Extending the tax gap
Page 67
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CHANCELLOR of the Exchequer Sir Geoffrey Howe echoed the language of wage negotiators when announcing increases in fuel tax. The significance should not be lost on road users.
The need to compensate for inflation was his main argument, as it has been with most trade unions in the annual wages round. The extra 9p a gallon on petrol and 7p a gallon on dery were calculated with this point in mind. The implication was that the Chancellor had not really put the tax up at all.
In this way he avoided admitting that he had learned his lesson from last year's Budget. He had been forced on that occasion to cut by half his original proposal of a 20p-agallon increase on derv.
The full 20p a gallon extra tax on petrol remained. The tradition that both types of fuel had to be treated on the same basis was broken. The effect can be seen in the fresh gap — although no more than 2p — opened up in the latest Budget.
The industry can be relied upon to exploit the advantage it has gained. Many operators would like to go further and question the propriety of the whole tax burden they have to carry.
Outside the industry, and even among operators themselves, the argument is accepted too glibly that road users must be taxed to meet the cost of the roads they use. There seems to be no sound warrant for this assertion. For any parliamentary justification it is necessary to go back half a century. There are still a few people who continue obstinately and nostalgically to refer to vehicle licence duty as the road fund.
No such piggybank has existed for a long time. But it was certainly the stated intention, when a modest petrol tax was introduced, that the proceeds would go into a fund out of which payments could be made for improving and extending the road system.
The tax raised greatly exceeded the expenditure — here is at least one point that has not changed over the years. The temptation to raid the road fund was too much for Winston Churchill when he was Chancellor. His successors soon ensured that nothing was left in the kitty.
Operators would not object strongly if the fund were reintroduced. Suggestions to this effect have been firmly rejected by the legislators. Ignoring what happened 50 years ago, they insist that it is inadmissible to earmark a specific source of revenue for a specific purpose.
In spite of this, the assumption remains, inside as well as outside Parliament, that road users ought to be taxed in such a way that each category contributes its fair share of road costs. A small statistical and propaganda industry has grown up in an attempt to establish exactly what that share should be in each case.
The new rates of duty have been designed to meet this requirement. The charges have been reduced for the smaller vehicles and progressively increased as the vehicles become heavier.
The whole exercise is futile except as a means of getting more money for the Chancellor. If he is not permitted to determine the use made of particular sums received, there is no point in agonising over the exact allocation.
Operators might reasonably suspect that all the fuss about the precise assessment of the damage a particular type of vehicle does to the roads is intended to disguise the brutal fact that the Chancellor has made up his mind to get the revenue he wants from road users and would like to soften the blow by pretending that he has a more respectable purpose.
If he once has to admit that he has no reason for treating road users differently from other sections of the public, he will find himself having to answer some awkward questions.
Local authorities spend a considerable amount of money on highways and do not need to raise a special levy to meet the cost. Why should the national Exchequer be the one exception?
Reasons have been advanced from time to time for a special tax. The railways have maintained that they have the responsibility for their own tracks and would be subject to unfair competition if road users were not under the same obligation. The more militant rail lobby goes further and Insists that the railways have a vital role in the economy and must be kept going by fiscal or other means.
Neither argument carries much conviction. Since the war the railways have been given sufficient public money to pay for their tracks and a good deal besides. Their continual decline makes them less and less indispensable, as the recent drivers dispute demonstrated.
There is more merit in the argument that, in spite of the North Sea, most of the fuel on which tax is levied comes from abroad. Commercial vehicle operators might reply, although perhaps not in public, that there is a possible reason here for imposing a penalty on the motorist — that is to say the petrol user — but not on the lorry owners.
Road transport is an industry. All other industrial users of liquid fuel pay no more than a nominal duty. Some of them could use other indigenous fuels without causing problems. There seems little reason to penalise the haulier who has practically no other choice but derv.
Motoring interests would reply that most road travel in cars is for business purposes and that they should share in any relaxation of tax. They have not yet carried this point with the Chancellor. The differentiation of road users into sheep and goats has now been made official, most plainly so far in last year's Budget.
Operators can be pardoned for concentrating their efforts on increasing the gap. Motorists will still be able to press the main argument that the very existence of a fuel tax on vehicles — except perhaps at a reasonably small level — Is an insult to the millions of voters who own care,