Motoring tax red herrings04 Jul 2008

Treasury plans to raise over £2 billion from Britain’s road users before 2011*, will cost the road user four times more than would be saved by persuading the Chancellor to drop the 2p October fuel duty increase,** according to an RAC Foundation analysis released today (4).

The RAC Foundation is urging the Treasury to carry out a root and branch review of motoring taxation, taking account of the impact of sustained high oil prices on family spending, and the impact of reduced mobility on the UK economy as a whole.

The tax changes, revealed in the 2008 Budget Red Book*, show that the Government is looking to the motorist to fund far more than their fair share of general Government spending:-

* In 2009, over 60% of Budget 2008 additional revenues will come from motoring taxes.

* In 2010, over 90% of Budget 2008 additional revenues will come from motoring taxes.

These changes are described in the Budget as measures “protecting the environment.” However, the RAC Foundation’s analysis of figures in the Government’s Stern Report show*** that there is no environmental case for raising motoring taxes – road users are the only energy users covering their carbon costs.

£1.2 billion of the increase comes from planned changes to Vehicle Excise Duty. The Foundation has criticised the retrospective nature of the changes and the fact that they are not revenue-neutral.

The Foundation believes that urgent action to rethink motoring taxation is needed, as the road user is paying more and more for an ever-poorer level of service. The difference between taxes taken from the motorist and investment returned to the road network has soared over four hundred per cent since the mid 1970’s. In 1975 income from motorists (£11.6bn in 2006 prices) was broadly equal to spending on the road network (£11.1bn). Today, the Government takes four times as much from the motorist (£31.2bn) as it spends on the roads (£8.2bn) making the difference between tax and investment 460 per cent greater than in the mid 1970s.****

Stephen Glaister, Director of the RAC Foundation, said: “The Chancellor may pull a populist rabbit out of the hat by scrapping the October 2p rise, but this will be a drop in the ocean compared to his plans to take an extra £2 billion from the road user’s pockets by 2011.”



* FSBR Table A.1, Budget Policy Decisions (extract)

A: Total additional revenue raised as a result of Budget 2008 decisions:

2009-10: 790 million

2010-11: 1,865 million

B: Total coming from road, fuel and vehicle duties (Detailed breakdown available on request.)

2009-10: 495 million

2010-11: 1,720 million

Percentage of additional Budget 2008 revenues coming from the motorist (A/B x 100%):-

2009-10: 63%

2010-11: 92%

** BCC analysis, May 2008. October increase in fuel duty will raise £505 million for HMT.

*** RAC Foundation, Roads and Reality, 2007

**** RAC Foundation compiled calculations Glaister 2008.