When will drivers start paying the full costs of motoring?

With more and more cars becoming less polluting, the Government can see that the revenue generated from Vehicle Excise Duty is set to decrease year by year. Car tax will no doubt be restructured to account for this but there’s also a very strong argument that motorists should pay to use the roads they damage. Many motorists believe they already pay to use roads via ‘road tax’ or the ‘road fund licence’. Both are the same thing, both were abolished in 1937. Motorists haven’t paid directly for roads since then, and only paid for two short stretches of new roads before the tax was abolished. But read the letters in the red-tops, or do a twitter search on ‘road tax’, to be confronted with ignorance of what actually pays for roads. (And hate, too, many motorists believe their payment of a pollution duty – mistakenly believed to be a ‘tax that pays for use of the roads’ – gives them more rights to be on roads than “tax dodger” cyclists, but same drivers don’t bang on about those motorists who pay zero VED).

The most vociferous proponent for road pricing is the RAC Foundation. In its latest report, published today, the RAC Foundation again calls on the Government to stand up to nay-sayers (1.8 million motorists signed a petition against road pricing in 2007) and introduce a pay-per-mile system.

Interestingly, the Institute of Fiscal Studies, which produced the report for the RAC Foundation, said:

“Road use generates costs which are borne by wider society instead of the motorist.”

Read that again. This is the RAC Foundation and the IFS admitting that motoring generates what economists call “negative externalities”. The orgs omitted “negative”, but still, this is ground-breaking stuff. Here’s more from the report:

“These ‘externalities’ mean that in the absence of taxation or pricing, there is an inefficiently high level of road use. Taxes can help bring private demands into line with the socially desirable level. Several different externalities are associated with motoring. Some, like carbon emissions from burning petrol and diesel, are easily addressed through fuel duties as the costs depend entirely on fuel use. Others, notably congestion but also the costs of noise and accidents, vary enormously according to where and when someone drives.”

The rest of the report then goes off to lobby for road pricing. The executive summary is very careful to talk about VED, rather than “road tax.”

But let’s explore those “externalities.”

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].”

In the UK, there is already a kind of excise tax on bicycles. A very small percentage of the money we spend in bike shops (except Halfords) is given to the Bike Hub fund. This part-pays for the Bike It cycling-to-school programme; Bike Week; the New Ideas Fund; and BikeHub.co.uk Disclaimer: I sit on the Bike Hub committee and I edit BikeHub.co.uk.

HYPOTHECATION & WHY THERE’S NO SUCH THING AS A TAXATION OPT-OUT
Taxes and Charges on Road Users, a 2009 report by the Transport Select Committee, said hypothecation is “the establishment of a direct link between specific taxes or charges and specific expenditure. For example, taxes levied on alcohol might be earmarked for spending on hospitals. In the UK there is no such link for taxes.”

The report said:

“the Government opposes the idea of hypothecation of tax revenues. It argues that decisions about revenue raising and spending should be kept separate for two main reasons:

• if all income were to be hypothecated, it would create severe difficulties for those services that could not readily raise revenues, such as schools, hospitals, police and defence; and
• inefficiencies would result. For example, if a large sum was raised from road users, hypothecation would dictate that it was all spent on roads (or possibly other transport modes, such as buses), even if the public priority was for more investment in, say, education.”

So, the taxes raised from motoring do not, and can not, ever go to facilities for motorists. If they did, the taxes raised by alcohol sales could be used to build bigger pubs. And married couples without children could ask for their taxes not to be spent on schools; and pacifists could ask for their taxes not to be spent on Trident nuclear submarines. Taxation doesn’t work this way.

  • http://twitter.com/bassjunkieuk Mark Skrzypczyk

    I was going to try and post a link to a picture of my side of the exchange but I sent them back about twice as many ;-) Still they can be viewed in my timeline here starting from about here:u00a0https://twitter.com/bassjunkieuk/statuses/202131895067213824

  • http://www.quickrelease.tv carltonreid

    Odd that it’s a company account and not just a crazed individual.nnWhy spout guff and be aggressive for no real reason (other than blind hate, I suppose)?

  • http://twitter.com/jpstacey J-P Stacey

    Even odder that Kitchen Kit Ltd seems to have returned with complete amnesia, not even deleting their old tweets (I would say: what would be the point once they’re screenshotted? – but that doesn’t stop others from trying to do it.)nnI think there’s a certain sort of internet commenter that just wants to supply drive-by hate and rage and then bomb off: very similar, in fact, to the way that a lot of drivers interact with cyclists, bellowing out of windows as they overtake them too close.u00a0nnWhen such commenters realise they’ve grabbed a tiger by its tail, and that moreover there’s more of them than they thought, and moreover moreover that the multitude is in the right, and have facts to back up what they’re saying, then such commenters just disappear, as far as online presence is concerned.nnI would also say that it comes as a real, frightening shock to some drivers that the privileges they’ve assumed for so long are actually castles built on sand. Some of the angriest drivers I’ve encountered: there’s fear there too.

  • Lawrence John

    Total nonsense – motorists pay 48B per annum and 9B is spent on them. The externalities are complete rubbish – for example, the 10.9B ‘on delays’ – would we be 10.9b better of if everyone was walking around, with no cars?nnLook at the economy in a totally poverty-stricken, transport stifled country like Sudan before answering!nnALSO -nFirst they created parking meters, saying that ‘those who use the roads will pay for them’nThen they created ‘road tax’,u00a0saying that ‘those who use the roads will pay for them’nThen they taxed fuel,u00a0saying that ‘those who use the roads will pay for them’nThen they created toll roads,u00a0saying that ‘those who use the roads will pay for them’nNow they want ‘road pricing’,u00a0saying that ‘those who use the roads will pay for them’

  • http://www.quickrelease.tv carltonreid

    The ‘delays’ stat is by that bunch of commies, the CBI…nnExternalities may be rubbish to you but then you’re not an economist. Even the RAC now mentions externalities in their Annual Report on Motoring. nParking meters are there to prevent or limit on-street parking by motorists who would otherwise hog a fininte and in-demand piece of ground. nTaxation of fuel was around before cars. ‘Road tax’ lived for under 20 years andthe monies raised paid for a few road widenings and a couple of new stretches of road. Since 1937 all roads have been paid for by all tax payers, whether they drive or not.

  • David

    u00a0Actually, even leaving aside the externalities, motorists have significantly more than u00a39bn spent on them … that is only the cost of roadbuilding. What about the costs of damage to life and property caused by motorists involved in accidents, medical bills, policing, recovery of damaged vehicles, all of those are costs directly attributable to motoring that are also paid out of general and local taxation.nnAnd that is before we get to the costs of operating the DVLA, and the whole driving licensing and testing infrastructure among many other things. nnYou actually almost make the point yourself. You only quibble about the cost of delays at roughly u00a311bn – even if you leave out those costs it is still almost a break-even position at u00a348.1bn paid in and u00a346.8bn paid back. nnWhich only leaves the fact that you clearly don’t understand that the tax system is not a “get out what you put in” system, but one that functions on the basis of some areas of life cross-subsidising others.

  • David

    u00a0Sorry, not able to edit. That should say “… leaving aside the delays …”