Saturday, 10 April 2010

Fuel duty clarification (congestion or pollution) and road pricing

The UK fuel duty issue is a complex issue. The story starts in the late 1980s when car ownership rocketed. New roads were needed and to be paid for by road users. A policy of fuel price escalation was introduced. Soon there were widespread protests against the building of more new roads. Fuel duty was increased in reaction to congestion and global warming (and general pollution) concerns and kept rising through the 90s and the 00s and is still rising.

Congestion is definitely a problem during peak times and global warming could be a serious problem for the planet, although it could be exaggerated. Fuel duty is proportional to any damage done to the planet. Flat taxes like car tax and show room taxes (emissions being the criteria) are not.

If the problem is congestion then there is a case for some sort of road pricing where lorries could get a rebate for travelling at night (or some similar related concession). Technology is becoming very realistic to manage this is all sorts of ways (e.g. GPS-based road pricing).

The problem is that one of the governments own policies suggests the issue isn't pollution and that's the reduced duty on red diesel which incurrs the exact same cost on the environment.

Red diesel is about £0.54/litre. Diesel for road use is currently £1.20/litre. What the government is clearly telling us (policy speaks louder than words) is the vast majority of fuel duty is paying for your share of use on the roads with less efficient cars paying disproportionaly more of the share in both fixed and variable costs.

By all means have a (large if justified) tax proportional to costs incurred to others, through damange to the planet or to pay for roads, but make it fair.

Clearly the cost of building and maintaining roads is unfairly distributed which is why road pricing should be something we aim for in the next couple of decades. A definite progressive tax on motoring and, to a much lesser extent, potential harm to the environment.

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