Tag Archives: fuel duty

Budget notes

It’s flattering and frightening that several people told me that they’re looking forward to my thoughts on the budget.  So here they are, in a crude and hastily scrawled brain dump.

The obvious item to shout about is fuel duty: a 1p cut now and a freeze on previously scheduled increases to help the poor hard-done-by motorist.  Fuel duty is not the problem.  Owning a car is a luxury and it shouldn’t be a problem that it is priced as a luxury.  The problem is that so many people feel they have no option but to buy fuel — that owning a car has become a necessity.  Over the past fifty years people have incrementally lost their railway lines and bus services, their village shops, banks, post offices and doctors’ surgeries; new sprawling housing estates have grown up without any of these services; and employment has moved to car-centric out-of-town developments.

In a recession people cope by giving up a few luxuries.  But this time they can’t give up the luxury of running a car because the alternative options have been taken away.

Fiddling with fuel duty is political pantomime.  Fuel prices are not a problem because they’re especially high — adjusted for inflation they’re not that high.  Fuel prices are a problem because we’re in a recession where people can’t afford luxuries like private motoring — but many find themselves with no alternatives to running a car.  Dropping a penny or two from fuel duty doesn’t change the fact that cars are unaffordable luxuries in recessions.  There is no single quick fix to the problem that we have built ourselves into, but it requires that the government starts putting money and effort into the multiple real solutions now.  The only thing that fiddling with fuel duty does do is send a message to motorists: you don’t need to do anything to change your behaviour or fix this problem; just keep whining and we’ll respond with more tax tweaks.

The chancellor is paying for the cuts in fuel duty with an increase in the levy on oil extraction: ultimately, therefore, the oil companies will be paying for it out of the increased profits that come with higher prices.  (Never mind that this clever scheme can only last as long as Britain’s oil fields, which are well past peak production and in decline.)  He calls the scheme a fuel price “stabiliser”, reinforcing the fantasy that one day oil will be cheap and abundant again: when oil falls back below $75 per barrel (it won’t), fuel duty will rise again, and the extraction levy fall.

Also in the budget there was fiddling with the tax-free mileage allowance for people who drive their own cars at work (rising from 40p to 45p per mile); and to the tax on company cars.  I don’t think there’s anything interesting to say about either — they’re minor tweaks.  There are no changes to the cycle to work (tax free bicycle benefit) scheme.  The budget does abolish tax deductible “cycle to work breakfasts”, as recommended by the Office for Tax Simplification.  I’d never heard of the benefit before and would have difficulty believing it had any importance.

Far more important than any of this headline grabbing tax fiddling, but barely talked about, is the fact that this budget steps beyond its traditional remit and strides into the field of planning law, kicking down many of the safeguards against bad planning that were introduced over the past twenty years.  To aid employment and economic recovery, the chancellor announced the introduction of “enterprise zones”: 21 areas in cities around the UK England where companies moving into the zone could benefit from tax breaks and a streamlined planning process that is weighted in favour of any proposed development.  When done well — with careful consideration of residential, retail, employment and transport needs — planned redevelopment can work excellently.  The Docklands are not a bad example.  But without that careful consideration and planning control, quick-profit companies will build edge-of-town low rise offices and big barn retail outlets in a sea of sprawling car parks — exactly the kind of bad development that helps drive the car-dependency problem.  At the exact moment when action to reverse poor planning is most needed, the government is dropping the guards against it.

The precise details of these zones have yet to be announced, so we don’t know how bad they will be.  The “West of England” zone could be an excellent mixed development of appropriate density with decent architecture and public spaces replacing the harbourside wastelands and scruffy industrial estates near Bristol Temple Meads station; more likely it will be barns and staff car parks amongst the motorways on the northern fringes.  The London zone could be a revived Battersea, but it might be a cloned Brent Cross.  The government has the power to put innovation and employment back into our city centres, where people don’t need to struggle to support a car.  But it also has the option to push existing businesses out into isolated industrial estate zones, sucking life out of cities, forcing people into cars, and moving congestion to the next level.  So far, the signs suggest the latter.

“Britain pays more for fuel than anywhere else”

It’s another frequently raised fact in comment threads and pub agreements.  Everybody knows it’s true.  If it wasn’t true, why would everybody know it and repeat it all the time?  They can’t all be wrong.

You would think though that such a fact, with all of the resources of the tabloid media and interested industry lobbies behind it, would have some readily available evidence to support it.  You would think that all these petrolhead websites would be falling over themselves to present the data showing off our great national achievement scandal.

Here’s the data:

Retail petrol prices in the past few weeks in Euros: EU countries from AA Ireland, US from DoE converted to Euros/litre with Google converter.

There are six EU countries with more expensive petrol right now; two others that match us.  The rest clustering around.  In Norway petrol is 20p per litre more expensive than here.  In Spain it’s 20p per litre cheaper.

Obviously relative fuel prices between countries fluctuate according to international and national events, our various national tax schedules, and, where applicable, currency fluctuations.  The order of countries on the list changes all the time.  I’d quite like to assemble a timelapse of the graph for the past 20 years, to see whether there were any interesting trends — perhaps it was true for a while that the UK was paying a noticeable amount more?  But there are a lot of other things I’d quite like to do more, so I’m not going to.

The best source I can find for the claim is a uSwitch “survey” from 2008: PDF. As you can see, uSwitch take researching their “surveys” even more seriously than I take researching blog posts.  They put some keywords into Google, found various sources of data, and put them together in Excel.  I recommend going to page 5 to follow their quite fabulous method for calculating the annual national spend on petrol.  Apparently we don’t have the real data, so they had to make it up.  Only they forgot the Peter Snow “just a bit of fun” disclaimers when they prepared the press release and accidentally got their made up facts printed in every newspaper.

The “survey” did show that Britain was paying more per litre than other European countries in 2008 (when the pound was noticeably stronger against the Euro).  In many cases it was only by a hair’s breadth, and thus it was not a particularly interesting fact, but it was true nonetheless, according to the data given.   So a press release was prepared and the newspapers mangled some impressive sounding numbers out of the data, which have become part of the collective wisdom of the British people.  Interestingly, even though the “survey” itself pointed out that we do not pay the highest rate of tax, this didn’t prevent the Daily Mail declaring that it is so in their headline.

But enough of that.  The basic conclusion is that, currently, the claim is not true.  And when it was true, it probably wasn’t interestingly true.  And the other conclusion is that, for such a common claim, there doesn’t seem to be any good quality well presented and well publicised data on this.  I’d love to see such things as:

  • Price-per-litre trends over time for these countries, with and without taking into account inflation and currency fluctuations.
  • Amount and proportion of the price-per-litre that is tax, with trends over time.
  • Total national spend (not made up numbers), with population, number of cars, etc, for comparison.  (Because paying more for petrol is not the same as spending more on petrol, and the latter probably says far more interesting things.)

And probably more.  But I looked in the obvious places and found nothing, and I will obviously not be compiling the datasets myself from each individual data point.  Surely there must be databases for this sort of thing?  I’m a science guy.  This sort of basic data is what scientists have free and publicly accessible databases with powerful querying tools for.  I’m used to having silly ideas and being able to instantly try them against the vast databases of already collected data.  I want a database for this sort of thing.  Is there one?  If it exists, it’s well hidden. I know all of the data exists, it’s just not accessible and easy to use…

“Driving has never cost more”

End to the war on the motorists?  No, driving’s never cost more,” declares Mark King, Money Editor, in The Observer today.  To be fair to King, he doesn’t actually say anything as absurd as that driving has “never cost more” in his article — but newspaper headline writers have never let reality or the actual content of an article get in their way.

Why would a headline writer, having glanced at a boring but reasonable article about saving money, think to write “driving’s never cost more”?  Where did they get that idea from?

Are cars more expensive than ever?

You would guess not: the manufacturing process has become vastly more efficient over the decades.  But it was really difficult to find data on this.  By difficult, I mean Google, Google Scholar, Wikipedia and WolframAlpha all failed to find anything useful with my keywords (thanks perhaps to the hundreds of excellently search engine optimised spam sites), and I’m too lazy to do proper research.  Instead, I pulled out a quick and crude graph of the US consumer price index for new cars compared to that for all items, showing how the cost of purchasing a car has fallen compared to general inflation in the cost of living.  (Obviously there is a plethora of caveats with this data and the contributory factors to the cost of living over here are quite different to the US — if anybody can find a more appropriate data set, please let me know.  Data from the UK for 1997-2009 is given further down the page, and shows a massive fall in the price of a new car even over that short time.)

Is fuel more expensive than ever?

Mark King could have read his own newspaper to find out that, no, fuel is not more expensive than ever.  Fuel prices are high, and Motorists can’t hide from the fact that dwindling resources are ever more difficult and dangerous to harvest.  They’re at the top-end of the post-war range, but not outside of the range that we should be used to:

That must be because oil is getting cheaper, right?  Because everybody knows that fuel tax is always going up.  Actually, as Mark King’s own editor pointed out in October, thanks to repeated freezes in fuel tax to appease the tabloids and roads lobby fuel duty remained 11% down on 1999 rates when inflation was taken into account.

So the price-per-litre is high but not exceptional.  But during all that time, the amount of distance you can get for that litre has been rising as cars get more fuel efficient.  Wikipedia has a graph for average fuel efficiency of car models available in the US.  (Average fuel efficiency of cars on the road, in the UK at least, will be higher and may not follow exactly the same trend, because we purchase more cars at the high end of the fuel efficiency range.)  You may be paying a little bit more each time you fill up, but unless you are driving further, you should have found yourself filling up less frequently over the years.

What about the other costs?

Is it more expensive than ever to pay your “road tax“?  Only if you have a really absurd car.  You could pay £950 in the first year of owning a car that emits over 255 g/km CO2.  But only expensive SUVs and sports cars fall into that category — if you own such a car, you are already rich enough to not notice the tax.  Normal cars fall in the top three or four tax bands, where tax has fallen and owners will pay only a token amount of tax, if they pay anything at all.

I couldn’t find much information on maintenance and insurance costs — though I didn’t try very hard, since these are not a significant proportion of overall costs anyway.  If anybody can find good data, I’ll add these to the post.

One area where “costs” might be rising is in depreciation — the decline in resale value.  People aren’t buying second hand cars so much, for all sorts of reasons — because new cars are so cheap (especially during the scrappage scheme and with all the other government subsidies) to the fact that nobody who buys second hand cars wants an old inefficient SUV.

So driving is more expensive than ever?

Mark King (or his headline writer) could have read his own newspaper to see that the Department for Transport estimate that the cost of driving fell 9% between 1980 and 2007.  Alternatively they could have read the Economist last month, which estimated an even more dramatic fall in the cost of driving — especially compared to the rise in disposable income — even during Labour’s famous “War On The Motorist”:

A lot of things happened in the past 18 months, but it’s not plausible to suggest that this trend has completely reversed.

Why do so many people think driving is more expensive than ever?

I don’t think they do.  Most people who are complaining are trying their luck.  Some of it is recall bias — they just don’t accurately remember how expensive cars and fuel used to be.  Some of it is the fact that the costs which are falling — annual VED and upfront vehicle purchase — are one-off or rare payments that one forgets about, unlike the weekly payment at the petrol pump, even though for most people the cost of the vehicle still makes up the bulk of the cost of driving.  Some of it is the Daily Express, the Taxpayer’s Alliance, and the rest of the roads lobby talking bollocks about the poor hard done by Motorist.  But, really, most of the car users I know are complaining about the costs no more or less than they always have.

What is probably true is that motoring is a painful cost for many people.  But paradoxically, it’s the fall in the cost of motoring that has caused this problem.  During the good times of the 80s, 90s, and early 2000s, more and more people have built themselves into a car dependency.  Car ownership is higher than ever because the cost has been falling for so long.  And so, with everybody owning a car, our houses have moved further from our work places, our village shops and services have closed, and the bus service has been withdrawn.  This in turn pushes more people to buy and run a car, even if they can not really afford to do so and were quite happy living without one until the shops closed.  And when the good times turn bad — when wages are frozen, when office locations are merged, and when redundancies are handed out — you can not simply give up the car.  The world changed.

Driving is not more expensive than ever.  Fuel is not more expensive than ever.  Not even fuel tax is more expensive than ever.  Claims that they are don’t even come close to reflecting reality.  And for most people, the fall in the cost of vehicles is far more significant than the cost of fuel.

Rather, ever more people who can not really afford it have been conned by false promises of the aspirational and “liberating” car lifestyle or forced into car dependency against their will.  And the tabloid media and Motoring lobby want to capture the few who are left.  Our politicians and planners should be liberating poor and rural people from that expensive car dependency, not keeping them captive right on the threshold of what they can afford.

This is a hastily thrown together blog not a scholarly article — if you spot something not quite right, do let me know so that it can be corrected.