Wednesday, 24 January 2018

What's sauce for the goose...

From the BBC:

The Association for Consultancy and Engineering (ACE), which represents companies involved in designing the UK's infrastructure, admitted some people were suspicious of road pricing.

However, in its report "Funding Roads for the Future" it said charges for road usage should be introduced which took into account:

- whether a driver's journey was on motorways or country lanes
- the time of day
- how much congestion was on the network
- drivers' financial circumstances - for example, whether they were students, pensioners or unemployed

ACE said relying on money raised through fuel duty, Vehicle Excise Duty and the HGV levy was outdated. "The growing uptake of zero-emission vehicles means revenue from Vehicle Excise Duty and Fuel Duty will continue to decline as a percentage of the UK's GDP in the future," it said.

That's the beauty of fuel duty, it acts like a rough and ready road pricing (which is a good thing, in principle, it's rent for road space). If you drive during the rush hour, you cause more inconvenience, use more fuel for a given distance and pay more per mile. Lorries cause more wear and tear, accidents and pollution, but use a lot more fuel and pay a lot more per mile. Whizz round in a small car at the weekend, you're not getting in anybody's way, using less fuel and paying less per mile. It all sorts itself out nicely.

Fuel "costs" average 15p/mile, two-thirds of that is VAT and fuel duty, so petrol/diesel drivers are already paying 10p/mile road-user charge. The actual fuel cost is more like 5p/mile.

Cost of electricity/mile, at residential tariff is in the region of 2p - 4p/mile, i.e. not a huge difference in absolute terms. The real saving is not because electricity is "cheaper" than petrol or diesel, but because the former is lightly taxed (5% VAT) and the latter is heavily taxed. Depending on how the electricity is generated, the amount of C02 emitted (to the extent that we worry about this) is pretty much the same either way.

So by all means, level the playing field by having road pricing of 10p per mile, or whatever, but as a quid pro quo, ditch VAT and duties on fuel completely. This is the problem with electric and hybrid cars and all that nonsense - the end result is we will need road user charges to reduce congestion.

The notion of having means-tested road user charges should be consigned to the dustbin of shit ideas, obviously.
From City AM (comment appeared as reader's letter today):

Why should we pay the EU for access to the EU market on services, financial or otherwise, if they will not be paying us for access to our domestic market on goods?

Let's be consistent about this, if the EU really believes in payment of fees for market access then they could start with an offer of the fees they are prepared to pay us for access to our wine market, our car market etc etc. Then we could add up all the market access fees payable in each direction, and given that they enjoy a chronic massive trade surplus with us they could pay us the net annual fee.

Or, if they prefer, let's go back to tariffs and they can pay us through that mechanism.

Denis Cooper


jack ketch said...

" pay us for access to our wine market, our car market etc etc. "

For a second there I thought he meant there are Continentals who would actually want to buy British wines and I was concerned he might be having a stroke.

But he meant Johnny Foreigner being able to flog his Chateau Pis De Chat here and BMercVW their cars here, none of whom will be (or 'are' as i happen to know in one case) particularly worried about tariffs being imposed. Infact BMW might end up selling more cars here to Brits than ever before #HeyPlebsIcanAffordABeama.

Mark Wadsworth said...

JK, that phrasing threw me when I first read it.

Physiocrat said...

The EU making people pay for market access is as if Reading Council made Oxford Council pay to allow Reading people go shopping in Oxford.

Reading people are deprived of market access. In the Brexit affair, EU people are deprived of access to UK goods and services. So the firms like the shop in Gothenburg which specialises in high-end British ceramics - Denby, Portmeirion, etc - could go bust, and people who want to replaced damaged pieces may find they cannot get them any more.

The Stigler said...

In general it works and regulates itself. Everyone avoids travelling in commuter hours except commuters. If traffic is too bad going to a place, you will find another place to get a job. Or take the train, or work from home, or get up earlier, or go in later.

That's not to say that road pricing wouldn't be more efficient, but I doubt it would be much different to what you have now.

Mark Wadsworth said...

Ph, agreed.

TS, I personally think that common sense and fuel duty work as well as road pricing, plus you'd have to have a devilishly cunning pricing model and all the infrastructure on roads and in cars.

Physiocrat said...

As the use of hydrocarbon fuels for road transport diminishes, the lost tax revenue will have to be replaced.

Under an LVT regime, the reduced cost of tax-free road transport would then lead to an increase in the LVT tax base.

A road pricing model is effectively a form of LVT. The main advantage of congestion charging is that it would match road space to demand, which will otherwise be rationed by congestion. A sophisticated system of road pricing was developed for Cambridge with the intention that it would come into effect in 1990. It did not happen because the technology was not up to the task. It is now feasible with GPS and tracking systems.

The nice thing about the Cambridge congestion pricing model was that there was no charge for travelling against the main direction of flow; the charge was for driving on routes of high demand at times of high demand. Cordon pricing schemes such as the London zonal arrangement do not achieve this, not do they discourage movement within the zones.