Wednesday, 7 March 2012

The Social Cost of Motoring

In round terms, ...the Government raises close to £50 billion from road users.
The Campaign for Better Transport extrapolates from the Government research on marginal external costs (above) to reach a total cost of externalities of £70 billion–£95 billion per annum at [2009] prices.
House of Commons Transport Committee - Taxes and charges on road users 2009

A great deal of those costs fall on individuals rather than the government, bereavement, noise, congestion, air quality, essentially standard of living costs borne by the wider society. So it might appear that the government raises £50bn but only spends some £9bn on maintaining roads, but the other £41bn goes towards offsetting the costs to society. A non motorist cannot claim back the cost of their reduced standard of living directly from anyone, but by raising taxes from motorists, the government can reduce other taxes paid by everyone. Even so there is still a £20-45bn shortfall between what motoring costs society and what motorists pay. Put another way, £45bn is half of the total raised by National Insurance, an even more direct tax on jobs than fuel duty. In fact, if you raised that extra £20bn in taxes from motorists (increase fuel duty by 40p, probably more like 50-60p to account for reduced sales due to changing behaviour) the income tax personal allowance could be raised to about £12,000, just about the right amount for those who insist on a living wage. OK, some inflation will follow offsetting things a bit, but we're in the ballpark.

Low taxes on motoring is not essentially right wing idealism, indeed, undertaxing it as we are is effectively socialising the cost of motoring.

Thoughtfully a list was drawn up of the cheapest and most expensive fuel around the world, the list of the cheapest countries could almost be a list of the world's greatest tinpot dictatorships. Meanwhile, Norway, the highest priced place in the world for fuel has been found to have the highest standard of living in 10 out of the last 11 years. Not a causal link of course, but I think it's safe to say that low taxes on fuel is not a necessity for making life better. I've been to Norway, I don't need to go to Turkmenistan to know which country I would rather live in.

1 comment:

  1. The trouble with including "externalities" is that you are now comparing apples with oranges.

    Are there any figures for what government (national and local) spends on roads, in all forms? Construction, maintenance and repair are the obvious ones, but do we have reliable figures for policing, fire & ambulance, NHS accident & emergency costs, and NHS general health costs from longer term effects of traffic pollution or long-term treatment/convalescence of serious accident victims? I dare say there are a few other things I haven't yet thought of to add to this list.

    And do we know what the £50bn comprises? Is it just VED and road fuel duty? Or does it include VAT on cars, spares and fuel? The latter should of course be excluded because, even if you permit "hypothecation" to creep into this debate, virtually all of our expenditures suffer VAT - only basic food, children's clothes and public transport escape it. Health and education also escape but in a different way (the providers can't reclaim any VAT they themselves suffer) and only a minority buy these services anyway.

    My guess would be that if we define our terms properly, the combined revenues from motoring taxes still fall short of the combined public costs of providing a roads system.