Finally the Government are facing the facts on Vehicle Excise Duty

July 10, 2008 11:58 AM

Abc_018Since the day it was announced we've been pointing out that the Government's rhetoric that the changes to Vehicle Excise Duty will have few losers, are a green tax on gas-guzzlers, is deeply misleading.  Our "what's my car tax" database shows how the bills will rise  for nine out of ten new car models and has information on hundreds of how hundreds of older cars which will also be hit.  Now, the Government are admitting it.


It appears quite likely that this measure was poorly thought through and didn't have the effects they intended it to.  Edmund King, from the AA, said at the time: "They rushed into this without thinking through the implications - it's a bit of a cock-up."  However, this wasn't just poor planning.


The fundamental problem is that under the logic of the environmentalist movement, which claims to want to make up for externalities when we burn fossil fuels, green taxes are already set too high.  We showed this in our report, The Case Against Green Taxes (PDF), which found that green taxes raise £10 billion above the total social cost of British carbon dioxide emissions.  Motorists face a particularly high burden; another TPA report, The Economic and Political Case Against Higher Fuel Duty (PDF), showed that the average motorist is already paying between £513 and £471 a year more than is fair.


Combine those already high green taxes with high fossil fuel prices, driven by demand in developing countries, and there are plenty of incentives to use less petrol.  Ordinary people are already doing what they can to keep down fuel bills, they are already driving more efficient and smaller cars if they can and using public transport if it offers an efficient and affordable alternative.  Unfortunately, outside the major cities public transport often isn't an effective alternative and people need to drive to get around.


People who still drive cars with poor fuel economy are mostly those who either don't drive very often, have a large family they need to accomodate or who are rich enough to ignore the huge financial incentive to maximise fuel economy.  If you try and target the last group you wind up hitting the other two.  Vehicle Excise Duty is a particularly crude way of imposing additional taxes on motorists as it does not vary based on how much people drive.  This will mean a lot of people facing an additional burden wildly disproportionate to the amount they use their car.


When new green charges are put in place the main effect people see isn't a marginal increase in the already huge incentive to run an efficient car.  What they see is a Government using green rhetoric as a smokescreen to conceal yet another imposition on hard-pressed motorists and not being straight with them.  They are rightly angry.

Abc_018Since the day it was announced we've been pointing out that the Government's rhetoric that the changes to Vehicle Excise Duty will have few losers, are a green tax on gas-guzzlers, is deeply misleading.  Our "what's my car tax" database shows how the bills will rise  for nine out of ten new car models and has information on hundreds of how hundreds of older cars which will also be hit.  Now, the Government are admitting it.


It appears quite likely that this measure was poorly thought through and didn't have the effects they intended it to.  Edmund King, from the AA, said at the time: "They rushed into this without thinking through the implications - it's a bit of a cock-up."  However, this wasn't just poor planning.


The fundamental problem is that under the logic of the environmentalist movement, which claims to want to make up for externalities when we burn fossil fuels, green taxes are already set too high.  We showed this in our report, The Case Against Green Taxes (PDF), which found that green taxes raise £10 billion above the total social cost of British carbon dioxide emissions.  Motorists face a particularly high burden; another TPA report, The Economic and Political Case Against Higher Fuel Duty (PDF), showed that the average motorist is already paying between £513 and £471 a year more than is fair.


Combine those already high green taxes with high fossil fuel prices, driven by demand in developing countries, and there are plenty of incentives to use less petrol.  Ordinary people are already doing what they can to keep down fuel bills, they are already driving more efficient and smaller cars if they can and using public transport if it offers an efficient and affordable alternative.  Unfortunately, outside the major cities public transport often isn't an effective alternative and people need to drive to get around.


People who still drive cars with poor fuel economy are mostly those who either don't drive very often, have a large family they need to accomodate or who are rich enough to ignore the huge financial incentive to maximise fuel economy.  If you try and target the last group you wind up hitting the other two.  Vehicle Excise Duty is a particularly crude way of imposing additional taxes on motorists as it does not vary based on how much people drive.  This will mean a lot of people facing an additional burden wildly disproportionate to the amount they use their car.


When new green charges are put in place the main effect people see isn't a marginal increase in the already huge incentive to run an efficient car.  What they see is a Government using green rhetoric as a smokescreen to conceal yet another imposition on hard-pressed motorists and not being straight with them.  They are rightly angry.

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