6 March 2008
Transport taxation is likely to be a key issue in the Budget this year. This briefing sets out what measures are likely to be covered and some comments on them. Fuel duty: Duty must increase to tackle climate change
The Budget last year announced future increases in fuel taxes, including one this April. This would increase fuel duty in line with inflation. Several road lobby groups have expressed concern about this, given current high crude oil prices, and have asked the Chancellor to cancel the increase. However, there is also pressure on the Government to continue to act on climate change, especially with the climate change bill going through Parliament with all-party support. A retreat on fuel duty now would add to the Chancellor’s reputation for u-turns, following “non-doms” and capital gains tax changes.
Campaign for Better Transport supports the fuel duty increase and wants to see the money put into alternatives to car use, including tax relief for commuters using public transport, cycling or car sharing. We have published a factsheet to clear up some of the claims being circulated about fuel duty - namely, that we pay too much tax. The factsheet reveals that:
- Fuel duty has not been increasing in line with inflation since 2000, with the small increase in October 2007 the first in years
- Tax, as a percentage of fuel, has not been this low since 1993
- Higher fuel prices are down to high oil prices not because of fuel duty
- The real cost of motoring has fallen in the past decade, while the cost of taking public transport has increased
And more. Read it online today: http://www.bettertransport.org.uk/campaigns/climate_change/roads/facts
Low-carbon vehicles: Greener vehicles a start but traffic reduction needed
The Budget will also see the publication of the final report on low-carbon transport from Professor Julia King. Commissioned by Gordon Brown when Chancellor, this report looks at how to bring down carbon emissions from transport, though it focuses on low-carbon vehicles and fuels and ways of getting people to buy them and manufacturers to produce them, rather than on reducing car use. Professor King has made no secret of her view that significant pricing/tax signals will be needed to incentivise this. We expect either some significant increases in top band car taxes (vehicle excise duty) or possibly a new purchase tax. One option being suggested is for a revenue-neutral “feebate” scheme where a purchase tax on “gas guzzlers” would be balanced by rebates on clean cars.
Campaign for Better Transport would welcome such measures and believes that real long-term increases in taxes on gas guzzlers will be needed, along with regulation already being proposed by the EU. We also believe that measures to reduce car and lorry use and improve alternatives will be needed.
Aviation: Tax changes needed
There is unlikely to be much on aviation in the budget, since the Government has already proposed changes to aviation taxes involving a shift from Air Passenger Duty to a tax per plane. Consultation on this finishes next month, and decisions will probably be part of autumn’s pre-Budget Report. However, given the huge opposition to expansion of Heathrow and other airports, there is pressure for further measures such as taxing fuel for domestic flights. Campaign for Better Transport supports this, with the revenue spent on improving rail services and cutting fares. We also have suggested the Government look at the VAT zero rating for aviation, which means that the industry reclaims all the VAT it pays. As a first step, we want to Government to publish the money reclaimed by the industry so we can see how large the subsidy to the industry actually is.
Other measures needed to reward green behaviour
We may see smaller changes to company car tax regimes and also to the tax-free mileage allowances for business use of private cars. This has been subject to consultation and Campaign for Better Transport has supported an option which would move from flat rate allowances to varying allowances by fuel efficiency/carbon emissions, again rewarding people who buy and drive fuel-efficient cars on business.