PROTECTION IN PRACTICE.
(To THE EDITOR Or THE " SPECTATOR."] Sie,—As a Free Trader I have read with interest the article in the -Spectator of February 18th under the above heading. Would it not be ivell to go back to the beginnings of the synthetic dye industry, which was established first in this country by Professor Perkin, and find-out why it was trans- ferred to Germany? In the making of synthetic dyes and fine chemicals -an essential factor is an ample supply of alcohol in order to get.the desired results. In,Germany it has always been possible to procure cheap industrial alcohol without pay- ment of duty or excise. This has not been possible here, and the enormous handicap which this has represented made the continuance of the industry in this country an economic impos- sibility. The present duty in this country on alcohol is £3 14s. per gallon, about twenty-five times the value of alcohol, which costs here about 3s. 6d. per gallon. The pre-War cost in Germany was -about is. 6d. per gallon, duty free, and it is probably about 2s. now. None of our political leaders, whether Free Traders or not, have apparently cared to instruct the general public—even if they have been aware of the facts—as to the importance of having alcohol free of duty sr excise for industrial purposes. There has always been a fear en the part of the politicians of saying or doing anything which might seem to savour of upsetting the Temperance Party, who apparently only think of alcohol in terms of Pussyfoot. A cheap, commercially pure alcohol such as is produced from potatoes and certain waste products is, although not matured, suitable for industrial purposes, but the various forms of duty-free alcohol, such as methylated spirits or denaturalized alcohol, are not suitable. The Free Trader has said : Charge an excise duty on the alcohol you use for industrial purposes exactly on the same basis as if it were imported or to be used for drinking purposes, and we will tax imports into this country on their alcohol content. He entirely overlooks the fact that the finished goods, i.e., fine chemicals, dyes, flavours, and essences, do not, in most cases, contain much, if any, alcohol. The alcohol has simply been used in the process of manufacture and is dissipated. Consequently the theory of
taxing imported chemicals, dyes, Le., on their alcohol content to put them on the same basis as home-produced goods breaks down.
I understand that recently the Government have made certain belated arrangements that will, at some future date, enable duty-free and part duty-free alcohol to be used for research work and for the manufacture of fine chemicals respectively, but I believe the regulations and arrangements are of so complicated a character that the cost and trouble involved probably equal any saving of duty. I believe the concessions made regarding the use of alcohol for dyes will provide for a preliminary quantity, duty free, the assumption being that the alcohol can be recovered indefinitely in the process of manufacture and reused. In practice, however, a considerable percentage is necessarily lost by evaporation and drying, and any such heavy losses have to be made up by alcohol on which a high duty is paid. If one wished to utilize waste and bye-products or fruit residue to produce alcohol for use in one and the same factory, the only procedure is to adopt one of the two following courses : either to have two Custom House officials installed in the factory to measure and tax the alcohol produced, and to pay their salaries and allow them access to the whole factory; or, to obviate this trouble and expense, the assumption had to be allowed that the still would be worked at maximum capacity for twenty-four hours on 365 days of the year, and taxation based on this calculation. Obviously the fruit season is limited to a few months in the year, and the actual working time would be eight hours a day, excluding holidays and half-days.
Consequently it was in practice before the War, and will continue to be so, cheaper to buy extracts, essences, and flavours from the Continent because there will be little, if any, alcohol in the finished product. (1) The alcohol would have served a valuable purpose as a vehicle or as a solvent, and to facilitate manipulation, drying, and other processes of manufacture. (2) There is only a fraction of duty payable on the finished product, when imported, as against the duty pay- able on the high percentage of alcohol used here in the process of manufacture. Might I suggest that you endeavour to venti- late this question? It should not be impossible to safeguard the interests of the State by having a heavy bond from any firm manufacturing alcohol for use in their own premises, providing always that the standing of the firm, and the bond entered into, were sufficient guarantee to avoid the risk of such alcohol getting into duty-free consumption as drink. We should surely free our industries from the heavy handicap under which they have suffered for so many years, and which has resulted in Germany having the monopoly of the dye, fine chemicals, and many other industries in which alcohol is an essential in the processes of manufacture.—I am, Sir, &c., X.
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