Tuesday, 15 May 2012

Road Pricing

Today the propaganda bureau has a special report priming the public for the perennially unpopular idea of road pricing. Apparently due to the logical economic decisions of motorists to reduce fuel consumption future fuel duty and VED will decline as people move towards more fuel efficient and less polluting vehicles. Surely the point of high fuel tax is to curb demand – as demand falls it is a bit sour to raise more taxes and make it even more prohibitively expensive to travel in the UK. The current government policy seems to be to make all transport equally prohibitively expensive so this IFS policy could be appealing to them.

Now you know my feelings on VED but what of road pricing?

The way road pricing is presented in the IFS report is a disastrously stupid idea principally because it proposes using pricing to disincentive travel at peak times. If I spent my life in a pure land of economic abstraction I too would conclude that people not all travelling on the roads at the same time would be a good thing but the reality is that people have jobs. They have jobs and there is a circadian rhythm which means most people aren’t about to start working overnight or at other off-peak times. A road pricing proposal around pricing of peak demand would be just as arbitrary as the stealth tax already imposed on all people who have to use the train to get to work at a reasonable hour in the morning (peak fares!).

Now at the margin obviously some people would delay their travel in the car until off peak hours but most normal people do this anyway because nobody likes to sit in traffic jam for an hour at 8.15am when they can wait one hour longer to go to the supermarket of visit their family and enjoy clearer roads. However taxes on road use not fuel efficiency would take no account of environmental degradation caused by emissions nor fuel consumption.

This is another great example of regressive flat tax on jobs because most people who commute at peak times do so in order to get to work. Just as people who use the railways around London have no alternative to trains so do a huge number of people who live around say Greater Manchester require the roads to get to work. If they want to introduce road pricing they should also either (i) liberalise planning laws so people can actually build homes near where they work, or (ii) introduce labour legislation which permits all workers to unilaterally dictate their working hour patterns to their employers without fear of reprisal.

Fuel tax is more than adequate to capture congestion as it is because in traffic one achieves a low mpg and thus uses more fuel. In addition this shortsighted survey neglects to consider the fuel efficiency gains being made today across the economy which will be offset later by gains in productivity and GDP output per unit of oil and hence there may be a greater general tax down the line following this wider process.
However unlike the railways where commuters remain captives to government policy road pricing is always so hugely unpopular that it’s unlikely to be implemented nationwide. The government is already wasting a ton of money building high speed rail lines to places people don’t want to go (Birmingham? Ashford?) so they hardly have the cash left over to build a road pricing infrastructure anyway.

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