Tuesday, February 28, 2012

Fuel Duty - Will Osborne Blink First Again?

You can tell it's nearly budget-time. Quentin Willson is on the telly again, banging the drum to postpone (again) the rise in fuel duty. Well, it worked last time - Osborne chickened out having first said there was no money for fuel tax cuts. There's a 3p rise due, and that's on top of the recent increase in the oil price. As usual, the BBC doesn't include any balancing opinion on what we could do instead of spending money subsidizing fossil fuel use by those fortunate enough to be able to afford a car.

Willson argues that postponing the rise (in effect reducing fuel duty in real terms) will magically create money from nothing. He reasons that if people can afford to put fuel in their cars, they will drive around spending money willy-nilly with small businesses, thus stimulating the economy and creating treasury income in the form of increased VAT. Challenged by the interviewer on where the money to fund a fuel duty cut is going to come from, he responds with an imperious final devastating sweep of logic: "the money doesn't have to come from anywhere: in the long term we'll cost the treasury no more."

Have you spotted the catch yet? Unless fuel suddenly becomes free, it's still going to cost money. Quite a lot of money: 135p - 145p/litre depending on your preferred flavour, and it could go up further in response to the expected military strike against those naughty Iranians. So if people start driving more, then more of their money is going to be spent on still-expensive car-juice - which won't generate many UK jobs, and a significant share of the money will go to the unsavoury regimes in some of the countries where oil originates. The regimes we seem to end up fighting expensive wars against - wars funded by taxes like fuel duty.

Now it's clear that people are driving less these days. Does it automatically follow they are sitting at home doing nothing and spending nothing? Is car travel a prerequisite for any type of consumption? Has Willson not heard of public transport, or internet shopping, or even local shops and restaurants you can walk to?

Meanwhile, in other news, the Association of Train Operating Companies reports that motoring is an unaffordable luxury for young people squeezed by tuition fees and youth unemployment. And fuel poverty is killing 8000+ people a year - more than die on the roads. Those two groups aren't going to benefit from any cut in fuel duty, because they can't afford a car in the first place, let alone the fuel to put in it.

So, if the Chancellor has any spare cash down the back of the No.11 sofa, should he be handing it out by lowering fuel duty? If you want to stimulate the economy, there are probably better ways that result in more of the spend generating UK jobs, and generate a long-term return on investment. Fuel duty cuts will benefit the wealthy most: those who drive high mileages in thirsty cars. If your goal is to help the hardest-hit, maybe you would like to lower transport fares for young people for whom cars are just posters on the bedroom wall. Or you could insulate homes, reducing our fossil-fuel dependency and helping those for whom cold can kill.

1 comment:

  1. If you put on a silly mask, can I sneak you in as the Chancellor instead of Osbourne?