Richard Wellings and the IEA offer a radical alternative to fuel duty

A report from the right-wing pressure group the Institute for Economic Affairs (in which the author at first seems to struggle to set out a case for abolishing fuel duty) has attracted some interest on Twitter, in part because of its rather ‘free-market’ attitude to the value of human life:

“While the discussion may seem callous, it is the case that some road fatalities save the government significant sums of money, for example in future health and pension expenditure.”

The report states that contributions from fuel duty and something which the report refers to as a ‘road tax’ (presumably the author is referring to the emissions-based Vehicle Excise Duty) outstrip the government’s current spending on road building and maintenance. Presumably the reader is supposed to infer from this that road building and maintenance are the only external costs arising from motoring where as the reality is that motoring costs the taxpayer at least £9 billion per year more than it produces in tax receipts. Surprisingly  for someone who has apparently managed to acquire a PhD in transport and environmental policy, Richard Wellings seemed to be unaware of this shortfall when writing the report:

“Motoring taxes were being used to fund general public expenditure, primarily on the welfare state. Spending on roads was only equivalent to about a fifth of the motoring tax take and a significant proportion was devoted to ‘anti-car’ schemes.”

However despite the IEA seemingly not doing their research on the wider costs of motoring, I was rather encouraged by this:

“The privatisation of the road network would facilitate the abolition of fuel duty. The flotation of motorways and trunk roads would raise approximately £150 billion, which would be used to make large cuts in fuel duty. Government spending on transport would then be phased out, saving about £20 billion p.a. Finally, general tax revenues would increase markedly due to substantial efficiency gains, including much lower levels of congestion.”

Note here that the term ‘transport’ is used here to refer to ‘car transport.’ For a right-wing pressure group the IEA seem oddly determined to remove individual’s choice when it comes to transport mode.

Presumably, the problems arising after the privatisation of the railway, electricity, gas, water and telecommunications infrastructure and services are supposed to be seen by the reader as the exception rather than the rule when it comes to privatisation. The report only specifically mentions motorways and trunk roads, suggesting the author, like Minister for Roads and moron Mike Penning, is labouring under the false assumption that trunk roads (like motorways) are for the exclusive use of motorised vehicles. However, when I thought more about it, I got the feeling that there might be more to this report than meets the eye.

The big question is, why only mention motorways and trunk roads? Surely the private sector would be more dynamic and innovative than local authorities when it comes to local roads and surely the IEA wouldn’t support funding these roads through council tax. So let’s suppose we privatise the whole road network, carriageways, footways and all. Setting aside the wider issues of selling basically the entire public realm off to private companies, what would privatised road transport without fuel tax and no VED look like?

Carving it up

Traditionally privatisation in the UK has taken the form of a handful of monopolies dominating a different regions, and there is no reason to expect that the privatisation of the road network to be much different. However, it may be the case that some companies specialise in roads formerly controlled by local authorities, whilst different companies specialise in trunk roads, motorways or rural roads. In order to be charged, expect to have your movements tracked like never before.

Externalities

Naturally with the contribution towards covering some of the wider costs of motoring coming from VED and fuel tax gone, it would fall to the road operating companies to cover the external costs arising from their operations. Costs such as the hospitalisation and ongoing care costs arising both directly from road traffic collisions and indirectly from factors like air pollution and obesogenic environments would no-longer have to be paid for by taxpayers, which should be reflected by a significant reduction in the individual’s tax burden.

An interesting knock-on effect from this would be that motorway-style road designs in towns and cities which encourage dangerous driving behaviour, require different modes of travel to mix, or which produce high-levels of emissions in densely populated areas through inappropriately high speed limits would likely be phased out by road operating companies in favour of designs which reduce their costs. New designs would enforce lower speed limits in populated areas and separate out different vehicle types in order to drive down costs.

Similarly, whilst the criminal justice system at present is reluctant to hand a lifetime ban even to those who have clearly demonstrated they should never, ever drive again, under a privatised road system, road operating companies would seek to minimise their liability by either banning such drivers from the roads they operate or else charge such individuals for access at such a rate that it acts as a de facto ban.

Costs for motor traffic users

Following on from the banning (or de facto banning) of dangerous drivers, high risk drivers such as those who have been previously involved in crashes, new drivers, young drivers or old drivers would likely be charged at a higher rate. Certain journeys would require using parts of the network owned and operated by different companies, the result of which being that whilst some journeys may be relatively easy or cheap, others could become quite costly and difficult with the difference between the two being down to largely arbitrary factors. With the effective monopolies road operating companies would likely be given over certain routes (as described above) and light-touch regulation from the state, it is likely that costs to motor-traffic users would increase above inflation year-on-year, as is currently seen on the privatised rail network.

Naturally, road operating companies would seek to maximise profits by charging a higher rate for peak-time use, in addition to increasing peak-time road capacity by reducing speed limits, whilst rural users would likely face higher standard-rate charges due to the lack of economies-of-scale on the roads servicing more remote, sparsely-populated communities, but people are free to move home if they so choose. Bus services using multiple road operating companies’ roads may be more expensive than routes along roads operated by a single company.

Another advantage of privatised roads would be that the current blight of local authorities providing free on-street car parking for people who don’t work hard enough to own a house with a driveway will end, in favour of parking charges at the market rate.

Impact on road freight

A knock-on effect from higher peak-time pricing would be that it would be more economical for businesses to schedule deliveries during off-peak times. Large and heavy goods vehicles would naturally face much higher charges than smaller motor vehicles due to their increased wear on the road, disruptive effect on other traffic and significantly increased costs arising from death or injury. However, the advantage of this would be in restoring the competitiveness of rail freight; rail freight hubs would be viable in most towns and cities, with the last mile delivered by smaller delivery vehicles.

Costs for non-motorised users

The issue of non-motorised traffic (pedestrians, cyclists and horse-riders) is not touched upon in the report itself, but it is easy to infer how these types of traffic should be dealt with. Naturally, like motor traffic these traffic types will require extensive tracking for the purposes of charging. However, as we have expected the road operating companies to pay for the negative externalities arising from motorised traffic, it is only fitting that we reward them for the positive externalities of non-motorised traffic.

Positive externalities such as productivity benefits and reduced instances of sick leave to employers whose employees travel to work on foot or by cycle, reduced healthcare expenditure and reduced emissions and benefits to local businesses along walking and cycling routes should be used to offset the costs of negative externalities to road operating companies. The knock-on effect of this is that road designs which maximise the uptake of walking and cycling would be a worthwhile investment for road operating companies, as would be removing road designs which create conflict between road users. As they produce almost exclusively positive externalities, the direct cost to pedestrians and bicyclists would be zero, although tracking and monitoring would still be required to calculate the offset to negative externalities a road operating company had earned from its pedestrian and bicyclist users.

In conclusion

At first glance Richard Wellings’ report, ‘Time To Excise Fuel Duty?’ might appear to be overly simplistic drivel which overlooks the existence and value of pedestrians, cyclists, public transport users, children and most startlingly the value of human life, bringing shame on the very institution of the PhD. Taken at face value, it certainly pushes all the classic right-wing buttons; motorists portrayed as unfairly-taxed victims whose travel choice is essential for economic prosperity and producing absolutely no significant negative outcomes for third parties, those living in rural areas are portrayed as victims and pedestrians, bicyclists, public transport users and children effectively do not exist. Even human life is given a market rate. However, on second glance what the report is proposing would actually be radical subversion of current right-wing thinking on driving. Reading between the lines, Richard Wellings is proposing a model in which motorists pay a fair price for their externalities and car use is restrained in favour of modes which produce positive externalities – an extremely logical, sensible proposal disguised between the lines in a report from the IEA.

2 thoughts on “Richard Wellings and the IEA offer a radical alternative to fuel duty

  1. The real problem is that drivers have votes and nearly every adult is a driver.

    Neither private charges or public taxes will be tolerated by a car mad public.

    Nothing is the public’s fault.

    From traffic jams to obesity everything bad has been thrust upon them and they have every right to complain.

  2. @Pete

    Ah, but even the mighty motorist is no match for the heroic shareholder!

    A vote might get used twice a decade, but money never stops talking.

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