The silence over Osborne’s hand-out to motoring

Something didn’t happen in the wake of the Budget. There was practically no media response to the Chancellor’s continued refusal, yet again, to increase fuel tax duty. Below we put this in the context of continued discrimination against sustainable transport modes and support for a more car-based transport system, as well as showing how the costs of motoring stand in stark contrast to other expenditure.

How much has he given to drivers…?

Cancelling the fuel tax accelerator means not taking some 3p per litre. A very rough calculation means that this represents a loss to the Exchequer of some half a billion pounds annually from car drivers, on top of the amount given in the previous budgets by the Coalition.  Adding on the amount from freight this comes to more like a billion pounds per annum.

My calculation – again very rough – is that this is the equivalent expenditure for the average car driver of some 40 miles of driving. It is the amount that could be easily saved by slightly more fuel efficient driving or cutting out about half a percent of the mileage driven. In other words, were the accelerator to have been kept in place there would be minimal effect on the average motorist, but we still have an additional handout of some £1.5 billion to car drivers since this Government came in.(N.B. April 16th 2014: These numbers may well be underestimates – see post here)

…as compared to other modes…?

By contrast there is plenty to complain about with regard to public transport. And then we have the spectre of increased spending on road building. And of course, we have the refusal of the Conservatives to specify a budget for cycling, with the Labour party unwilling to give a figure.of how much it might spend to support the recommendations of the Get Britain Cycling enquiry. I think it interesting that the cycling lobby fails to make a connection between the amount recommended (initially about £10 per head of the population rising to £20, to come close to Dutch levels of expenditure) which is some £600 million p.a. – or about the amount the Chancellor has just given to car drivers again.

 

…and how much should drivers pay?

While the Campaign for Better Transport correctly lambast the petrolheads and lorry operators who want even cheaper petrol, they don’t make a case for more expensive petrol. I believe these arguments should be made. Here are some:

 

1.    A. Motoring has got cheaper while other costs have increased.

While fuel prices may have gone up, as the costs of cars has gone down, the cost of motoring as a whole over the last couple of decades has either declined or stayed the same (depending on when the precise benchmark is made). By contrast, real earnings have declined and disposable income has declined:

Avgerealearningsgrowth1979.2013

Average real earnings growth 1979-2013

In contrast, more important areas of expenditure such as housing have significantly increased. So, even if it is judged that the economic priority is to give members of the public a financial boost to increase their spending ability, there are far more worthy areas for state allocation of funds.

 

B.  Conventional economics states that motoring costs far more than the revenue gained from motoring taxation

Note that this view – that the “external costs” of motoring are far higher than taxation gained from motoring – is based on a conventional view about monetizing the adverse effects of motorisation. There are arguments to suggest that taxation – or rather motorists paying an amount to reflect the damage they cause – could be a lot higher.

C. The price of petrol should rise with the use of more fuel-efficient cars.

It is common to see modern cars advertised with increasingly high mileage per gallon. Naturally, although reducing car use and replacing it with the more sustainable and healthy modes is desirable and necessary for sustainable transport policy, but since cars will still be used a priority will be for them to be far more fuel-efficient. Raising the costs of petrol will be necessary to encourage this.

In addition, if there is to be a take up of more fuel efficient motoring, unless the costs of petrol rise, there will be a decline in revenue raised for the Exchequer.

 D. An equitable transport policy requires a rise in petrol prices.

Cyclists are used to hearing the myth that motorists have “paid for the road” by paying a “road tax”. Perhaps a necessary way of confronting this myth is to point out that – compared to cyclists – motorists have not paid their way. Compared to cycling and walking, and some forms of public transport, motoring is unfairly cheap.

 Yet none of these arguments have made it into discussion in the media. My suggestion is that this means that the prospects of a less car-dependent future are diminished.

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