Keeping up attacks on tax
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TAXATION is a subject which arouses strong feelings at the best of times. And Nigel Lawson's Budget two months ago not only increased the tax on the heavy end of the vehicle range, but did so in the face of rationally-based expectations of something better. Only the most optimistic expected the track costs consultation exercise would result in a cut, but there were grounds for hoping for a standstill.
So it was no wonder that Road Haulage Association DirectorGeneral Freddie Plaskett, in his address to Tipcon (CM, May 12), attacked the imposition of the environmental surcharge with unusual bitterness. Since almost the entire fleets of his Tipcon audience are within the affected range, his remarks were sure of a warm reception.
This column has dealt with the taxation issue several times recently and would not normally have returned to the subject again so soon, but Mr Plaskett was kind enough to refer to my recent conversation with Cromwell on the subject (CM, April 21). And he seemed to attribute to me the view expressed by Cromwell that the consultation exercise was totally useless. That is not my view — or not quite.
Perhaps two months after the Budget it is now possible to look at the tax changes more calmly than in the state of shock which followed their announcement. In particular, I suggest that the environmental element should be put on one side to be looked at separately.
That might sound like the question put to Abraham Lin coln's widow on the morning after his assassination at the theatre: "Aside from that, Mrs Lincoln, what did you think of the play?" However, I shall return to the surcharge. But it should not be allowed to obscure other aspects of the track costs exercise.
What has the industry gained from the exercise? The answer is a clearly-stated theoretical basis for the calculations of track costs and the way in which they should be allocated between different classes of vehicle. Moreover, although there are some differences between the industry and the Department of Transport there is a very large area of agreement. That provides a rational basis for discussion. Surely that could be worth a lot.
Could be, but only if the Government applies its own principles. The industry's complaint, most recently and bitterly voiced by Mr Plaskett, is that it has not done so. On the contrary, it has acted capriciously.
The Treasury and the DTp would no doubt argue differently. However, there has at least been the start of a rational dialogue between Government and industry, something which happens all too rarely in this country. It would be a pity, though understandable if disappointment led to this being broken off. There are still enough opponents of open government in Whitehall ready to say: "We told you so-the more facts you give them the more discontented they become."
Let us, therefore, look at how the Government might see what it has done.
First, it is Government policy that Excise Duty and similar indirect taxes should rise in line with inflation. So some increase — say five per cent — was due in any event.
Then they might argue that to have applied the logic of the Government's response to the consultation paper at one go would have given rise to great difficulty for those operating the types of vehicle due to bear large increases. There would also have been some effect on the truck manufacturers. Indeed, the Freight Transport Association asked for a phasing-in period on these very grounds.
Nevertheless the Government would say that there has been considerable move towards applying the agreed principles. Of about 300,000 vehicles between 7.5 and 13 tonnes most had a reduction, while the others had no increase, not even the inflationary five per cent. Even so their ratio of allocated costs to revenue is 1.5:1, so there is stilt some way down to go. As we shall see later, this could be significant.
Then 100,000 rigids above 13 tonnes had a nine per cent increase — including the element for inflation of about five per cent. This still leaves the class not quite covering the allocated costs.
Finally comes the top end of the range. Here the hopes of at worst a standstill, and possibly even a reduction, were at their highest, and the disappointment correspondingly most bitter. Yet the Government would argue that the Budget's increase of about five per cent was the equivalent of a standstill in real terms, after taking inflation into account. And, most significant for the future, the ratio of allocated costs to revenue for this class is only 1.2:1. What about environmental and social costs? in the Government's response last February to the consultation process there is a significant sentence worth quoting in full: "The Secretary of State proposes to follow the approach in the consultation paper, recognising that there will need ultimately to be some consistency between the margins allowed between track costs and tax rates for broadly similar vehicles."
The "approach" referred to says that "there should be some margin between allocated costs and revenue, particularly for the heaviest vehicles."
That is manifestly not the present position — indeed, almost the reverse is true. Although the heavies pay 20 per cent over the odds, the 7.5-13-tonners pay 50 per cent. The heavier rigids almost cover their costs. There is no logic in this except as a staging post on the way to a system based on the Government's stated principles.
Although the Government's handling of the matter might have been improved, particu. tarty to avoid disappointment there is no case for alleging that the environmental chargE was suddenly whisked out of no where to satisfy the Chancellor's rapacity. Having let off steam hope that the RHA and the FTA will start now to prepare thE ground for the 1985 Budget. An meanwhile operators consid ering purchasing the heaviest ar tics should not assume that tht Chancellor has already done hi: worst. Just remember the 1.2:' and 1.5:1 ratios.
I dread to think what Cromwel will make of all this.