Taxes and Charges on Road Users (HC 1175-i) Transport Committee 5 Nov 2008

Evidence given by
2.45 Royal Automobile Club Foundation for Motoring Professor Stephen Glaister CBE, Director Institute for European Environmental Policy Dr Malcolm Fergusson, Senior Fellow Institute for Fiscal Studies Andrew Leicester, Senior Research Economist
3.45 The Chartered Institute of Logistics and Transport in the UK (CILT) Jim Coates, Chairman, Road Capacity & Charging Forum Professor Alan McKinnon Professor Alan McKinnon, Heriot-Watt University, Director of Logistics Research Centre Professor Jon Shaw Professor Jon Shaw, University of Plymouth, Professor of Transport Geography

Q25 Mr. Eric Martlew (Carlisle): I represent an urban area surrounded by a large rural area and every morning the urban area becomes crowded - the streets become congested because of the people you are referring to as being socially deprived driving into work in the city. I also find that the houses in the rural area are probably half as much expensive again as those who live in the urban area, so I do not really understand your comments, Professor. That is in my experience; but I think it is not the experience of many of my colleagues. They accept what Dr Fergusson is saying, there are people who live in the rural areas that do not have access to public transport and cannot afford cars, but I find that the poor move into the urban areas and the rich move out of the urban areas to the rural, what they consider better quality of life.

Professor Glaister: I did say that I think you will find in official figures a lot of deprivation in town centres, as well as a lot of deprivation in the deep rural areas. It is a very mixed story and I was simply making the point that because it is very mixed you cannot assume that a particular scheme will help or hinder social inclusion - you have to look at where people are living and what their incomes are like. I would just add that the poor households make far, far more use of roads and cars than they do of public transport - it is just in the statistics - because there is to any public transport. They rely on lifts with their friends; they pay their friends, they use taxes, they have to get about. Therefore fuel duty, for instance, can hurt them quite badly.

Q26 Mr. Eric Martlew (Carlisle): The reality is that a lot of them have been forced into the urban areas because of the problems that we have talked about, and there has been a displacement of more affluent people to the rural areas.

Dr Fergusson: What you have described is really something where the ready availability of cars and the high mobility has, in a sense, generated its own new demand because it is often a new opportunity for wealthier people to move out of towns and thereby generate more traffic and more congestion, which is the circular effect you get with motorisation, which in some ways it might be quite nice if we could reverse.

Professor Glaister: One thing you will see in our evidence is the way that the cost of owning a car has fallen so very dramatically over the decades and I would argue that that has been an enormous benefit for poorer households who now get access to a good quality but cheap vehicle. That is why we have a particular concern about the way the Treasury was thinking of changing vehicle excise duty because that can bear very heavily on a poor household with a good quality but cheap car, suddenly having to pay a lot more for their annual licence fee, and that could be very regressive.

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Q30 Mr. Eric Martlew (Carlisle): Has there been any reduction in the speed of traffic?

Professor Glaister: Yes, there has. Interestingly, overall journey times have been improved because of the reduction in congestion but free flow speeds have fallen because people recognise that you use less fuel if you go more slowly. So they are travelling in more free flow conditions at lower speeds and getting there quicker.

Dr Fergusson: There is actually quite a lot to be said for controlling traffic speeds because they are a very important way of improving fuel consumption and relatively cheap if you eliminate excessive speeds.

Professor Glaister: That has been well demonstrated by the M42 where speeds are closely controlled and you get a much smoother flow at 50 or 60 miles per hour than you would without a limit.

Dr Fergusson: Also you can get more cars on the road as well if you have a stable, slower speed. So there is quite a lot to be said for speed control.

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Q44 Mr. Eric Martlew (Carlisle): Professor Glaister, you have confused me - and it may not be difficult - but in another exchange you said about the problems for people living in the rural areas paying the extra duty. Then you have just said that you should tax the carbon, which means that you would actually increase the duty on fuel.

Professor Glaister: No. The current duty on fuel is about 52 pence plus VAT - just over 60 pence.

Mr Leicester: 50.35.

Professor Glaister: Thank you. 50.35 plus VAT. The carbon content of a litre of fuel at the Stern recommended value of carbon is 14 pence - one-four pence. So if you think of the duty as if it were a carbon tax it is far, far too high, although I do recognise that the duty is counting other things as well. This goes to the nub of your inquiry, I suggest, that if you are asking what the principle should be in setting road user taxes and charges you need to unpick what the components would be, and the carbon component is a lot less than the current fuel duty. So my recipe - which we have set out in our document Road to Reality - is that if you take away current duty completely, replace it with a carbon tax at 14 pence a litre and then add on congestion charges and other charges the result would be in rural areas that they would be much better off, they would be paying a lot less for their travel than they do at the moment, and they would be paying more in urban areas.

Q45 Mr. Eric Martlew (Carlisle): They would be paying more in urban areas? This is due to congestion charges?

Professor Glaister: Yes, there is a balance - two opposite and balancing effects.

Q46 Mr. Eric Martlew (Carlisle): I am still not totally convinced of your argument but the essence is that you reduce the duty but increase the charges?

Professor Glaister: If I could just enlarge a little? I do think that the announcements - and I have no idea what they will be - of the Climate Change Committee in a few weeks’ time will bear on all of this. If the Climate Change Committee adopts the Stern recommendation that throughout the economy we meet our carbon targets by finding the correct price for carbon - so if you are burning electricity, heating your house, whatever it may be, you are paying the same price for carbon - then we will have to think about how that will bear on road taxation as distinct from the price you pay for your electricity in your house or what railways pay for their electricity and everything else. It will blow open this whole issue of the basis for road taxation and for me I think unless we get that right and establish a single price for carbon across the whole economy we risk doing a great deal of unnecessary damage. I suspect at the moment in most terms road users are paying too much and other users are paying too little for their carbon, but we will have to see how that all plays out.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

The full transcript may be read here.

On behalf of Eric Martlew, 3 Chatsworth Square Carlisle Cumbria CA1 1HB