All entries for Sunday 09 January 2011

January 09, 2011

Mine's a Litre: Are We Paying Too Much for the Road Lobby?

Writing about web page http://www.guardian.co.uk/business/2011/jan/09/fuel-prices-truckers-threaten-blockades

Yesterday a friend asked if I liked UK Petrol Blockade 2011. It turned out to be a cry for Something to Be Done:

Fuel has gone up too far now the tax is mad By the end of 2011 it will rise to over 1.50 a litre so remember the petrol blockade in 2000 Time for that again i say it will lose the Fuel companys money so the government will also lose money and look bad as the companys will add pressure on to the government so will have to do something about it it will take time but we need to do something now

I didn't take this too seriously until this morning, when I read in The Observer:

The spectre of trucks blockading streets in protest at record fuel prices – on top of student and public-sector worker demonstrations – will be raised tomorrow when the haulage industry unveils a campaign to force government to halt rises in petrol duty.

I thought hard about this. What was it all about? It seemed to be aimed at the government. Maybe the logic behind it was this:

  • Fuel taxes are rising because the government needs more revenue just to pay for public services and welfare benefits that are currently funded from borrowing. Let's stop the government raising some of the taxes it needs, and force them to strip even more funding out of benefits, care homes, and so on. 

No, it couldn't be that. Maybe the real target was the oil companies:

  • Pension funds are already hurting because BP suspended dividend payments after the Gulf oil spill. Let's hit the pensioners even harder by disrupting oil company operations so that they face higher costs and lose more revenue and profits, and cut dividends further ...

No, it couldn't be that, either. Maybe it was simpler than I thought:

  • Consumers are already hurting because of job losses and price and tax increases. Let's hurt them some more by blockading fuel supplies so that we can't move around, go to work, or buy stuff ...

Hmm. Somehow, I thought, we're getting further and further away from reality. This was my last throw:

  • Food and oil prices are rising because the global economy's recovering from a dangerous recession. The recovery is increasing jobs, incomes, and the demand for commodities. As a result, oil prices have risen again. If the recovery is the problem, the solution's obvious. Let's stop the recovery and take the economy back into recession. If we can bring back the recession, oil prices can drop back down, making it cheaper for the people who lose their jobs a second time to drive the cars they won't be able to afford any more ...

I'm still struggling with that one.

The fact is that fuel should be taxed, for two reasons. First, fuel taxes are hard to avoid, so it's a good way to raise revenue. Second, burning fuel emits a lot of pollution and carbon dioxide, and the people that use it should pay society back for the damage they do to the environment we all have to share.

Is there any kind of case for giving the road haulage industry special treatment? A case that's been made involves unfair foreign competition.

Britishtruckers.com is arguing that UK firms are more at risk because of competition from abroad with foreign vehicles able to operate in Britain using cheaper fuel picked up on the continent.

It sounds compelling -- but think about it. There is less here than meets the eye.

Some truckers compete with foreign vehicles; others don't. The ones that face foreign competition are on the same routes as vehicles from overseas. That means they have exactly the same opportunities to pick up cheap fuel on the continent as their competitors. It's their choice if they fail to do so. No unfairness there.

In reality, the truckers that compete internationally are a situation no different from those that compete in the domestic market. If their fuel costs go up, they can either pass them on or not. If they can pass higher costs on to the customer, they're all right. If they can't, because their customers won't pay, there's a message in that -- like it or not.

It's not a case for special treatment.

On one point, I agree. In the UK, taxes on fuel are too high, relative to road charges. Fuel taxes should come down and, to compensate for this, congestion charges should be put in place in city centres and motorways. (And, of course, these charges will be paid the same by British and foreign truckers.) Why should this happen?

It is costly to provide roads, but in the UK nearly all road use is free. Because road usage is not priced, many of our roads are over-used. As a result, there is pressure to expand the road network, creating costs that would be avoided if road usage was not free of charge.

Other results of our lack of road charging include excessive wear and tear of roads (mainly by heavy trucks) and congestion (mainly by light passenger vehicles). Congestion wastes everyone's time and also increases fuel consumption because vehicles burn too much fuel while idling, creeping forward, and starting and stopping.

Some of the burden on motorists should be shifted from taxes on fuel consumption to charges for road usage. With less traffic on the most congested roads, we can save money on providing and maintaining them, and less time will be wasted in queues and jams. We could all end up better off.

There's only one problem: Campaigners for lower fuel taxes often turn out to be the most vehement opponents of road charging (not to mention speed limits, speed cameras, traffic lights, and other stuff). In other words, they're not interested in improving things for society. They just want to shift the costs of their own choices and activities onto other people.

Ironically, therefore, the road lobby itself is one of the biggest obstacles to moving towards a more efficient distribution of the tax burden -- including lower fuel taxes. Everyone's aware of the price we pay for petrol, but what about the price we pay for the road lobby? It may be higher than you think. Someone should do something about it.


I am a professor in the Department of Economics at the University of Warwick. I am also a research associate of Warwick’s Centre on Competitive Advantage in the Global Economy, and of the Centre for Russian, European, and Eurasian Studies at the University of Birmingham. My research is on Russian and international economic history; I am interested in economic aspects of bureaucracy, dictatorship, defence, and warfare. My most recent book is One Day We Will Live Without Fear: Everyday Lives Under the Soviet Police State (Hoover Institution Press, 2016).



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