CAB129-78 — Page 134

Page 134. Government are unable to extend further relief to them, while it is prepared to do all it can to assist in finding other work for those whom the industry can no longer employ.

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I am very much afraid of the consequences of action on these lines. It will certainly be represented that by making a tax concession the Govern- ment would keep an important industry in existence and 4,000 men in employment. The prospects of finding alternative employment on any considerable scale are not bright unless we are prepared to contemplate some quite exceptional measures. The area is already within the Development Area but has not shown itself attractive to industry; only one new factory has been set up there since the war.

7. I understand that the Chancellor feels that assistance to this industry would lead to similar requests for tax relief from other industries or individual firms which happen to be in difficulties; and that as Scottish Oils are the most uneconomic unit in the domestic oil industry further assistance would probably be swallowed up by rising costs like the relief granted in 1953. The Chancellor also stresses the added difficulty that fiscal measures would require legislation through a Finance Bill - which could not be the current one; and he feels that legislation on this subject would throw open to discussion the whole question of our policy on the oil duties and stimulate pressure for tax remissions which would be extremely costly. I fully appreciate these difficulties other than the last, as to which I am not in a position to judge. I would have hoped that the circumstances of this case were so unique in the oil industry that a concession would not have opened the door to tax remissions to other sections of the industry which do not need them.

8.

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In all the circumstances, and after the most careful consideration, I am so disturbed at the prospect of severe unemployment in this area, which we shall be accused of creating, that I feel bound to ask the Cabinet to agree in principle that the industry should be enabled, by a further reduction of duty, to maintain a reasonable level of employment. I should be glad to discuss further with the Chancellor and the Minister of Fuel and Power the amount of the reduction that would be necessary.

Scottish Office, S.W.1.

16th November, 1955.

J.S.

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