Wednesday, 2 April 2014

April Fools it was, UK is not getting rational road pricing soon

I may have tweeted this yesterday...

Scott Wilson ‏@roadpricing  

"UK Labour Party to announce plan to scrap VED and halve fuel duty in exchange for pay-as-you-go road pricing based on weight and emissions"

but no, I wont expand on that tiny April Fools joke.

Whilst the Liberal Democrats did include in their manifesto an interest in road pricing (and in ending spending on upgrading roads), for either major political party in the UK to bite the bullet on this issue would require both the policy foresight and PR skills to pull off convincing voters that existing taxes would be reduced or abolished in exchanged for paying for road use directly.

It isn't going to happen soon.

Why?



1. Cynicism:  The overwhelming political mood among voters is to not trust politicians.  Any politician who would talk gleefully about a new way of paying for roads will simply be seen as one who wants to raise taxes.  Few voters will genuinely believe that that politician would reduce other taxes in exchange.  It will take a lot of hammering home that point for it to get in to enough voters to be worth risking.  Although the HGV levy is an example of this (the vignette effectively replacing much of VED for lorries), that is largely invisible to most voters.

2. No political mileage in it: Really, there is no votes in this. Unless there is a concerted effort to demonstrate that most voters will be better off, many will think the opposite.  To make it work, road pricing revenue would need to be hypothecated to highway spending and for that money to be clearly seen as being well spent.  So there needs to be a leap forward in infrastructure management, but also needs to be a demonstrable commitment to reducing other taxes. VED should be reduced to a level akin to an administrative charge, and fuel excise duty should be cut by at least enough to provide highways funding through road pricing.  The greater the willingness to cut fuel duty relative to road pricing, the bigger chance it may have.  That may be difficult for Treasury to support, but the dynamic economic benefits of charging road users directly should well exceed any short term losses in taxes.

3. Treasury opposition to refunding fuel tax:  Now Treasury will support road pricing, as an additional measure.  It will be opposed to treating fuel excise duty as anything to do with roads or road users, so will reject reducing other taxes in exchange for road pricing.  In part it is about control, there is an inherent distrust in letting a tax that can be spent on anything be replaced by charges dedicated to one area of government spending.   Treasury will rightfully fear that the justification for 58p/l fuel tax lessens somewhat if around 15p/l is taken off for roads, or even 25p/l for all government transport spending.  Don't underestimate the inertia that civil servants can put around ideas they don't like, it will take determined and united Ministers to fight this one.

However, that doesn't mean it will go away as an idea, or that the status quo is sustainable or remotely desirable.  It's far from optimal, and the problem of the political difficulty of raising tax on fuel combined with the gradually lowering yields from ever more fuel efficient vehicles, is going to continue.

Thinking politically, those traditionally on the left will probably want to preserve that source of revenue, but face challenges as to how to raise such taxes without unduly and unfairly hitting the poorest - who are least able to buy more fuel efficient vehicles, and in some cases more likely to have to drive to get to work (because they don't work in a CBD with decent public transport, or their employment is at times that are difficult to commute by means other than by car).   Those traditionally on the right may be quite relaxed about ever reducing yields from fuel taxes, as it fits in with their belief in reducing the size of the state.  After all, whilst revenues exceed spending on roads (although more questionably on externalities), a believer in a small state can really only argue for road pricing because it is more efficient and more market oriented. Environmentalists will argue for road pricing because they can really target charging driving in cities at peak times as trips that should be by other modes.   However, populists will see it as a conspiracy to charge more, run by foreign corporations and to spy on everyone.

That is the conundrum faced by policy makers in the UK.

Confront all that, and it becomes quite easy!



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