Jul 2008 10

Finally the Government are facing the facts on Vehicle Excise Duty3

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.

Related Posts

  • Dave

    Hmmm Public transport as an alternative? Not really much of one, is it?
    I currently pay £170.00 a month to run my P reg Audi 1.9 TDI Estate. This comprises of £15 tax, £36 insurance, £19 MOT and associated costs and £100 for diesel. With this car I drop my daughter and her friend off at school, my wife at work, take myself to work and repeat the process in reverse.
    I also have a large (55kg) German Shepherd dog who loves the countryside and long walks, which we take daily. The car provides this freedom, all for £170 a month. I can reduce this by £10 a month as the parents of my daughter’s friend donate this amount for taking their daughter to school. So the new total is £160 a month.
    I then priced up what public transport would cost monthly to achieve a similar result, and I was shocked.
    To send my daughter on the bus to school and back again will cost £44 a month. For the wife to get to work and back is £82, and it is another £125 for myself, slightly more because I have to catch two buses as no single bus goes in the correct direction. A total of £251 a month. Now I can mitigate that down with saver cards, taking a third of the costs away, making it £167 overall. Note that I haven’t included the cost of my daughters’ friend; her parents will now have to pay for her travel. £167.00, sterling! It is extraordinary! I would have to get rid of the car, stop going for days out at the weekend, stop walking the dog on country walks with the family and more, all for it to cost £7 extra!
    Let’s not also forget the standing around in the cold, wet and rain, or warm rain if it is summer, waiting for a bus to arrive in its own time. Then having to sit on that, usually vandalized, bus with some of the strangest characters ever seen. I could go on and on, there is so much more that could be said but I will leave that to others.
    What sane person is even going to contemplate such a thing. Not I.

  • Graeme Pirie

    What’s really happened is Brown and Darling saw an opportunity under the “green” umbrella to cream a few extra Billion from the motorist.
    They then proceeded to blatantly lie about the number affected expecting to be believed.
    Just like the 10p tax, there is no way on earth that either of them were unfamiliar with the full effects of this tax… unless of course they’re totally incompetent.
    And again just like the 10p, they’re getting caught….
    When they start bleating “unforseen consequences” don’t believe a word of it.

  • Richard Garland

    I love Gordon Browns comment that we should be grateful for the high price of running a car now and switch to electric and hybrid cars.
    If his education system was upto scratch many more people would realise the laws of physics do not allow us to create energy from nothing.
    You cannot have a solar powered car capable of carting a family of four and food shopping 30 miles, let alone 300 miles for a holiday. Electric vehicles will not be able to haul 2 tonnes of weight any appreciable distance for many years to come on the roads we have now.
    The price of food is now our fault – as Gordon says we should eat all the scraps and throw nothing away.
    Equally the price of running a car is now our fault has we haven’t traded in our diesel 1.8litre estate for a Prius Smart eco-wind powered electric midget car.(PS Gordon – know ye a car dealer that will give us all a reasonable price for our unwanted vehicles we cannot afford to run !)