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Treasury told to implement fuel duty rise now

Posted on 29 August 2012

The "war on motorists" is a myth, and it is public transport users
who have suffered the most from government measures, according to a new
think tank report that advocates more government support for railways
and buses.

The IPPR report
compares the cost of motoring, both to individual drivers and to the
public purse, with the cost of living and of using other forms of
transport. It finds that private motoring costs have risen less than the
general standard of living over the past 20 years, and that the
Government should avoid further delays in increasing fuel duty.

It concludes: “There is no war on motorists. Fuel duty and VED are
both effective and justifiable motoring taxes that not only encourage
greater fuel efficiency, but go some way to offsetting the environmental
and social costs of motoring."

The report notes that it's the poorer people in society who use buses
the most, yet bus costs have increased more than any other mode of
transport, therefore it urges that "priority should be given to bringing
down these costs".

The chancellor's decision to delay increases in fuel duty, extended
recently to 2013, has cost the Treasury nearly £2.8bn in 2011/12 alone.
The report questions whether “waiving this potential revenue in a time
of economic hardship is in society's best interests".

"Compared to users of public transport, there is no war on
motorists," said Will Straw, IPPR associate director. "Rail and bus
users have seen fares spiral out of control while the cost of driving
has actually fallen over the last decade. Given the pressures on the
public purse, the chancellor should avoid further delays in fuel duty
and think again on rail fare hikes."

The report argues that new ways should be found to reduce the
external costs of road traffic, and that the government should make a
clear statement of the importance of encouraging people to shift away
from driving and towards more sustainable forms of transport, like rail,
tram, bus, cycling and walking.

This means that there should be more investment in transport capital
projects, and public accounts concerning the wider costs of transport
should be updated. The think tank argues that “given the current low
interest rates, there is a real opportunity available now" to make these
investments.

It calls for the Green Investment Bank to be empowered to begin
borrowing immediately to support such projects, and for the wider use of
road pricing and congestion charging.

Local transport authorities should be encouraged to improve other,
more sustainable, forms of transport, particularly in areas with poor
rail connections and bus services.

The relentless increase

Road traffic, mostly cars, has increased by nearly 15% over 20 years
up to 2010, but, despite realising that the old policy of building roads
to meet demand is not sustainable, there are no government targets for
limiting this growth.

Meanwhile, drivers complain about the cost of motoring, primarily
driven by the perception of fuel costs. However, the report's author,
Lisa Hopkinson, finds that the average household's weekly motoring costs
was actually 7% lower in real terms in 2011 than 10 years earlier.

Over this period, the total cost of motoring also fell, as cars
became cheaper. Although fuel duty is higher here than in other EU
countries, motoring taxes and other charges are lower, meaning that,
overall, "compared to other European countries, the British motorist is
not highly penalised", the report says.

The report compares the total of £9bn spent on roads in 2010, about
40% of total public spending on transport, with the estimated social and
environmental costs ('externalities') of road transport, at £56bn, or
£32bn excluding congestion costs.

These 'externalities', the report says, include "road casualties, air
pollution, noise, greenhouse gas emissions, physical inactivity,
community severance, landscape destruction and waste and water
pollution".

Therefore, “the full costs of the environmental and social impacts of
car and road traffic are not being fully paid by motorists".

It therefore calls for the separation of investment in roads from the
general total of motoring tax revenue, since investment in reducing the
damage of transport can be "justified on the grounds of wider transport
objectives and needs".

The House of Commons Transport Committee itself called for "account
to be taken of the full cost of road use, including social and
environmental externalities, when considering the structure of taxes and
charges on road users" as long ago as 2009.

In its report on an enquiry into road taxation, it said that every
motoring organisation had told it that “fuel tax is the most efficient,
equitable and effective way" to encourage fuel efficiency, reduce carbon
emissions, and make those who consume the most, and pollute the most,
pay the most".

Public transport

While car users are paying less in real terms, people who use public
transport "are being hit twice by the high cost affairs and cuts" in
services, says the report.

It compares the cost of various journeys by car, including parking,
with rail and bus or coach, and finds that in every case it's cheaper to
go by car. This gives a perverse incentive to encourage people to stay
in their cars. It also punishes those who cannot afford to run a
vehicle, which includes 68% of the poorest 10% in society.

Transport minister Norman Baker himself has admitted as much. In a
Parliamentary Answer last year he said: "Between 1980 and 2010 the real
cost of motoring, including the purchase of a vehicle, declined by 10%,
bus and coach fares increased by 54% and rail fares increased by 55% in
real terms.” (Hansard 2011)

Last week, it was announced that rail fares are to rise by an average
of 6.2% next year, prompting calls that such rises should be limited to
the amount of inflation.

In 2010, £32bn went into Treasury coffers from fuel duty and vehicle
excise duty. Revenue from these taxes has increased by 50% in real terms
over the last 20 years, although it actually decreased in the last
decade. Because vehicles are becoming more fuel efficient, the report
forecasts that these revenues will decline in the long term and so
should be replaced.

The report chimes with the findings of another think tank, Transport for Quality of Life, whose report, Rebuilding Rail, published in July, called for the renationalisation of railways.

Ian Taylor, director of TFQL, said: "At a time of budget constraints
it's absurd that motorists are not being charged for the cost of their
impact on the environment".

TFQL also campaigns for the promotion of smarter travel choices,
making alternatives to car use more attractive, and for spatial planning
that reduces the need for car use.