A hot topic of conversation at the moment is inflation, and in particular the spiralling cost of petrol and diesel in the UK. Car drivers are quietly seething while they watch petrol prices rise steadily beyond the £1.10 a litre mark. Diesel is at £1.20 a litre and rising, despite the European average being just 60p. The Chancellor seems intent on pressing ahead with 2p-per-litre tax increases with each passing budget, despite taxation making up nearly 70% of the cost of a litre of petrol. Meanwhile BP have announced that their annual profits are up 48%. The short-term forecast is grim: expect to pay £1.50 per litre of petrol within the next four months, almost £7 a gallon.
Apart from a gently increasing tax burden, the main reason for the escalating prices it that crude oil is at an all-time high, having been at $24 a barrel in September 2000, the events of 9-11 and beyond have pushed the price to around the $120 mark.
The economic impact on UK businesses is quite severe. Today 65 haulage lorries converged on Downing Street to protest at the price of diesel fuel, which has increased 30% in the last year, thus taking the average weekly fuel bill per lorry to around the £1,000 mark. Try being competitive on price against European rivals who pay 50% less for their diesel - many companies are getting seriously worried.
So, we have a problem. What is the Government doing about it? Nothing.
Why? Well apparently, it's good for "the environment" to charge people more for their fuel. I see! So by charging more, people will use their cars less? Sadly, no. We won't all suddenly hop on buses, swap our petrol cars for diesels, or hybrids, or use the train more (because average annual fare increases of 8% aren't tempting either). In the same way that we're not all cancelling our holidays now that we have to pay an environmental charge for our aeroplane fuel. People will go on with their usual behaviour patterns, bite the bullet, and pay more for the same product - as simple as that. We'll all be getting a lot poorer, with the average UK weekly pay up just 2.9% in the last year, salaries cannot hope to compete with the current price rises.
If the Government was serious about helping out not only their citizens, but also their own economy, then they might consider cutting some of the heavy tax burden on petrol and diesel. Before a rampant Green party member accosts me with a wet lettuce, I'd like to point out that the environmental benefits of the increased fuel taxation are negligible - carbon emissions from privately owned cars are set to fall by just 1% by 2010 as a direct result of taxation.
It is interesting to speculate about the government's aims apropos taxation on transport. Are they perhaps working towards a less mobile population - one that no longer goes away for short breaks, or uses their cars so often? Are they aiming to move even more people out of the countryside and into towns and cities, by imposing crippling taxes on the off-road vehicles favoured (and needed) by farmers and those living in rural communities? Or are they merely flailing wildly, trying to get cash from anyone who can pay? Given the recent decision to scrap the 10p tax band, I would suggest that the latter is true - they're short of money, and are tightening their belts the only way they know how. A small increase on the higher tax band might bring in some of the money they need to plug the ever increasing national debt.
I wonder what Gordon Brown is saving up for? An electoral "Treasure Chest" perhaps, to curry favour with the masses? If he doesn't act soon, I fear he'll have more than just financial problems on his plate.
3 comments:
Interesting post, Pete. I think you're right to say that the green arguments put forward by successive governments as a justification for fuel tax increases are a load of greenwash. Particularly so now that we can see how little of the revenue generated has been ploughed into alternative forms of transport, leaving car users in a catch-22 situation with no alternative to driving, so they simply have to swallow hard and pay up. Of course the real reason for the high level of fuel tax in the UK is that it's a stealthy way of keeping income tax - the most visible form of taxation - under control. People are less likely to notice semi-hidden taxes on transport, goods and services. In other European countries they are more honest about taxation and simply whack it on up front. But then we've always been rather American about these things.
But let's get back to the environment. What's your solution for cutting carbon emissions from private vehicles? You seem all in favour of exponential growth in car use, irrespective of how polluting they are. I hope I'm wrong about that. My solution to the gas guzzlers (the vast majority of which are actually driven by wealthy people who live in towns and cities) would be tax them into oblivion, with limited exemptions for farmers and people who live in remote areas. Et tu?
I agree with taxing the urban users, and leaving the rural ones (with no choice) alone.
In Canada they sell 'purple gas' in the countryside. Purple gas is literally dyed purple, and is only sold (tax free) at farming gas stations, to people driving a vehicle with farming license plates. Police do spot checks of non-farm license plated vehicles to ensure they aren't running on purple gas. Everyone else gets taxed at the pump.
Okay, so it's obviously not the end -all solution (we still all drive 4x4s to the end of the street without a thought), but at least they're not penalising the people who need to run large vehicles on a daily basis.
Purple gas?! We have "red diesel" in the UK, sold at rural petrol stations to farmers. It's an offence to have it in your vehicle if you're not registered to buy it. The trouble is, it tends to be sold to farms for their tractor fleets, whereas there are thousands of "ordinary" (non-farming) folk who live in the countryside, and do high mileages, who aren't allowed to buy it.
As for taxing gas-guzzlers, I firmly believe that the answer lies in cleaner cars - such as the Toyota Prius / Honda hybrid. Modern diesels are excellent, polluting on average 33% less than a modern petrol engine, while doing roughly 45% more miles per gallon. With Volvo and Renault working on water/air-powered engines, there is hope - assuming that the oil companies can step aside and let the new technologies take off...
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