Should drivers pay more for petrol?

12:58pm Friday 29th August 2008

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This week a report claimed families in Sussex were paying almost £800 too much in “green taxes”. The Taxpayers’ Alliance called on the Government to cut taxes, especially on the forecourts where soaring petrol prices were crippling drivers financially. Yet should we in fact be paying more for our petrol? Here are two very different opinions on the subject.

Yes
Ben Duncan, Brighton and Hove City Councillor and Green Party parliamentary candidate for Brighton Kemptown.

Of course no one wants to pay more for anything, especially in times of rising prices. The cost of housing, food and fuel – for heating our homes as well as getting us about – are all rocketing, with wages failing to keep up.

It’s vital that we urgently address these economic woes, and that means changing the way we do business on a whole range of fronts.

That includes reining in the vast profits of the energy companies with windfall taxes, improving and subsidising public transport and tackling fuel poverty by ensuring everyone has access to better energy efficiency measures to keep our homes warm.

Domestic insulation should be free for everyone, for example.

We should be promoting locally produced food, as Green councillors have made sure Brighton and Hove’s schools will be doing. The shorter the trip from farmyard to dinner plate, the lower the cost of food.

As for the chaos in the housing market, we must introduce tough regulations on the banking sector to stop the financial fat cats who got us into this mess from gambling away any hard-fought economic recovery – and call an immediate moratorium on all repossessions.

All of these measures will make life more affordable, sustainable and fair.

But none of them will be able to make much difference to forecourt petrol prices. Energy analysts are increasingly warning that we’re hitting the moment of “peak oil” – at which demand increases faster than new oil fields are being found.

The law of supply and demand economics means this is bound to push prices up further.

Of course the Government can tinker around with the rate at which at which petrol is taxed, and it can even subsidise the oil giants by paying them to produce more cheap fuel.

But I believe that is short-sighted.

As supplies dwindle it can only get more expensive to do this and before long we’ll be facing the same problems as we are today, but with higher tax bills and a little less in the treasury to help tackle them.

And, of course, there are the increased greenhouse gas emissions that come with burning fossil fuels rather than seeking alternatives.

Surely it’s better for us to start making the shift to a greener, cheaper, fairer, society now, and implement measures to make life a little more affordable. Even if that means having to pay a little more for petrol on the forecourt.

No
Matthew Sinclair, policy analyst at the TaxPayers’ Alliance.

Government estimates show we have among the highest taxes on petrol in Europe, never mind countries such as the US and China where taxes on motor fuel are negligible.

British drivers also pay increasing amounts in road tax under the new vehicle excise duty regime. Motorists already pay VAT on their cars and petrol, so fuel duty and vehicle excise duty constitute premiums on top of the rate of tax that is considered fair on other goods and services.

That premium is justified on the basis that it corrects for externalities. The idea behind green taxes is that when people buy petrol, or other goods that create environmental harms, they should also pay the cost to wider society, now and in the future, of the associated contribution to climate change – the externalities.

That way, they will only buy each gallon of petrol or watt of power if the benefits to them of using it outweigh the costs both to themselves and the rest of us.

The TaxPayers’ Alliance report entitled The Burden of Green Taxes, released this week, showed British green taxes go far beyond correcting for the externalities and are therefore excessive, to the tune of £783 per household.

The biggest green taxes – fuel duty and vehicle excise duty – charge drivers far more than any mainstream estimate of the damage motorists create by contributing to climate change, even if you take into account the cost of road building.

The Institute for Fiscal Studies, when it looked at fuel duty, concluded it was “much higher in the UK than the environmental cost of vehicle emissions would appear to justify”. This is particularly unfair because many people who drive can’t realistically choose an alternative means of transport. Outside major cities public transport isn’t a viable alternative to the car.

That is why driving accounts for 85% of passenger trips, against just 7% by train and 6% by bus or coach. Even if we could double the capacity on the trains that would barely make a dent in the numbers driving.

Politicians should stop using green rhetoric as a cover for tax rises and we should pay less for our petrol, not more.

What do you think? Comment below.