What the Budget will not say
Page 31
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DURING the month between now and Budget day the press will be full of leaks, hints and guesses about what the Chancellor of the Exchequer will do in his second Budget on March 19.
This page is different. Anxious as always to provide readers with variety, I am devoting this article to a forecast of three lorry taxation measures which Mr Lawson will not take.
First, he will not abolish Vehicle Excise Duty (Road Tax) for lorries and make up the loss by increasing fuel tax. Supporters of this idea (who include CM's editor) argue that this would abolish vehicle excise duty evasion and relate tax paid more closely to road use.
The Government seems to be opposed to this idea even for private cars. It would bear hardest on the rural motorist whose average mileage is higher than his urban and suburban counterpart. And cars would still have to be registered. So the Swansea computer and most of the hundreds of civil servants who tend it would have to remain. Nevertheless it remains a possibility, but only for light vehicles.
The objections to applying the principle to lorry taxation are stronger. Government policy requires lorries as a whole to pay enough tax to cover the costs they impose. At present that objective is more than achieved by a mixture of fuel tax and ved. It could just as easily be achieved by concentrating the tax on fuel.
But that would cut across another aspect of lorry taxation policy. The tax bill of each broad class of lorry should reflect the costs imposed by that class. That objective is not yet fully in force; for example some heavier rigids barely achieve this, while lighter types pay up to 50 per cent more. Nevertheless I expect the Budget to move strongly towards consistent application of the principle.
Abolishing ved in favour of fuel tax would be a move in just the opposite direction. For example, at present a five-axle, 38-tonne artic pays much heavier ved than one with six axles. But the fuel consumption of each type scarcely varies. To remove the ved incentive to go for six axles would discourage the less damaging vehicle. The same principle applies right down the scale. So the Government will keep ved for lorries.
It might look again at the balance between fuel tax and ved. The comprehensive review of lorry taxation in 1983-4, from which current policy stems, concentrates on the total of tax. It says little about the balance between the two sources. If there were a change I would expect a swing towards ved. This would encourage the use of less damaging vehicles. But that is not a prediction.
Second, lorry taxation as a whole will continue to exceed the total costs allocated to goods vehicles.
This year the Government admits that there will be a 10 per cent surplus (about £160 million) in what lorries pay over and above the costs attributed to them. It defends this on the grounds that taxation — all taxation, not just on lorries — is above all a means of raising Government revenue. Within that objective certain principles can be followed, but they are totally subordinate to it.
This is perhaps the aspect of taxation most likely to cause apoplexy among hauliers, for it does not just put up their costs. Haulage costs enter into everyone's costs manufacturers', retailers', service industries' and, eventually, the general public's.
The Road Haulage Association's director-general Freddie Plaskett claims that this excess taxation puts haulage in the same category as "sin industries" such as gambling, alcohol and tobacco. But haulage finds itself in much more respectable company. For Government policy is, in effect, taxing a whole range of essential services, including gas, electricity and even such a basic commodity as water.
These industries fall into the same essential category as haulage. Moreover, unlike haulage, the public pays its bills direct, not via prices in shops. So their charges are much more politically sensitive. If the Government's cash hunger makes it prepared to shoulder the blame for bigger gas, electricity and water bills, what hope do hauliers have?
Indeed, I should be surprised if this year's £160 million total did not go up. The total of costs allocated to lorries will be index-linked to inflation — say five per cent. The industry will be lucky if the surplus above costs is not subject to a bigger increase.
The distribution of the surplus is also likely to be brought more into line with the Armitage policy that it should be concentrated on the heaviest lorries, which are judged to be the most environmentally intrusive. This year the heaviest artics are already paying a 20 per cent surcharge, but some lighter classes are paying more — in a few cases up to 100 per cent. That inconsistency seems unlikely to continue.
Third, down-licensing will still be ruled out. The move to taxation based on maximum gross weight, though generally welcomed by the industry, sparked off pressure on behalf of operators who habitually carry weights well below their vehicles' plated weight. Car transporters, empty tin can manufacturers and many others were cited as examples of those who imposed lower costs than average for the permitted weight of their vehicles.
When this point was first raised by the Freight Transport Association the Government appeared to be sympathetic. It took powers to enable it to permit operators to pay a lower tax rate on condition that they did not operate above the weight for which they were paying.
The arguments in favour were deceptively incomplete. For one thing, such a system would have opened the door to further tax evasion. And there are many operators who impose below-average costs — those who always have to return empty to base, for example. Since the total of lorry tax would remain unchanged, any reduction for those benefiting from a downlicensing system would have to be made up by those who could not.
The Department of Transport therefore offered to look at what seemed to be the most common case of complaint -the heavy tractor pulling a single-axled trailer. In theory, that is still under discussion between the DTp, the FTA and RHA, but I should be astonished if the downlicensing power were used. Even without considering the Budget's possible increases, the tax outlook for hauliers is far from cheerful.