October 2004

The rising cost of fuel in the UK

It’s happening again, fuel prices are steadily rising toward the point where they can cause serious and unexpected damage to personal financial planning. Four years ago the cost of commuting by car went up by £50 per month for me within a matter of weeks, this time I am working from home so I am not so directly affected, but what concerns me most as I see fuel prices rise again is that I am not convinced any lessons were learned four years ago.

It has been common practise for the government of the day to announce in its annual budget that the tax paid on fuel would rise by some small amount. Currently when I pay 83 pence for a litre of fuel about 61 pence of that goes to the government and the UK has one of the highest rates of tax on fuel in the developed world. Generally the Chancellor of the Exchequer uses the preservation of the environment as the excuse for raising taxes as an incentive for us to stop driving cars, but when lorry drivers blockaded fuel depots in 2000 there were no politicians praising the good this was doing to our environment, instead it was proven that much of the countries infrastructure relies upon fuel and that many who rely on it cannot simply switch to using public transport.

Of course, that blockade of fuel was not expected and therefore it caused more problems than a planned-for shortage would. What has always seemed silly about the environmental incentive argument for fuel tax is that the cost of fuel (and thus the tax paid on it) in large cities, particularly London, is substantially cheaper than it is in rural areas, yet public transport into and within these cities is very good while public transport in more rural areas is very poor. In south east England a commuter can easily commute any number of miles toward, or directly away from, London but travelling less than ten miles east or west can often require a car or an 80 mile train journey via London. So where the choice really exists to leave your car at home and jump on a train or a bus there is substantially less incentive to do so, while those who have no choice are hit with higher and higher living costs.

When the fuel protesters rolled up in 2000, however, and suggested that the government drop tax on fuel by just 2p per litre, the governments response was very revealing. The government informed us that losing 2 pence from fuel tax would require a public spending cut of over one billion pounds in an essential service such as education, health or the emergency services. What this information suggests about the UK’s reliance on fuel is that the government needs the public to buy fuel just as much as the public need it to operate their lives. Simple mathematics suggests that if just a few percent of UK drivers were in a position to stop using their cars completely for the sake of the environment then the government would be in that same predicament of lacking funds for essential services. So long as the UK government needs the tax from polluting fuels to fund the rest of the economy they are not going to have an incentive to make real improvements to public transport or offer powerful incentives to speed up the take-over of cheaper and cleaner fuels on our roads.

Back in 2000 there was talk of change from the government, a ten year plan had been introduced to improve transport throughout the UK, one suggestion in the plan was that Britain’s most congested roads might benefit from using tolls, but we were pomised that public transport would be greatly improved before this plan would be considered. Now, in 2004, the suggestion of tolls for congested roads is being considered again but without the promises of an improved public transport system. I worry for M25 users because this must be one of the most congested roads in Europe, nicknamed the M25 car-park by many regular users. One of the main reasons that the M25 is always so busy is the lack of alternative transport moving in a direction other than London, if there were such alternatives I think it is obvious many people would choose them over hovering between the break and the clutch in the bottom two gears for an hour. Most regular M25 users already suffer enough having to face the congestion nightmare twice every day, forcing them pay more for it just doesn’t seem fair and will likely make getting to work too expensive for some of them.

Obviously pollution is a problem that the people of the UK take very seriously, most people proudly switched to unleaded fuel as quickly as they could when it was introduced because they thought they were making a big difference. If the incentives and advertising were put in place to encourage drivers to convert to LPG (Gas) and it was sold at every fuel station then I am sure this would also be a popular move for most Britons. Even with cleaner fuels in place we still need to discourage non-essential travel that pollutes the environment, and some kind of toll charging may still be a good idea, but I would want it to be made conditional upon needs. If you can prove that your journey to work, or your actual work, or even your shopping trip or school run reasonably requires that you regularly use certain motorways then you should have free access to those sections of the road network, on the other hand if you are using your car for those purposes when there is a public transport alternative, or you are on a journey outside the part of the network that you require use of for your day to day life, then I think it fair that a charge would be made for occasional, luxury or liesure use of Britain’s motorways.

Ideally, of course, taxation needs to be re-thought so that tax taken from polluting transportation fuels that we should be trying to be rid of is only used to fund and improve transport and environmental projects and the funds required for our essential services are raised from other sources which we, as responsible and environmentally friendly citizens, would want to see available as a source of funds in the longer term.