First, the good news: another academic study using conventional cost-benefit analysis finds that motorists in the 27 EU countries have a net economic cost to society, with the UK second only to Germany in costs. Take a look at the nice short summary in the Guardian. It’s good to counteract what the Guardian correctly calls “The perennial complaint from drivers that they are excessively taxed”, not least the prejudice that cyclists are cheating by “not paying a tax”. The figure given for these external costs – £48 billion per annum, some £10 billion more than the total of motoring taxation revenue – looks pretty damning. However, it can be argued that the costs of motoring to society are considerably greater than those in the picture painted in the study, and that the report is inadequately critical of the status quo.
Let’s look at the report in a bit more detail.
Cost-benefit analysis: How much for your grandmother?*
The main point to start off with is that the report is based on a form of economics which is highly conventional – cost-benefit analysis (CBA). CBA has been relentlessly criticised for the inhumanity of its basic principles, most forcefully by John Adams, for example in “Transport Planning: Vision and Practice”, which you can download here – and from which the sub-heading above* comes
Essentially, the adverse effects of motorisation are monetised – which means that you have to put a money value on these adverse effects: pollution – noise, noxious and greenhouse gas emissions, “accidents” etc. This involves asking people (which people – ones with a lot of or a little money?) how much they would be willing to pay for people (which people – their loved ones or strangers?) not to be hurt in road crashes, poisoned by pollution etc.
There is another point. That is that the arbitrary values ascribed to various adverse effects (“external costs”) seem to be less than the benefits in a typical CBA, which is then used to justify pursuing policies supporting the policy status quo. While many academics and campaigners have faith that a properly carried out CBA will lead to more civilised policies being implemented, many of us are not so sure.
What gets counted?
The main adverse effects of motorisation covered in this document, as in other reports, do not cover some of those we might be interested in. The authors point out that the health disbenefits of driving to those driving are not considered. One of the key arguments – if not the key argument – for supporting cycling nowadays is therefore missed out.
Nor is congestion – although that is no bad thing considering that it is a typical example of how CBA can be used for the purpose of promoting policies which support increased motorisation. Reflecting the arbitrary nature of values used in CBA, estimates for the costs of congestion have varied massively over the years. My view is that if the costs can be used to justify a programme of road building, they will be high enough to make the programme look economically justifiable. If reducing motor traffic – possibly by requiring the motorised to pay the costs that come out of the CBA – such a programme doesn’t seem to get off the ground.
One of the key items counted is what is known as “accidents”. Now, as those familiar with the principles of Road Danger Reduction know, you cannot measure danger by adding up the numbers of people reported as hurt or killed on the road. It is immoral to equate, for example, someone falling off a bicycle and hurting themselves with someone hurt by the rule or law breaking of another. It is frequently the case that locations which present significant dangers – particularly to pedestrians and cyclists – have low numbers of people hurt or killed, often precisely because the danger there has scared them away from being there in the first place.
Instead, how about putting a cost on danger? We could be looking at the effects of limiting the use of the more benign modes. After all, we know a lot about the restriction on the independent mobility of children by motor traffic danger: see “One False Move… A Study of Children’s Independent Mobility” downloadable here . It is possible to add up monetary costs of parent’s time spent driving to school and add that to the costs of car use, if that’s what you want to do. CBA counts the cost of a white collar worker at around £20 per hour: think of all those middle class parents driving children to and from school and how much that cost would add up to. But that is not counted in this report.
In a similar vein, what about considering the community disruption – the loss of traditional local communities – caused by motorisation?
We can go further: the visual intrusion of motor traffic, or the space consumed by stationary as well as moving cars. The latter could be a very useful topic for discussion – relating the cost of space to the kind of price people expect to pay for renting real estate. Think of the fuss made by residents for Controlled Parking Zone – typically fees of only about a pound a week – complaining about being charged “a rent for space on the road”. Why shouldn’t some form of rent be charged for leaving a car in scarce public space? Or paying for the costs of traffic policing: not of course, at the paltry levels it is nowadays, but the level it should be.
Probably the most obvious cost excluded from this report is that of road building. We are on a spend of about £5 billion per annum at the moment in the UK. That does not get included, on the basis that it may be seen as a public good – presumably because road building has to be justified on the basis of some sort of CBA.
One item which gets missed out is motoring taxation. This is interesting. The report’s authors argue that motoring taxation is just one of many forms of taxation, and should not be seen as something to be set against the costs of motoring costs. It is an excellent point to make.
The analogy they draw is with taxation on alcohol, saying that there is no reason that it should be used to offset the costs of alcohol to society. The next time a motorist grumbles that the taxes they pay should go on road building or be considered against the costs of car-generated pollution, crashes, global warming etc., do bring in the alcohol analogy. Why shouldn’t the tax I pay on a pint of beer be reserved towards paying for the treatment of alcoholics? Or making pubs nicer? Or helping pubs to stay open? That makes as much, if not more, sense.
Anyway, the amount of taxation raised by UK motorists – fuel duty and its associated VAT along with vehicle excise duty contribute around £38bn a year – is £10 billion less than the £48 billion estimated by the report’s authors to be the external costs of motoring.
And don’t forget that those costs do not include the health disbenefits to drivers, congestion, danger, visual intrusion, community disruption (with loss of children’s independent mobility), policing and road building, and parking space costs.
If anything one can argue that they are a significant underestimate.
What is wrong with this report?
Despite the predictable response from the motoring lobby (see the one by Edmund King of the AA here) it is actually quite pro-motoring. Consider the following from the report:
“The results of this study advocate that the European Union should embark as soon as possible on a process that estimates external costs regularly and develops a smooth integration path of these costs into transport prices: Slowly and steadily, designed well in advance of implementation, with accompanying measures to support adaptation. Let it be remembered that there is no intention of creating additional revenue from transport users: the intention is to give price signals so that everybody adapts and hopefully nobody has to pay these prices. Then, all costs would be reduced, efficiency would be increased”.(my emphasis)
In one sense this is correct: hopefully “internalising the external costs” as economists put it, would result in a modal shift from car use, or shortening car journeys, or driving more fuel-efficiently, or a combination of the above. But let’s consider this in more detail: what would happen if – no doubt to the horror of the AA, petrol prices were to actually double?
Making motorists pay
We have discussed this at length before. (see our posts here ). In particular, see this . Doubling the cost of petrol gradually – something like a 15p per litre increase every year for 10 years – would lead to motor manufacturers producing cars twice as fuel efficient. They are quite capable of doing this. But such vehicles have not come into the mainstream (while SUVs and other gas guzzlers have) because the demand from consumers is not there: petrol is too cheap to force such a necessary change.
But what would happen if such – in my view necessary – change were to happen? While emissions would fall significantly, the gap between the costs enumerated in reports such as the one we consider here would fall to something close to the tax revenues from motoring, giving another defence to the car lobby. Emissions would still be above what any serious greenhouse gas reduction policy aims at. And all the other costs I have drawn attention to above would remain.
Let’s look at just one consequence of this: the relative costs of cycling and driving to the individual. At present, one of the barriers to cycling is that it can be quite expensive, particularly to people on low incomes, at about 20 – 25p per mile cycled. With cheaper motoring coming in with far more fuel efficient cars, the difference between the two modes would be very small. This is neither morally equitable nor likely to assist a shift from driving to cycling.
A couple of other problems
- “…no intention of creating additional revenue from transport users.” One should ask – why not? While there is a long term hostility in this country to so called “regressive” taxation, in fact substantial revenue is gained from VAT, not to mention alcohol excise duty. Besides, simple steps like more fuel efficient driving and/or more careful driving (leading to falls in third part insurance) could lead not just to cheaper motoring but declines in necessary taxation revenue. The poorest in society are not motorists, and lower paid drivers have plenty of other financial problems – such as the cost of housing – which are , I would suggest, more urgent
What about carbon rationing?
It has been argued for some time that carbon rationing – allowing personal carbon trading – would be necessary to deal with climate change. Looking at consumption of petrol this way would radically change the kind of discussion in this report.
In conclusion, it is nice to see a report using the kind of techniques used by establishment economists to challenge some prevailing myths. There is a dominant myth that motorists have “paid their way”, with – to give just one example of its negative effects – associated prejudice against cyclists for supposedly not doing so. It leads to people like Ed Balls supporting what is in effect continued subsidy – indeed additional subsidy – to motoring. But using a conventional approach which has been part of the problem is always dangerous. And even if something similar is to be used, it needs to be considerably more forceful.