to deal partially with this problem, but, again, it deals only partially with it. There is no suggestion that there should be any assistance for thermal insulation of offices, other than for industry. There cannot be any artificial distinction between the two.
This is an important amendment and an important clause. The Government have not addressed themselves seriously to this most urgent of problems. It is urgent for another reason. We lay great stress on the impact of the OPEC countries' oil price increases and the effect that has had upon us. But, as my hon. Friend the Member for Cirencester and Tewkesbury said, all that it has done has been to change our pattern of import consumption.
The reality of it is that the price of oil from the OPEC countries is still extraordinarily low. It represents about 35p a gallon. That is all that is paid in the Middle East.
Successive Governments have for long [column 43]depended upon the revenue from the duty on oil. Consequently, it is no use saying that the action of the OPEC countries has itself brought inconvenience to us. We have for many years lived on a revenue which we have ourselves raised from the import of this commodity. It may be necessary to make other arrangements, of course. That is a problem for the Government to solve.
I do not think we can assume that there will not be further problems from the OPEC countries in raising their prices. Nor, I regret to say, can I share the optimism that seems to be so general about the outcome of oil from the North Sea or the price it will be worked at. That, again, is a matter in which the Government are closely engaged, with their petroleum revenue tax and their desire for 51 per cent. participation, which has slowed down considerably the desire of the present American oil producers to carry on their work in the North Sea.
For these reasons, the Government must go a great deal further than this clause, or the amendment suggested by the hon. Member for Cornwall, North, in considering the effect of extra duty or taxes on petrol. We need to go far wider than that. It is a considerable challenge, and I do not regard the Government yet as meeting it.
On a point of order, Mr. Crawshaw. Further to the point of order raised by the hon. Member for Woolwich, West (Mr. Hamling), one or two of us on this side had points to make on this which could be made either on the amendment or on “Clause stand part” . In the interests of accelerating the Government's business to the maximum possible extent, we had it in mind to make them on the amendment rather than in a separate “Clause stand part” debate. But, if there is to be a separate debate, it might be better for us to wait for that. May I have your guidance on that, Mr. Crawshaw?
I have not made up my mind about it at the moment. As it stands at present, if we are to take a vote on this Amendment soon, I think there may be a discussion on the clause, but I hope that it will not be prolonged as there has been a fair discussion, and I shall want to call those who have not yet intervened.[column 44]
Further to that point of order, Mr. Crawshaw. As, through your generosity, you have allowed the debate to range fairly wide on this amendment, it might be for the convenience of the Committee if hon. Members made their speeches on the amendment. Surely, there would be no problem about voting on the clause rather than on the amendment, if that would be acceptable to you, Mr. Crawshaw.
If it is acceptable to the Committee. I hope that at “Clause stand part” nobody else would then want to continue the debate. If that is acceptable to the Committee, it would be better to have the debate now.
I thought, to help the Committee, that if the hon. Member for Woolwich, West intended to initiate a debate on the clause——
Mr. Joel Barnett
He does not.
In that case, speaking for myself, I can guarantee that I shall not. I just want the opportunity to say a word or two on the amendment, mainly to support what has been said by my hon. Friends the Members for Blaby (Mr. Lawson) and for Horsham and Crawley (Mr. Hordern), and to add to their objections to the idea of a two-tier rate of petrol tax.
It seems to me that, whatever possible justification might be argued for it in the terms used by the hon. Member for Cornwall, North, it would add to all the problems that most of us are worried about in the discrimination against the people and areas with the most need to use petrol. If we provide cheap petrol, to whatever amount, whether five gallons a week or eight gallons a month, it will inevitably give benefit to people living in tightly-knit areas with relatively little need of private transport in comparison with those who live in areas where they have to travel further to work. In many ways it will be a socially and geographically regressive change in taxation, of a kind that I, at least, could not support, whichever side of the Committee advocated it. It would certainly add to all the problems of rural areas about which many of us are concerned.
If the Government want to go along that route, I am sure that in any event they [column 45]would find it better to follow the advice of my hon. Friend the Member for Cirencester and Tewkesbury and simply scrap the vehicle excise licence. The scrapping of that duty appears to me to have a great deal to be said for it in any event. The tax could then be put on petrol, if that is the way that the Government want to go. It would be simpler than the proposal the Government are said to be making, and which is advocated by the hon. Member for Cornwall, North.
An allowance on anything like the scale talked about, either in the amendment or in such leaks as we have had of the Government's proposals, would do little to help the vast majority of people with even their basic travelling costs. I did some quick sums just now on the problems of my children, for example, who live with me in a rural area. They went 3½ miles to school last term. That does not sound much, but it works out at 70 miles per week, which means at least two gallons of petrol in almost any car, and would immediately swallow up a large part of the kind of allowance we are talking about. That leaves nothing for travel to work, or my wife going shopping. And I have a small problem by comparison with many living in rural areas.
It would be a mistake to think that that kind of allowance would even touch the problems concerning us on this side of the Committee. As on the previous debate about the disabled, this is a subject on which I have changed some of my own long-standing views about the right way to use the tax system. I have been a long-standing opponent—no doubt Treasury Ministers still are—of the idea of a tax allowance for travel to work. But I think that we are reaching the point at which—I do not suggest that Ministers will do it in the Bill—the idea of looking again seriously at the question of tax allowances for travel-to-work expenses ought to be given closer consideration than has been done for some time.
I accept the argument touched on by the Financial Secretary about people choosing to live in rural areas. If everybody were suspended without homes and making a choice for the first time, that would be a fair argument. They could choose to live in a rural area and travel a long way to work, incurring the extra expenses. But we are not in that situation. We are living in a situation in which many people already live in rural areas and in which, [column 46]over the past year, there has been a drastic relative shift in the balance of costs between urban and rural life.
The rating revaluation, the surge in transport costs, and over a longer period the rise in house prices in rural areas, have transformed what would have been the balance between rural and urban living of a decade ago, and even of two years ago. Unless the Government are seriously arguing that people should now move back into the cities, with all the problems that that would involve in extra pressure on the cities and depopulation of rural areas, the argument about the balance and the choice made by people does not hold water.
I do not pretend that it would be simple to introduce a tax allowance for travel to work, but I submit that it might operate on much the same basis, for example, as our car mileage allowances operate. A scheme might be operated on the basis of declaring to the Inland Revenue where one lived and worked. I do not suggest that the method would be simple, but it could be done. There could be a cut-off point to avoid payments of amounts of merely a few pounds a year. But I believe that the issue is now far more in need of serious consideration than I should have imagined a year or two ago. I hope that the Financial Secretary will feel able to say a word on the subject.
I emphasise that I include in my remarks public transport travelling costs as well. I do not suggest that consideration should be confined to the private motorist. The surge in commuter rail fares is causing at least as much hardship to people in my constituency, some distance from London and with a large commuting population, as does the increase in petrol prices. Many people are being hit by both increases because they use their cars to drive about 15 miles to the station every day in order to commute to Liverpool Street. The 30 miles a day return journey represents a lot of money, plus the increase in rail fares, and there will be real hardship caused in such areas unless serious consideration is given to what public policy on this matter should be.
In some respects the constituents of my hon. Friend the Member for Braintree (Mr. Newton) are lucky to have any railways left. The rural areas do not—not any that are of any use.
My principal point might have come more happily on the clause as a whole, [column 47]but in view of your suggestion, Mr. Crawshaw, perhaps I may introduce it here.
I dislike the amendment, and administratively I prefer, if this is what is to be done, the vehicle excise subsidy suggested by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). I dislike the amendment all the more because it introduces in some respects three rates of VAT, because it introduces two rates on petrol in addition to the standard rate.
The clause introduces a new principle into VAT—the principle of multiple positive rates of VAT. I say multiple positive rates because there are, in a sense, already two at the moment—the standard rate and zero rate. I dislike multiple positive rates of VAT, and I hope we shall not see any further extension of them.
I appreciate that for petrol it is easier, and more convenient, to introduce a separate rate of VAT than it is in the case of most commodities. Petrol is more distinguishable in that it is already separate in many respects. It is separated for excise duty, and so on, and therefore it is easier to draw a line between petrol and other substances for the purpose of a special rate of VAT. It is easier for petrol retailers, even if they sell other things, than multiple rates would be if introduced into almost any other commodities.
My hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) briefly mentioned the views of the chemists against multiple rates, and they are by no means alone. He mentioned also the booklet that was sent round earlier this year by the Government on the possibility of additional rates of VAT, the absolutely horrifying part of which is page 9, which illustrates the sort of invoice that would be necessary if we had multiple rates of VAT. The example shows a whole page of figures. Another four cash columns are necessary on the end of the invoice in order to account for VAT. There would be special arrangements for small invoices, and so on, but nevertheless the dummy tax invoice clearly illustrates the complexities that would be involved in introducing multiple rates. There would be grave difficulties in drawing lines between different commodities.
Some of us remember, not from being in the House but from reading newspapers, the late Sir Gerald Nabarro making great [column 48]play of the differences between the various classes of goods subject to purchase tax. All those difficulties would be reintroduced, and we should need another Gerald Nabarro in order to help us through the difficulties. I am not volunteering, because I hope that such a Member will not be required. Nevertheless, all the difficulties will be with us if ever we get multiple positive rates of VAT. I hope that we do not.
Mr. John MacGregor
I, too, Mr. Crawshaw, wish to speak rather more widely, and, in view of your ruling, I prefer to speak now.
I support the clause and disagree with my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). While I recognise, as my hon. Friend did, that putting this load on the private motorist makes comparatively small difference to the savings on oil imports in our present situation, I believe that any difference is welcome. I support the clause, too, for the reasons given by my hon. Friend the Member for Blaby (Mr. Lawson), the psychological reasons. I think that this measure has brought home to people more than most others the critical situation that we are in.
I suggest that some of my hon. Friends may have been slightly unfair to the hon. Member for Cornwall, North (Mr. Pardoe).
I am used to it.
I am sure the hon. Gentleman is used to it. He recognised the defects of both the proposals put forward. Any suggestion made so far, both in the debate here and elsewhere, has considerable defects. On this question, it is so much easier to draw attention to the difficulties than to find an alternative solution.
I believe that hon. Members, with their manifold other duties, may perhaps not be best placed to come up with the constructive suggestion for which the Financial Secretary asked. But we can point out the hardship caused in certain areas by the general clause, and press the Government to put their own civil servants hard at work to come up with solutions that we find difficult to devise.
I want to add a few words on the difficulties created for scattered areas. I prefer the description used by my hon. Friend the Member for Gloucestershire, South (Mr. Cope) namely, “scattered” rather [column 49]than “rural” areas, because many of these areas could not be properly described as rural. The Financial Secretary fairly pointed out that people in urban areas suffer just as much from some of the disadvantages of the higher fuel prices as do those in scattered areas, But, as one who works in an urban area and lives in a rural area, I think that there are great differences of scale.
First, those who live in urban areas can take advantage of public transport which is easily available to them. In most cases, that public transport is highly subsidised. Secondly, as a matter of policy we have encouraged development in scattered areas. We have encouraged people to move out of the conurbations and come to work in urban areas, as a matter of general planning policy. That policy has been pursued for many years. Now, because of the considerable change in the cost of transport and of fuel over the past 18 months, we are suffering from that policy.
I can give examples from my own constituency. All over Norfolk now there is scattered semi-urban development, but without a sufficiently large scale of population to provide sufficient employment. Therefore, Norwich is becoming one of the fastest growing commercial and industrial employment areas in the country. The city is drawing its employees from distances as far as 30 and 40 miles away. Those workers are coming from small communities where it is not economic to provide public transport. The workers are, therefore, highly dependent on the motor car. We have encouraged that development.
There is a third problem concerning the scattered areas that I must emphasise. It has been brought forcefully home to me in the past 10 days. If some of the smaller townships provide local employment and that employment disappears, as has happened in one of the townships through the liquidation of a company due to general economic conditions, it means the same as the disappearance in a metropolitan area of a substantial employer. There is no alternative employment, so those people are now forced to seek employment many miles away, and they have to rely on private transport to get there. None of the problems I have mentioned apply to urban areas in the same way as they do to scattered areas.
So far, we have concentrated our discussion on the difficulties of getting to work. There are other equally pressing [column 50]difficulties, including the difficulty of getting to hospital, or of doing simple shopping. Due to rising costs, and in particular the rates increases that we have suffered over the past two years there are in many smaller villages—certainly in Norfolk, and, I guess, in other parts of the country—where the two, or perhaps only one village shop is now disappearing because the shopkeeper finds it uneconomic to continue. The village population is dependent on the motor car to get somewhere to do the shopping.
The same is true with schooling. Again, quite rightly, we have been concentrating on larger schools in bigger centres. But this means the most enormous problem of travelling to school for people in the outlying villages. All these groups have been greatly disadvantaged, much more so than the average population, in the past 18 months because of the rise in the cost of petrol.
The final point is that there really is no alternative transport available. The National Bus Company has been providing most of the services that there is, which is very limited. We now learn that it had a loss of £20 million last year, and we are also learning from all the problems of local government expenditure that the rural bus subsidies this year will certainly not be increased on the scale that will be required to keep many of the existing rural bus services going. We are thus faced with a situation in which the very limited transport there is may actually disappear in a number of cases.
Next, there is the difficulty of getting the private motorist to take the place of the public transport. There was emergency authority last year, during the previous energy crisis, to allow the private motorist to charge without a licence, but that has now been withdrawn. I think that a great pity.
There are many alternative solutions which do not affect the Treasury and do not, therefore, affect this debate, which, I think, in many cases are rather easier to put through than those we have been discussing today, such as restoring the licence for the private motorist to charge, and relaxing licences generally so that, for example, council buses provided for school transport could be used for other purposes, or, perhaps, developing post buses. But [column 51]we must go beyond that and look for more solutions from the Treasury.
The difficulty is that it is so easy to criticise every proposal that we have put forward today, for one reason or another, and, in particular, to argue that the right sort of proposals are those which concentrate on the problem of need. That brings us inevitably back to a voucher system such as we discussed in relation to the disabled. We know the snags in that.
I am attracted to the road fund licence proposal because it seems to me that it would produce a saving on the administrative side in both cost and time spent and achieve to some extent the same end as we might have been seeking through the two-tier system.
But the only problem for those who argue that the urban areas would be advantaged as much as the rural areas is that this proposal equally benefits both. For myself, I should be perfectly prepared to go along with the idea that the urban areas should be benefited because the real need is to provide some relief for those in the rural areas who are finding it extremely difficult to meet the extra expenditure required to cover these higher costs.
I am not in favour of the two-tier system, however it is achieved, But if my hon. Friend wanted to achieve what he suggests he should advocate a large bumping up of the road fund licences and a cheapening of petrol. It depends whether one cheapens the fixed element of the tax or the running element of the tax. That way one benefits or disadvantages those who use their cars a lot or a little.
I understand that, but the real problem is to produce just that little bit of relief for those in the rural areas who find things so much more difficult. I do not want to see any proposal going into much wider implications such as the one my hon. Friend has just suggested.
While I recognise that there are snags in all proposals, I believe that the hardship now is so great that we must try to find some solution. I strongly support the recommendation of my hon. Friend the Member for Braintree (Mr. Newton), that one should look again at the question of tax relief for costs of travelling to work. I have read the Financial Secretary's reply [column 52]in the Adjournment debate on 15th January, and I recognise that there are potent arguments, but we now have a different situation, and one in which those living in areas of low income have high-cost journeys to work. I hope, therefore, that the Financial Secretary will look again at that proposal in this context.
Mr. Graham Page
I had intended to raise a very small, almost drafting, point on “Clause stand part” , but I think that I can introduce it on this amendment.
The purpose could be achieved not by amending the Bill in this way but by making an order under Section 3 of the Finance Act 1972, which is mentioned in this clause but in rather a strange way. Part of the clause reads:
“… section 9 of the Finance Act 1972 … shall have effect as if for the rate of tax for the time being in force, whether by virtue of subsection (1) of that section or of any order under subsection (3) thereof” ——
and so on. The use of the words “for the time being” seems to me to abrogate a power under the Finance Act 1972 to make an order under subsection (3) of Section 9 of that Act, and I find it extraordinary that this Bill should endeavour to prohibit something in the contents of an order which may be made in future under the 1972 Act.
I am not trying to bowl a fast one at the Financial Secretary. I think I am a Fred Titmuss rather than a Bob Willis. In placing a nice point before him, I do not ask for an answer at this time. But, from the point of view of drafting, it should be looked at carefully, because it may cause great confusion and, indeed, take matters to court on the basis of it being outside the power of the Minister to make these orders.
I put that on record, that perhaps this amendment could be achieved by such an order if the power to do it by order was not removed by this clause.
It is good that we on this side can have a healthy disagreement. I agree with those who do not believe that a two-tier system would be for the better. There are no Scottish National Party members of the Committee, and I say in passing that the whole question of a two-tier oil price will probably arise anyway when the oil starts coming from the North Sea, at which stage the Arabs can reduce it to the economic cost of bringing it out [column 53]of the deserts of the Middle East. We could have a two-tier price system then.
However, I hope that the whole question of VAT and the 25 per cent. increase is not the thin edge of a rather important wedge. For many years, many of us have been trying to get rid of the old purchase tax principle, which was added to by SET, and replaced it by a system of VAT. The whole point about VAT is that it should be either at zero or one rate only. I have spoken to this effect on the Floor of the House.
The point of the value added tax is that it is a small percentage on everything, so that we do not have the build-up of costs of an administrative bureaucracy to decide what is a luxury and what is a necessity. It is up to people themselves to decide what is luxury and what is necessity, and, as the percentage remains the same, to take their own decision. That is why I hope that one day we shall see the 25 per cent. coming off petrol and a return to one rate only or a zero rating.
We have had an extremely wide-ranging debate on this amendment, thanks to your generosity, Mr. Crawshaw. I congratulate hon. Members opposite on their ingenuity in converting a debate on an amendment, which is strictly related just to an extra five gallons of petrol per week, with no discount specified, into a debate ranging over balance of payments problems, monetary matters, the Budget deficit and many other subjects. In fact, at one stage—if I may borrow a phrase which I believe came from the hon. Member for Horsham and Crawley (Mr. Hordern)—I thought that we might have to have a division among the Opposition first—the Ayes to the left and the Noes to the right—to decide what their attitude would be. However, it is perfectly right that these differences of view should be vigorously expressed to the Committee.
At one stage, I thought that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), in his strictures on the hon. Member for Cornwall, North (Mr. Pardoe) had at last stumbled upon a definition for a scattered area—an area that produced a high quantity of scatterbrains. Be that as it may, and leaving aside all the contributions that Miss Rice-Davies may or may not have made to a white market in petrol coupons, I shall attempt to address myself not to such questions as whether people went abroad for £50 because they suddenly found how cheap it was but to the [column 54]many serious points that have been raised. Hon. Members have very fairly recognised the complexity of the issues. I hope that, through all the notes I have in front of me, I can manage to construct a reasonably coherent, if not satisfactory, reply.
I recognise that the distinction between an oil deficit and a non-oil deficit is one of diminishing significance. I think that that is generally recognised. But it is not totally without value, as the hon. Member for Norfolk, South (Mr. MacGregor) pointed out, in that the distinction helps to focus public attention on what is, after all, a major element in our import bill. It helps to concentrate people's minds on the need for making savings on which one might hope to see considerable savings made.
That is just the argument which the hon. Gentleman should not pursue. He is saying that it is the fault of the people, and they have to do something about it. The Government should stop befuddling the people by pretending that it is somebody else's fault that we have this balance of trade. If they did not spend so much money, we should not have a trade gap. That is all there is to it.
I was not for one moment suggesting that it was the fault of the private motorist that we had a trade gap, any more than it is the fault of the consumer of bananas that we have a banana deficit. It is a function of our economic circumstances. On the other hand, a contribution could equally be made by the consumers of bananas and the consumers of oil. I cannot see that any harm is done, as the hon. Member for Norfolk, South said, in encouraging people to focus their attention on a major element in our import bill, and one where the public could probably produce a result commensurate with the effort being made.
Some hon. Members have suggested that we scrap the vehicle excise duty. Others have suggested that we go for a higher rate of vehicle excise duty. There are other suggestions, which have not been put before the Committee, such as that we could have differential rates of vehicle excise duty. All these things, of course, fall to be considered.
Various of the proposals have implications, in addition to those which have been put before the Committee, for British industry as a whole, in particular, for the motor car industry, for engine design, and [column 55]whether or not industries could acquit themselves well in export markets as a consequence of tax changes of this sort. There are considerable repercussive effects to some of these suggestions which are easily overlooked when people take a somewhat simplistic view of the problem.
The hon. Member for Horsham and Crawley said that it is impossible to make a great deal of progress by concentrating on one sole element in the through-put of a refinery and excluding the fact that to get balanced production a refinery must produce a certain amount of fuel oil and a certain amount of higher refined petroleum products, and one has to operate on the mix as a whole rather than one single element. Of course, that is by the Government. It is one of the factors adding to the complexity of the situation.
The hon. Gentleman suggested that we should do more to reduce the consumption of fuel oil, and he was good enough to point to a clause later in the Bill on that subject. I am sure that he recognises that the Government have laid down various standards of heating for buildings that the public occupy which are intended to have precisely the effect that he has in mind.
Many hon. Gentlemen have suggested that income tax relief be made available for travel-to-work costs, and I was extremely grateful to the hon. Member for Braintree (Mr. Newton) when, in his usual fair way, he said that such relief would have also, of course, to be available to people who had public transport costs, as it would be. Once one gets into a consideration of this sort, the cost would be simply enormous; and if one is to forgo amounts of revenue of the sort that would be involved in giving any one individual such a substantial relief, there would have to be compensating increases in revenue from other sources.
The hon. Gentleman would recognise at once that no Chancellor could lightly embark on a course of that sort. Again, once that solution had been conceded, I do not see how it could be done without imposing some sorts of constraints and limitations. The hon. Gentleman would not surely suggest that someone fortunate enough to live in Sussex and able to afford a first-class season ticket up to London every day should be able to deduct the cost from his income tax. There would have to be some limitations, which would [column 56]lead to line drawing and so on, and I am sure that he is as seized as I am of all the difficulties involved there.
I do not know that I can say anything more to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) about business cars passing ordinary working people in their own cars. I recognise that there is an element of abuse in the use of cars for business purposes. This is one of the issues for which the Revenue is constantly on the look out.
The hon. Member for Norfolk, South (Mr. MacGregor) widened the whole area of discussion to cover questions of subsidies for rural bus services, and pointed out that travel to hospitals was another element that involved this problem, and one completely takes his point. There is no condition at the back of my mind when I say that the Government are open to constructive suggestions of any sort. It is the responsibility of the Environment Ministers mainly to see what can be done about rural transport. One of the factors, as the hon. Member for Norfolk, South will be aware, having read my contribution to that Adjournment debate, is that a side product, albeit one not to be regretted in itself, of the rising cost of petrol is that certain areas where bus services were not previously economically viable might now become economically viable, because there will be a larger number of people preferring to travel by public transport due to the balance of cost and convenience of transport changing. I would not make that point, but in one sense it is a fortunate result of the increase of petrol prices. Maybe this is something that will, in turn, lead to greater use of public services and more public transport services becoming available.
I recognise that one has the problem of the chicken and egg situation here. If there is no public bus service, how can the demand be made known? But I am sure that bus service operators will be on the look out for opportunities of this sort. I take seriously the hon. Gentleman's point about the level of subsidies available for these services and, as he will be aware, during the debate to which he referred, there was an Environment Minister on the Treasury Bench who was seized of the hon. Gentleman's suggestion.
We have had a fairly wide-ranging [column 57]discussion on this subject. I am not at all sure that I have succeeded in addressing myself to all the points raised by hon. Members.
There is the technical matter. I rather think that the message has now arrived.
I am much obliged to the right hon. Lady, as I was to the right hon. Gentleman, for giving me time to find an inspiration from on high to answer a question. I am informed that the basic rate, which is now 8 per cent., could be varied up or down by an order under Section 9(3), which allows for a 20 per cent. fluctuation. The object of the words quoted is to secure that petrol stays at 25 per cent., regardless of the basic rate.
I think the clause needs amendment because it seeks by the words “for the time being” to affect a future order under this measure that may be made under another. It will cause confusion. However, I leave it there for consideration.
I am much obliged to the right hon. Gentleman. I will look at the point he has raised and see whether it is necessary for us to make any amendment on Report.
I come back to the remarks of the hon. Member for Cornwall, North (Mr. Pardoe) who introduced the debate although his comments were overtaken by the contributions of other hon. Gentlemen. I do not think that his scheme is practical, as he would be the first to agree, I am sure. Allowing the first five gallons purchased in each week by an owner would allow for all sorts of abuse. The mind boggles at the auctions which would take place up and down the country at the time of the year when people did not want to use their five gallons. I think the administrative arrangements would be a nightmare.
I think the hon. Gentleman suggested that mainly as a peg on which to hang a general probing debate about the Government's energy policy and I wish I were better qualified to reply to him on that theme. I am grateful to him for indicating that it was a probing amendment and we have had a very useful debate as a result.
Would the hon. Gentleman confirm my impression that that [column 58]was a fairly clear-cut rejection of any idea of a two-tier rate for petrol?
I certainly did not intend to give a flat rejection of a two-tier rate of petrol. I am just rejecting this amendment. There are considerable difficulties in introducing a two-tier pricing system, as the Committee will be aware. It is not for me to anticipate any decision.
I should be most grateful, because I do not want to go home tonight too confused, if the Minister could just define those objections to this amendment which are not also objections to any two-tier system.
I accept the Government's rejection of any two-tier system in the spirit in which it was intended. I expect the Government will continue with this idea for some time to come, for reasons I shall briefly sketch in.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) cannot escape an answer, because none of us can hope to attain the higher degree of purity to which he attains. The sheer intellectual beauty of his economic system can be compared only with the perfection of a Bach fugue or an algebraic equation. He is positively lyrical when he gets going. Quite clearly, he is in direct contact with the God Mammon and the grace of that great god shines all around him. We cannot touch him. I only wish we could.
He believes two things about my amendment, so far as I can see: first, that it would not reduce the consumption of petrol, and I agree that it would not reduce the consumption of petrol if it were introduced at the present rates. At present rates, my amendment would reduce the price for five gallons for every car owner, and that would automatically increase the consumption of petrol.
I am suggesting that almost inevitably the Government will increase the price of petrol to about £1 a gallon—within the next few hours, I should think, give or take a day or two. When that happens—and I am not asking the hon. Gentleman to tie us down to a time scale—we shall have to ask ourselves whether people would rather pay £1 for every gallon, or pay 50p for a few gallons—the allocation to start with, which would allow everybody a reasonable degree of motoring—and then pay a higher price for the rest.
If we were to ask our constituents which [column 59]they would prefer, my guess is that the majority would prefer the latter. Of course, they would all prefer not to have the price put up at all, but my hunch is that that will not be possible and that there will be a substantial rise.
The second belief of the hon. Member for Cirencester and Tewkesbury appears to be that even if we could cut oil consumption, we should not really try to do so. I entirely disagree, for all sorts of reasons. In the short term, we cannot suddenly change course to overcome the huge increase in the balance of trade deficit that has followed upon the increase in the price of oil. We may be able to do it in time. We may be able to do it by the purity of his economic thinking, given a little time. But we cannot cut total imports of other goods and other commodities to make up for the oil deficit without severe changes to our economy.
So there would be damage to our economy. We certainly cannot do it in the short term. Therefore, it is better to try, in the short term, to effect this change selectively and to concentrate on cutting back on oil consumption by direct means.
Nor can we balance this deficit which oil has caused suddenly by increasing our exports. The oil countries do not want the exports and cannot absorb them yet—in time, of course, they will be able to do so—and other countries to which we might be able to increase our other exports—processed bananas, for instance—are not able to take them either, because they are in much the same trouble over oil.
So we have to borrow to cover the deficit for the time being. All I am suggesting is that since we have to borrow these huge sums of money to cover the deficit for the time being, we might as well borrow as little as possible. So let us cut consumption of that category of imports that has had the effect.
Mr. Norman Lamont
I am very interested in the hon. Gentleman's dismissal of the economics the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) as just purist——
Join the Liberals!
I am a Liberal in an old-fashioned sense. When the hon. Member says that these adjustments simply cannot be made, can he explain why, if that is impossible, these adjustments have already [column 60]been made in Germany and will be made very shortly in Japan and in other countries?
I like the way the hon. Gentleman says they will be made in Japan. I shall not go into long and detailed arguments about what is happening in Japan. I agree that many of us are rather surprised by the speed of which the Japanese economy has adjusted. But one of the things that separates us from some of these other countries is that before the oil crisis hit us in October, his Government—of which he was so proud a supporter—had produced the most monstrous deficit on goods and commodities other than oil, and the oil deficit came on top of a very substantial deficit. That is one of the reasons why we have not been able to adjust quickly enough.
All I will say about cutting back consumption is that I believe it to be crucial. We have to produce tax policies to do it. I am not saying that it is the only way it can be done, but I say that in the longer term it is just as important as in the short term, because we do not know how long we shall be able to go on borrowing this money to cover our deficit. At the moment it is borrowed on the confidence engendered by North Sea oil. We do not know how long that will be coming, nor what price North Sea oil will be when it finally comes ashore. Only yesterday, a Committee of the House was given important evidence that the likely full production life of the North Sea was 20 years. So we have to be on our guard about what happens when it runs out. We might as well start adjusting our economy to that situation now.
The hon. Member for Cirencester and Tewkesbury probably says that it will all come right in the end, that if we allow Mammon to play his little games, everything will work out, that it is marvellous, lovely. I only wish it were true. We have to plan for this change. We have to intervene to make it. We have to create the conditions in which we can balance this deficit. Without those conditions we shall be in a very serious situation, if not next year, certainly in 20 years' time.
So, while I accept from the Financial Secretary that my proposal about five gallons a week is not acceptable to the Government, I think that the Government should pursue the kite which they have [column 61]flown this week, and I support them in doing so. Therefore, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 ordered to stand part of the Bill.