Nobody has the right for “their” tax to be spent on “their” projects, not even motorists

A press release on motoring taxation (“Motoring Tax is Highway Robbery Says IAM”) sent out today by the Institute of Advanced Motorists is getting car blogs and auto-centric news websites all in a tizzy. Many of them are talking about “road tax”, something that was abolished in 1937. Interestingly, neither the IAM press release nor the report it’s based on, mention “road tax”, although the report isn’t terribly au fait with the way the UK Government works.

“The government spends only about one-third (£12,752 million) of its total tax revenue from road users (£43,885 million) on roads and local public transport.” IAM, July 11th 2011

The money the Government raises from motorists is not ring-fenced for motoring-related expenditure. Revenue ring-fencing is something vehemently opposed by Governments down the ages, and for very good reasons.

The argument that money raised from motorists ought to be spent on motorists is a weak one and motoring organisations do themselves no favours by wheeling out such an argument. In fact, they have been doing so from the earliest days of motoring but it doesn’t wash with Governments.

Motoring organisations would be better off arguing about the many benefits of mass car ownership; the we-pay-squillions-so-ought-to-get-squillions-back case is easily swatted away, behind the scenes, by Treasury mandarins.

If the money paid by motorists did go back to motorists, all hell would break loose. Interest groups of all creeds and colours would start demanding “their” tax contributions should only go to fund “their” projects. But society does not work that way; can not work that way.

There are no taxation opt-outs: married couples without kids cannot ask that the fraction of tax they pay for schools should instead go to child-free projects; pacifists cannot specify that the tax they pay goes on overseas aid rather than defence spending. And motorists can’t successfully demand that the money they give to the Government is given straight back to them in the shape of smoother, less congested roads.

Smoother, less congested roads would be wonderful for all road users, not just motorists, and such infrastructure – a shared national resource – is paid for by all taxpayers, not just motorists. The public highway is, by definition, for the benefit of the public, not a sub-set of the public.

“Investigative” TV programmes have often fallen into the “motorists are getting ripped off” trap. Last year, ITV’s Tonight programme wondered aloud why the duties paid by motorists aren’t all spent on roads:

The Tonight reporter said he could reveal that £47bn was raised in taxes but only a fraction of this was “spent on roads”. This ‘exclusive’ was attributed to the Road Users’ Alliance, and portrayed as though the statistic was new and shocking. In fact, the RUA has been using the same basic ‘only a fraction spent on roads’ stat since the alliance was founded in 2002.

And it’s the same sort of statistic wheeled out by the RAC and IAM and any number of other motoring organisations.

“The Government raises almost £50 billion from motorists, and returns less than one fifth of this in spending which directly benefits the road user,” is the standard ring-fencing refrain from the RUA.

rua

What the RUA and all the other organisations fail to stress – an error repeated by the ITV programme and countless car blogs – is that the money generated by motorists is NOT a fund to repair roads and build new ones; it’s money that goes straight into the national pot, the Treasury’s Consolidated Fund, the public purse.

Airline passengers pay taxes when they fly from British airports but nobody suggests all this money should go to building more runways. Drinkers and smokers pay big-time for their tipples and their filter tips but the billions raised by duties on booze and ciggies are not spent on bigger and better pubs, or swankier tobacco emporiums.

When he was Chancellor, in 1925, Winston Churchill railed against ‘Road Fund’ ring-fencing:

“Entertainments may be taxed; public houses may be taxed; racehorses may be taxed…and the yield devoted to the general revenue. But motorists are to be privileged for all time to have the whole yield of the tax on motors devoted to roads. Obviously this is all nonsense…Such contentions are absurd, and constitute…an outrage upon the sovereignty of Parliament and upon common sense.”

The ring-fencing had been started by Lloyd George in 1909, with ‘road tax’ and fuel duties pumped into a hypothecated Road Fund. Lloyd George’s 1909 budget is quoted in the IAM report, although it’s not mentioned that his ‘road fund’ lasted only 17 years. For a just a blink of an eye, motorists paid into a ring-fenced fund which helped pay for some road crust improvements and a handful of road realignments.

WinstonChurchill1925CommonSense

But such ring-fencing was always controversial; to the Treasury anathama. Churchill wanted to quash the Road Fund. He – and the Treasury – plotted against it. Churchill famously made ‘raids on the Road Fund’ in the mid-1920s, all but killing it off. By 1937, the Road Fund – which had been fatally wounded ten years previously – was finally abolished. Amazingly, the concept of a Road Fund, paid for by ‘road tax’ (still, wrongly, believed to be a payment for the upkeep of roads) has lingered on in the folk memory of motorists.

Many motorists – perhaps even the majority? – still believe that ‘road tax’ exists, and demand that the duties paid by motorists should be ploughed into fixing potholes, widening dual carriageways and adding to the UK’s motorway network. In reality, everybody pays for Britain’s roads via general taxation. Paying fuel taxes and Vehicle Excise Duty (VED) confers on motorists no right to the use of Britain’s roads. Motorists are allowed to use roads ‘under licence’, not as ‘a right’.

Motorists do not pay for use of the roads, motorists are taxed on buying and using their vehicles. VED is not a tax on roads, it’s now a tax on emissions: cars which spew the most CO2 pay the most Vehicle Excise Duty. Cars which spew less CO2, pay less VED. Cars in VED band A pay zero duty.

Motorists are not the only users of public roads. Pedestrians, cyclists, and horse-riders also use public roads. So do farm tractors but, even though they’re heavy and so damage roads, they do not pay Vehicle Excise Duty. They have to display tax discs, but these are issued free of charge. Motorists have been filmed attacking cyclists for “not paying road tax” yet there are no known cases of motorists attacking farmers for the same perceived ‘crime’. And nor do motorists attack band A cars, disabled drivers, the Royal family, or other “road tax dodgers” out there, of which there are millions.

UK motorways and trunk roads are paid for with cash supplied by the Highways Agency via the Department of Transport via the public purse via all UK tax payers; all other roads – that is, 87 percent of all the roads in the UK – are paid for by local authorities. Local authorities get some grant aid from national Government, but most of the cash for local roads is raised locally, via council tax. Non-motorists pay the same for roads as motorists.

Externalities
What IAM doesn’t didn’t mention in its press release, and what organisations like the RUA don’t factor into their equations, is the many external costs of motoring. In effect, Britain’s motorists are subsidised to drive.

IAM said: “Since 2002, the government has spent more on rail infrastructure than road infrastructure, although rail is used for only seven per cent of all passenger travel. In 2008 the government spent £4,807 million on road infrastructure compared to £5,567 million on rail infrastructure.”

To motoring organisations, spending on roads is “investment”; spending on railways is “subsidy”.

The 2009 Transport Select Committee report, Taxes and Charges on Road Users, calculated the total taxes and charges on UK road users as £48 billion per annum. The report quoted the typical annual expenditure on roads as about £8-9 billion.

In the same report, the Department for Transport estimated that the average marginal external cost of driving a car an additional kilometre is 15.5 pence allowing for the congestion (estimated at 13.1 pence per kilometre), infrastructure, accidents, local air quality, noise and greenhouse gases. This compares to 3.6 pence per kilometre paid in fuel duty and VAT.

However there are other costs to society as a result of our existing car-dependent transport patterns. In 2009 a Cabinet Office Strategy Unit report on urban transport attempted to quantify the costs of our existing urban transport patterns. Working with the Department for Transport, the Department for Communities and Local Government, the Department of Health and the Department for Environment, Food and Rural Affairs (Defra), they arrived at the costs shown here:

Costs of driving

The figures are based on the best available evidence sources, adjusted to 2009 prices. Where there is uncertainty or disagreement, they have stated the likely range as shown in lighter shading in the bars. The conclusions changed policy makers’ understanding of the situation. Previously, congestion had been thought to represent the majority of transport’s external costs to society. Now the combined costs of accidents, air quality, physical inactivity, greenhouse gas emissions and noise at £27-38 billion per annum represent 71-78 per cent of the total.

The total cost for the English urban areas is estimated at £38-49 billion. Given that the Cabinet Office’s report states that this covers 81 per cent of the population, scaling up the appropriate impacts gives an estimate of £43-£56 billion for the whole of the UK.

It is important to note that the report makes no attempt to quantify the external costs of negative social impacts, despite referring to reduced social cohesion and interaction as a result of traffic. Yet research in Norway estimated that the cost of community severance (the ‘barrier effect’ due to transport infrastructure such as busy roads) is greater than the estimated cost of noise and almost equal to the cost of air pollution.

The Cabinet Office report also excludes the impacts of noise pollution on health, productivity and the ecosystem and does not attempt to quantify ‘quality of life’ impacts of the built environment. However it acknowledges that all these areas could represent significant additional costs, mentioning for instance an additional £4-5 billion for noise impacts on health and productivity alone.

Alternatively, estimates of the marginal costs of road transport provided in a report commissioned by the Department of the Environment, Transport and the Regions result in a higher total cost figure of £71-95 billion (in 2006 prices). This excludes the costs of physical inactivity and other as yet un-monetised costs such as severance effects and loss of tranquillity. According to the Campaign to Protect Rural England and Natural England, the monetary values for landscape and loss of countryside have not been calculated.

The Campaign for Better Transport extrapolates from the Government research on marginal external costs to reach a total cost of externalities of £70 billion–£95 billion per annum at prices for 2006.

The Sustainable Development Commission, a non-departmental public body (2000-2011) responsible for advising the UK Governments, concluded:

“So it would appear that the overall costs imposed on society by motoring outweigh the revenues obtained from motorists, probably very substantially.”

And the externalities of driving costs don’t include noise pollution (£3.1bn); air pollution (£19.7bn – not including CO2); water pollution (between £1bn and £16bn); or obesity (£2bn).

Subsidy for driving

But there are other, hidden subsidies, too. Donald Shoup, Professor of Urban Planning at UCLA in the US, estimates that providing free off-street car parking in the US cost a whopping $386bn in 2002 (in the same year, the US government spent $349bn on defence). As UK town planners operate to similar rules to their US counterparts – in that any major development has to have a set number of parking places, most of them unfilled but there ‘just in case’ – UK drivers get similar parking subsidies. No doubt it’s in the magnitude of many billions of pounds.

Fair’s fair. If cyclists were ever asked to contribute cash to get a “seat at the table”, to have a say in transport infrastructure decisions, any payment they made for the provision of excellent cycle facilities ought to be offset by the cost savings made by cyclists for the benefit of the economy. Going on just some of the externalities, we could be due for a rebate of somewhere in the region of £50bn. Such a rebate isn’t far-fetched. In Norway, the Norwegian Public Roads Administration pay for employees to cycle to work instead of driving. In Copenhagen the city calculates that for every kilometre a citizen on a bicycle rides, society earns 1.22 kroner [25 US cents]. For every kilometre a citizen drives in a car, society pays out .69 kroner 89 [13 US cents].”

And the above subsidies to British motorists don’t include cash from the 2009/10 ‘scrappage scheme’. 360,000 UK car buyers were gifted with £400m of tax payers’ money. And the UK Government also subsidises the purchase of electric cars to the tune of £5000 per car buyer. Stimulus for a new industry? Er, so there’s a cash hand-out for electric bikes, then? Nope, just cars. The Nissan electric car plant in Sunderland also received fat start-up grants.

All of the externality figures can now be revised upwards. In short, motorists are not cash cows, they’re cash sinks. Of course, the externality equation doesn’t factor in the many societal and financial benefits of motoring (I have a car, it’s dead useful for many journeys) but costs are costs and if motorists had to pay the full costs of motoring, they’d be paying an awful lot more than they do now.

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iPayRoadTax.com is an ironically-named campaign supporting the road rights of cyclists. The message that cyclists have equal rights on the roads is carried on iPayRoadTax t-shirts and jerseys.

  • http://www.kimharding.net/blog/?cat=9 Kim

    Very well put.

  • http://www.quickrelease.tv carltonreid

    And not just because I copiously credit your earlier work?

  • Anonymous

    ‘Airline passengers pay taxes when they fly from British airports’nnPerhaps the money should be spent on building more ‘sky’ for the aeroplanes to fly in? ;)

  • http://www.quickrelease.tv carltonreid

    iPayAirTax.com…

  • Anonymous

    One could equally argue that motoring related taxation is needed to pay for the health service costs when many motorists let themselves get “a little portly”, sometimes injure and kill, and just the sheer extra load that motor vehicles put on the road surface causing wear and tear.

  • Fb

    Ok, so if cars, lorries etc were banned tomorrow, the exchequer would make more money? Have another think about that one…. Entire collapse of the economy anyone?

  • Danny G

    Interesting points but a couple of points you raise I do have to disagree with….”Non-motorists pay the same for roads as motorists.” Is obviously incorrect because non-motorists pay council tax (which you claim is the main contributor to the cost of road maintenance but motorists pay council tax and VED, and tax on fuel and tax on insurance….I’m no mathematician but I’m sure that means motorists pay more than non-motorists.
    Also you mention the cost of “negative social impact” caused by roads, but what about the positive social impact of roads? Being able to visit family, friends, taking holidays, visiting tourist attractions, being able to travel the length and breadth of the country in hours not days, attending large social events etc, etc, etc. without roads our society would suffer a far greater negative social impact than having them. Otherwise I agree with many of the points raised.

  • David Birch

    Every tax should be ring fenced, the argument that it’s not feasible these days is silly, ever heard of the internet? Making 1 group of people pay for something else is just plain wrong.

  • Linas

    This is misleading – kind of sick logic (probably cyclist was behind the conclusion). Majority of externalities occurs exactly and only because spending on road network is insufficient. Simple example – percentage of accidents, fuel consumption (hence pollution) and delays are in comparison very low on motorways. If we improve the roads to have more lanes, flow etc. The congestion, pollution and accidents going to reduce. In no ways they can be attributed to externalities, but rather to poor financing and improvements. If the money raised by the motorist going to be invested in the road network externalities going to diminish. Similarly Physical inactivity cannot be attributed to motoring – if I drive to gym how comes I am physically inactive, similarly would I be better off taking tube or bus everyday? How many overweight people are using public transport? Physical inactivity is the way of live for certain people and in no way it correlates to motoring. The correct equation would be that the Receipt is Ved + duties + other costs + excess delays (about every journey in London) + accidents, so = 67.7 while the Costs = Air quality (4.5b), Emissions (1.2b) and Noise (3b) + maybe 20% of physical inactivity (2b), so 10.7. I deliberately used the lowest figures for costs, because it is obvious that excess cost is caused not by motorists, but by insufficient infrastructure . That means that motorists are contributing to economy or simply just losing 57b, not receiving 9.6b in subsidies. This is just the way you interpret the figures.