Hauliers doing their duty
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Truck operators don't need a crystal ball to see whether fuel tax is going up in this month's Budget—it's already been decided. But the logic behind the rise is as hard to grasp as the gas it's supposed to reduce.
by Brian Weatherley • Ask why a gallon of diesel now costs more than ever and you'll get any number of excuses. The price of introducing new low-sulphur fuel, the depletion of stocks caused by last year's cold winter. Then there's the small matter of tension in the Middle East. Whatever the reason, since August bulk and pump prices for diesel have gone up by 71 and 4.9%.
Fluctuating fuel prices are nothing new to hauliers. But since 1993 they've also had to swallow an annual 5% increase on diesel duty.
The reason for the rise is carbon dioxide. In 1991 John Major backed the Rio Convention on Climate Change to return emissions of CO2 and other greenhouse gases to 1990 levels by the year 2000.
In order to achieve that goal Chancellor Kenneth Clarke declared in his 1993 Budget statement that, as the largest contribution to the growth in UK of CO2 levels was expected to come from road transport, "fuel duties would be increased on average by at least 3% a year in real terms". The actual increase has been 5%. Thus Britain's strategy against Global Warming has been fiscally driven as the Chancellor tries to discourage vehicle usage (and reduce CO2 emissions) by raising the level of fuel tax every year.
Operators faced with an annual 5% hike in duty may well feel aggrieved. While road transport is the second largest contributor to EU CO2 emissions at 24%, that figure represents all vehicles. And, as there
are 421,000 LGVs in this country and close to 22.7m cars, some might feel disproportionately penalised.
As truck engines become more fuel efficient, and burn less fuel, the amount of CO2produced by each vehicle has fallen. Scania quotes figures for a typical artic in the 1970s producing 45 grams per tonne-kilometre of CO2; by the early 1990s it was down to 31gm/tonne/krn.
Ironically, while EU emission laws have sought to reduce the levels of harmful
32% oxides of nitro 24% gen, unburnt 22% hydrocarbons, 19% sulphur diox ide and particulates, CO2 (around 10%
of diesel exhaust) is not included in the latest standard.
Despite the rolling increase in fuel duty, the demand for road transport, including road freight, continues unabated. So as a mechanism for reducing CO2 the Chancellor's strategy is questionable -especially while the biggest culprit remains the
power generation industry.
Meanwhile, the increases ensure that UK operators stay on top of the EU fuel tax league (see table). Come 26 November, when the Chancellor sits down after making his speech, operators will have to find another 5%.
But can the increases be passed on? At last month's RI-IA conference delegates voiced concern that an annual 5% hike in duty was unlikely to Rah France Belgium Ireland Spain Greece
convince customers that a rate rise is essential. RHA spokesman Sydney Balgamie says the association will lobby Parliament on the matter: "What we're questioning is if the Government is going to stick to its statement that the polluter pays— why aren't power stations, the railways and industry paying too?"
Perhaps that's because road hauliers are an easier target for a pay-as-you-go tax— unlike car drivers they can hardly cut down on their vehicle usage.
One question to ask the Chancellor is "how's that extra money going to be spent?" According to the FTA: This policy will have yielded .C18bn additional revenue by 2000 and a further .E.5bn per year."
With an election on the horizon the extra tax revenue will no doubt be welcomed by a Chancellor under pressure from backbenchers to offer tax cuts in this month's budget. Cuts that will be felt by the time the polls open in 1997.
However, in May Clarke declared: "I have too high regard for the British people to try and bribe them with tax cuts we cannot afford."
Hauliers paying an extra 5% in fuel duty will help solve that conundrum—and never mind global warming.