Let\’s raise fuel taxes by another 50 p!

Umm, no, not really:

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.
….
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)

Many of those externalities identified are a result of having a transport system, not a result of having an ICE propelled car based one.

So even in theory we shouldn\’t be charging all of the costs of the externalities to the fuel.

It\’s entirely possible to build steam powered cars: with coal fired boilers n\’ll. There have even been cars powered by rotting chicken shit. Taxing petrol does not change the noise, congestion etc produced by those.

24 comments on “Let\’s raise fuel taxes by another 50 p!

  1. That’s all very true Tim, but the fraction of non-ICE cars is rather tiny, currently to the point of insignificance. An alternative might be congestion charging but that’s considerably harder to implement than raising duty and the costs are much higher which offsets the duty rise attempting to be revenue neutral by reducing other taxes.

    With regard to coal powered cars, it’s probably more worthwhile to just increase duty until the proportion of coal powered cars increases significantly.

    :o)

  2. And the analysis of course completely ignores any benefits derived from motor transport, which presumably are at least equal to the total financial outlay on it.

  3. “A great deal of those costs fall on individuals rather than the government”

    Costs never fall on government for the good and simple reason that government has no money.

    “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.”

    He apparently fails to realise – or, he realises but chooses to ignore – that everything he consumes, except for utilities, is transported by road. Cyclists are not the unwilling victims of the evil motorist. How much does the average cyclist contribute to the road network?

  4. State raises £50bn from motorists, but spends only £9bn on roads.
    Motorists unhappy.
    State produces report claiming the ‘real’ costs are enormously high.
    Credulous cyclist is triumphant.

    BTW, As a cyclist myself I am not convinced that cyclists calling for a 50p per litre rise in petrol is going to make cyclists more popular with motorists.

  5. So even in theory we shouldn’t be charging all of the costs of the externalities to the fuel.

    True, but it’s reasonable proxy, given that the alternative would be charging separately on the fuel and the road space, which would introduce a lot of cost for the increased granularity.

    Curmudgeon:

    And the analysis of course completely ignores any benefits derived from motor transport, which presumably are at least equal to the total financial outlay on it.

    Most of those benefits won’t be externalised though.

    Ian Bennett:

    How much does the average cyclist contribute to the road network?

    Whatever they pay in Council Tax, along with the proportion of centrally paid taxes which get redistributed to local authorities.

  6. Rob:

    State raises £50bn from motorists, but spends only £9bn on roads. Motorists unhappy.

    But I imagine that if you told most of those motorists that rents on council houses were going to be slashed so that they raised no more from the tenants than the amount spent maintaining them, a significant proportion would be up in arms. I’m a motorist and I’m not unhappy about it, but I suppose I’ve got a better understanding of economics than most motorists.

  7. Paul:

    “Most of those benefits won’t be externalised though.”

    Doesn’t matter, they still need to be taken into account. The whole point about considering externalities is that you should consider all costs and benefits. If you consider only externalities you are cherry-picking.

  8. Paul: “Doesn’t matter, they still need to be taken into account. The whole point about considering externalities is that you should consider all costs and benefits. If you consider only externalities you are cherry-picking.”

    No, you only need to consider externalities. If a cost or a benefit is internalised, then it doesn’t impact beyond the people choosing to engage in the activity. We only want to worry about the impacts on those who are affected passively.

    Otherwise, I could come and dump all my rubbish in your garden and then argue that it is perfectly fine, because it is keeping my garden tidy.

  9. Paul, in reply to me: “Whatever they pay in Council Tax, along with the proportion of centrally paid taxes which get redistributed to local authorities.”

    Which the motorist also pays, in addition to his share of that £50bn.

    Also, “But I imagine that if you told most of those motorists that rents on council houses were going to be slashed so that they raised no more from the tenants than the amount spent maintaining them, a significant proportion would be up in arms.”

    If council house rent raises more than the cost of council house maintenance, why is spending on council housing an item in my local authority’s budget?

  10. Ian Bennett:

    Which the motorist also pays

    That’s true

    …in addition to his share of that £50bn.

    That doesn’t make any sense. It isn’t in addition to anything. That is how they both finance road expenditure.

    If council house rent raises more than the cost of council house maintenance, why is spending on council housing an item in my local authority’s budget?

    I don’t know without looking at it, but I would suspect, like most financial reports, it is because it records revenue as one item and expenditure as another.

  11. “No, you only need to consider externalities. If a cost or a benefit is internalised, then it doesn’t impact beyond the people choosing to engage in the activity. We only want to worry about the impacts on those who are affected passively.”

    Rubbish. this will mean that you will always have a motive for raising taxes as any benefits accrued will already be considered sunk.

  12. This all misses the point that the report regarding the “true” cost of motoring will all most certainly be complete and utter bollocks just like the reports on the true cost of alcohol and the true cost of smoking and the true cost of junk food. These reports are compiled by people who know what conclusion they wish to come to and set out to achieve it. Irrespective of the quality of the research, the figures will become established facts for those for whom the numbers suit their arguments.

  13. Emil:

    Rubbish. this will mean that you will always have a motive for raising taxes as any benefits accrued will already be considered sunk.

    You seem to be a bit confused, but I can’t quite work out where the confusion is.

    On the basis that Tim was referring to, the tax would be levied at the point that the charge is equal to the negative impact of the externalities.

  14. “That doesn’t make any sense. It isn’t in addition to anything. That is how they both finance road expenditure.”

    But my twin brother, identical in every respect except that he doesn’t own a car, pays less tax than I do.

    Also, to clarify, council house spending is a part of the disbursement of the council tax which I pay. It’s listed as a destination of some of the council’s tax receipts. If the council needs money from me to spend on housing, rent obviously doesn’t cover the costs.

  15. Ian Bennett:

    But my twin brother, identical in every respect except that he doesn’t own a car, pays less tax than I do.

    You could also have a twin brother, who doesn’t own a car, but pays more tax than you. It’s an anecdote which isn’t especially informative.

    Also, to clarify, council house spending is a part of the disbursement of the council tax which I pay. It’s listed as a destination of some of the council’s tax receipts. If the council needs money from me to spend on housing, rent obviously doesn’t cover the costs.

    If a council were spending more on council house maintenance than it was getting in rents, I’d be worried, but in any case, it wouldn’t be relevant to the point at hand.

  16. Can someone help me, please? Is there an example of a ring-fenced tax in operation?
    Thanks in advance.

  17. The Congestion Charge is ring-fenced. But technically that’s a charge not a tax. I can’t think of anything that’s explicitly a tax that’s ring-fenced in the UK.

  18. Nick Luke:

    Can someone help me, please? Is there an example of a ring-fenced tax in operation?

    The TV Licence is the only obvious example I can think of.

  19. Curmudgeon:

    And the analysis of course completely ignores any benefits derived from motor transport, which presumably are at least equal to the total financial outlay on it.

    If the person receiving the benefit doesn’t incur the full cost there’s no reason why they must balance. Inefficient market, innit.

    Ian Bennett

    He apparently fails to realise – or, he realises but chooses to ignore – that everything he consumes, except for utilities, is transported by road. Cyclists are not the unwilling victims of the evil motorist. How much does the average cyclist contribute to the road network?

    Products consumed are indeed transported by road, and the cost of doing so is reflected in the purchase price. If the cost of transport must increase to pay for wider societal costs then everyone who purchases goods, benefits from that transport would pay proportionately.

    Nobody is saying road transport doesn’t have benefits, just that those who benefit be they motorists or consumers or public transport users, pay appropriately.

    DocBud

    This all misses the point that the report regarding the “true” cost of motoring will all most certainly be complete and utter bollocks

    You are welcome to come up with your own figure, here’s a few things you might or might not want to include

    Road building
    Road maintenance
    Accidents
    Protection of other highway users from motor vehicles
    Policing/courts/prisons for motoring related offences
    Congestion
    CO2 air pollution
    Non CO2 air pollution
    Noise pollution
    Vibration damage
    Maybe even some part of the land value given over to roads, particularly motorways.

  20. Rob

    State raises £50bn from motorists, but spends only £9bn on roads.
    Motorists unhappy.
    State produces report claiming the ‘real’ costs are enormously high.
    Credulous cyclist is triumphant.

    If they was any attempt to fudge the numbers one would also expect to see it in the ‘revenue raised’ side of the equation, however looking at the estimates provided by various organisations on page 7 of the report, the figure of £50bn is on the high side. Even the Sun and the TPA only estimated road transport revenues at £30bn

    http://www.thesun.co.uk/sol/homepage/news/money/3361249/Drivers-pay-for-roads-twice-over.html

    http://www.taxpayersalliance.com/home/2011/01/tpa-reseach-motorists-throttled-excessive-taxes.html

    So do we accept both the £50bn revenue and £75bn costs figures or reject them both, because it would be bad form to accept one and reject the other without evidence to show why?

  21. The £50bn figure includes VAT on fuel and vehicles. £30bn is the taxes and charges specific to motoring. (both are round numbers)

    By far the largest part of the £70-95bn estimate for externalities is congestion costs, which are borne not by “wider society” but by motorists.

    I think a very good case can be made for discouraging motoring and encouraging cycling, but not by reference to these numbers.

  22. Not entirely true, cyclists and bus users are two other groups affected by congestion.

    However even within motorists, not everyone values congestion in the same way, back to that inefficient market. If the full cost of motoring is borne by those who create those costs then they can decide if it is really worth it and resources are allocated more efficiently.

  23. Paul, my almost-identical “twin brother” doesn’t actually exist; he’s a device for explaining how the motorist pays more tax than an otherwise-identical-in-every-respect non-motorist. I assumed you would have realised that.

    “If a council were spending more on council house maintenance than it was getting in rents, I’d be worried, but in any case, it wouldn’t be relevant to the point at hand”

    Surely the simple fact that “housing” is an item that my tax must pay for indicates that rent does not cover maintenance. The relevance is to your notion of rent being “slashed” (downwards) to the level of maintenance.

  24. Ian Bennett:

    Paul, my almost-identical “twin brother” doesn’t actually exist; he’s a device for explaining how the motorist pays more tax than an otherwise-identical-in-every-respect non-motorist. I assumed you would have realised that.

    I did. That’s why I pointed out that it wasn’t a useful device, because you can twist it to say whatever you want. If he is identical in every other way, then he must have more disposable income, due to not spending it on motoring. So what is your device spending it on? If he were spending it on fags and booze, he could be paying more tax. All your device really amounts to is telling us that motoring attracts taxation, which I think we all knew anyway.

    Surely the simple fact that “housing” is an item that my tax must pay for indicates that rent does not cover maintenance.

    You haven’t demonstrated that that is the case, you’ve just indicated that housing (possibly including items beyond maintenance) is an item on which the local authority spends some of its revenue.

    The relevance is to your notion of rent being “slashed” (downwards) to the level of maintenance.

    The point was that there are some militant motorists who imply that charges on motoring shouldn’t exceed the cost of road maintenance, but wouldn’t tend to apply the same rationale in other areas, such as council housing.

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