The facts on taxes

Let's correct a few myths about motoring taxes.

Myths:

We pay too much tax on our fuel
Motoring has become much more expensive
Drivers already pay their full environmental impact
Road transport is not important in the battle against climate change
We pay more tax than other European countries

MYTH: We pay too much tax on our fuel.

FACT: Fuel duty has not been increasing in line with inflation since 2000, with the small increase in October 2007 the first in years. This has kept fuel duty artificially low. Even with these small increases announced in Budget 2007 (pdf - paragraph 7.6) (2p increase in October 2007, 2p in October 2008 and 1.84p in April 2009), fuel duty in 2009 will still remain 11% lower in real terms than it was in 1999.

Tax, as a percentage of fuel, has not been this low since 1993 (see Transport Statistics Great Britain, a pdf, Table 2.4, page 37). With unleaded at £1 a litre and duty at 50.4p, and VAT at 17.5%, tax as a percentage of the total pump price is 65%. In 1991 it was 64%, in 1992-3 it was 66% whilst in 1994 it was 70%. Even with the planned 2p increase in October 2008, if oil prices remain the same, tax as a percentage of the total price will still be only 67.7%, which is below 1994 levels (see Transport Statistics Great Britain, a pdf, Table 3.3).

Source: Transport Statistics Great Britain 2007 (The graph is available as a larger image)

Given the inevitability of high fuel prices it makes economic and environmental sense to reduce our reliance on fossil fuels, and move towards a low-carbon economy, rather than wanting to attempt to drive more and get cheaper fuel.

MYTH: Motoring has become much more expensive.

FACT: The cost of motoring has fallen 8% in real terms since 1997, whilst the cost of travelling by rail and bus has increased 5% and 13%, respectively. Revenues raised from any fuel duty increases must be ring-fenced for public transport to improve travel choices, which was promised by Gordon Brown in Budget 2000.

Even in the past three years, when fuel prices have been rising steadily, the cost of driving in real terms has fallen by 4%.

MYTH: Driver already pay their full environmental impact.

FACT: There are many costs to society from motoring that we all have to pay for:

Cost to the NHS for the 250,000 casualties, including 3,000 fatalities, each year which result from road collisions
Cost to the nation’s health due to air pollution
Cost to the economy due to carbon emissions
Cost of maintaining roads
Cost of transport police and traffic officers

MYTH: Road transport is not important in the battle against climate change.

FACT: CO2 emissions from transport are rising, and emissions from road transport alone make up 25.7% (Transport Statistics Great Britain, table 3.8b. 2007) of the UK CO2 emission total, so road transport is a very important sector to tackle. The small increases in fuel duty announced in the 2007 Budget are expected to result in carbon savings of 0.16 million tonnes of carbon by 2010 (see Budget 2007, Chapter 7, Protecting the Environment, Table 7.2).

MYTH: We pay more tax than other European countries.

FACT: This just isn't true. At least 5 other countries pay more at the pumps than we do, and several countries have very close or the same rates to us.

Fuel tax is just element of motoring taxes. Other countries have a much higher vehicle purchase tax, and other countries have tolls on their roads.

From the Department of Trade and Industry:

Top 5 EU petrol prices, April 2008