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Macmillan's Shilling

26th April 1957, Page 50
26th April 1957
Page 50
Page 50, 26th April 1957 — Macmillan's Shilling
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Which of the following most accurately describes the problem?

IMPOSITION and removal of the extra shilling on the fuel tax took place with surprisingly little comment. Operators were perhaps so concerned about their ration, and so pleased when they got it, that they had no breath left for a sufficiently strong protest at the price they had to pay. They not only bore the brunt of the shortage caused by the blacking of the Suez Canal, but also bore the greater part of the cost.

No sensible justification was given for the higher tax. The Chancellor of the Exchequer, who was Mr. Harold Macmillan last December, gave the House of Commons two reasons. In the circumstances, he said, a commodity as precious as oil had become should effectively he guarded by taxation as well as by rationing. The loss of revenue as a result of rationing would be something like £6m. a month, and it was essential to the Exchequer that this should be made good.

Temptation to Waste

What the objectors might have emphasized more at the time was that the extra tax was notto be paid by all fuel users, but by a certain category., Industries of many kinds are large users of petroleum products, but they pay no tax and were required to pay none while they were rationed. Mr. Macmillan might have been called upon to explain why the additional guard that taxation provided was thought necessary only for road users, whose temptation to waste fuel was already suffieiently well curbed by the tax of 2s. 6d. '

The fuel situation was no more the fault of the road user than of anybody else. If the Government needed the £6m. a month that would be lost through rationing, they could well have found some other means for getting it. Admittedly, there can be few things more fatally easy to tax than liquid fuel, and this was perhaps Mr. Macmillan's true reason for choosing the commodity. If so, it can have been his only reason. It would have been refreshing, although unusual, for the Chancellor to have admitted the fact. He would not have saved, himself from criticism, but at least road users would have known where they stood.

Self-evident Absurdity The absurdity of Mr. Macmillan's argument would have become self-evident if the fuel situation had been More severe. The principle he followed was apparently that, when rationing leads -to afall in revenue, the fuel tax should be correspondingly increased. The extra shilling allowed for a fall of about 30 per cent. in consumption. If the fall had been' 50 per cent:, presumably the tax would have gone up to 5s., and rates and fares would' have increased by a quarter. Had the fall been 60 per °cent., or about twice as m,uch as it was in fact, the few operators left in business would have had to bear a tax burden amounting to 6s. 9d. on every gallon of fuel.

:Thc new Chancellor has put the tax back to 2s. 6d. There is no guarantee that the next budget, Or the next Chancellor, may not see the extra shilling, or part of it, restored. Mr. R. A. Butler, in 1952, described oil as a "scarce product which costs us foreign exchange," and added 7-td. If this point of view is not challenged vigorously enough, every Chancellor may be encouraged to put on his own quota.

BI 6 In the'minds of most people, the fuel tax is inextricably mixed up with expenditure on the roads. History supports this view Taxation on road users was originally imposed in 1909 by Mr. Lloyd George, when Chancellor. He made it plain that all the revenue should go to the improvement of the roads. In this, he had the support of the Conservative Party. The principle he had laid down remained substantially intact until 1926, when Mr. Winston Churchill, as he then was, raided the Road Fund, which was never quite the same again.

The aim of .road users should be to establish, as definitely as did Mr. Lloyd George nearly 50 years ago, the relationship between their taxation and the cost of the roads. The ideal, that the whole of the revenue be spent on roads, may not be easy to attain. At least, as a compromise, it should be established that the sums allowed for road expenditure are, in fact, met from what road users pay to the Exchequer.

Permanent Way

What is left over, about three-quarters of the whole, can then be dealt with as a separate issue. Hauliers, and other road users, have complained recently that the railways obtain oil fuel for their engines free of tax, and are using a steadily increasing volume. The stock reply appears to be that the railways have to meet the cost of their own permanent way and should not, therefore, be taxed. It might now be argued that at least a proportion of the tax on road users should also be levied on the railways.

If Mr. Lloyd George himself thought up the idea of taxing liquid fuel to pay for the roads, it was a happy invention. The wear and tear of a vehicle on the road is probably in proportion to the amount of fuel used. The main exception arises from the growing use of derv, which provides up to double the mileage. There might be a move among petrol users to increase that part of the tax on dery that could clearly be shown to relate the improvement of the roads.

The suggestion may not be as frivolous as it may seem. In his paper early this year, Mr. M. E. Hubbard, of the British Petroleum Co„ Ltd., stressed that the present apparent advantage of the oil engine depended largely on the product of the quantity of fuel it consumes and the difference between the cost of oil fuel and motor spirit.

-Artificial Incentive The oil engine in the road vehicle, said Mr. Hubbard, had less basic advantages, but had the benefit of a fiscal system that meant a lower rate of tax per ton or passenger mile, "If, one day, Governments come to realize that the swing to the Diesel on the road results in a cumulative dollar drain, it is possible that they will change the system of tax so as to eliminate any artificial incentive towards Dieselization."

Whether -or not this would be the result;most operators would welcome a movement in Parliam,ent to look into the whole question of taxation on liquid fuel. Its avowed purpose has been changed to suit the whims of successive Chancellors. It might be helpful to get agreement on this) point, even if the actual rate of taX were stillthe subject of dispute.

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