Why motorists are being pumped dry

In an article in the Yorkshire Post, John Meadowcroft argues for a radical rethinking of taxes on motorists

In the last month UK petrol prices have hit record levels. In July unleaded petrol passed the £4 a gallon barrier for the first time ever and now costs an average of 88p per litre. The immediate cause of these rises is events in the Middle East that have reduced the supply of crude oil, leading to a price rise at pumps. But the exorbitant cost of petrol – and of motoring generally – is a result of the size of the tax burden levied by government on car users.

Comparing prices at British pumps with those in other countries illustrates the point. In the United States that 88p litre of unleaded costs the equivalent of only 35p. In Estonia it will set you back a mere 53p, in Greece 64p and in Luxembourg only 73p.

This is because of an 88p litre of petrol in the UK, only 22p is the actual cost of production and profit for the supplier. A whopping 51p is fuel duty levied by the government and a further 15p is VAT. In other words, if petrol was tax exempt, a litre of unleaded would cost only 22p.

This is not the only tax levied specifically on motorists. They are also required to pay between £75 and £170 per year road tax, plus of course VAT at 17.5% when they purchase a vehicle in the first place.

It should come as no surprise to learn that, according to figures compiled by the transport pressure group Transport-Watch, after taking into account government expenditure on the road network, road users presently give the Treasury net receipts of £30 billion per year.

In other words, motorists are helping to fund a huge array of government expenditure via fuel duty, road tax and VAT on petrol.

Such expenditure may be necessary and worthwhile, but is it fair that one group of individuals should shoulder such a disproportionate share of the burden just because they happen to drive cars? In particular, those who live in rural areas may have little choice but to use their cars for the great majority of their journeys but are financially penalised by the government for so doing.

Comparison of the government’s attitudes to roads and railways may further illustrate the raw deal received by motorists. While road users presently pay the Treasury £30bn per year net, the rail network receives an annual subsidy of approximately £2 billion. In other words, train journeys are relatively cheap because money is taken from road users to (effectively) reduce ticket prices.

Such cross-subsidisation may be thought desirable because rail travel is more environmentally friendly than road.