Fuel protests are due to return to London this morning. Hauliers are protesting against the rising costs of fuel and the detrimental effect it’s having on the economy. Co-incidentally a group of Labour MPs is meeting the Chancellor today to press for concessions on forthcoming motoring tax increases.
I’ll deal with the general issue of fuel and vehicle duty in another post. The government have had 8 years since the last fuel protests to sort the system out to make it equitable, accountable and acceptable to the public. One is not inclined to be sympathetic to their predicament over the issue now.
Nevertheless I do have some sympathy for the position of the road hauliers. They are asking for a 25p / litre rebate on fuel duty. Their reasoning being that fuel duty (and hence fuel prices) are significantly lower elsewhere in Europe and that they are not able to effectively compete with foreign hauliers. They complain that foreign hauliers are coming to Britain fully loaded with fuel in order to undercut their British counterparts. They also point to the lucrative cross-Channel haulage business.
Clearly the effect that high fuel duty has of getting HGVs coming over from across the continent (burning even more fuel) is somewhat perverse. Yet simply giving hauliers a significant rebate is not the answer, either. Our use of fuel is not sustainable. The oil price is going to stay high, and rise, for the medium to long term. The cost of road haulage must rise, along with all other uses of oil, in order to encourage use of alternatives (i.e. local produce and rail freight). Other European countries might have lower fuel duty, but they also have a much higher state subsidy for rail, paid out of general taxation. It’s unlikely the British taxpayer could swallow moving to such a model overnight and, arguably, it’s better to make people consider the economic cost of each journey they make rather than simply subsidising greener alternatives.
So, in order to address the hauliers’ valid concern over fairness of competition I propose that they be given access to red diesel (currently permitted to farmers only, with significantly lower tax levels). This would give them a much bigger discount than what they are asking for. But I would propose one condition: hauliers should start paying electronic road pricing.
Road pricing is a much fairer mechanism for hauliers to pay for both the economic cost of road maintenance as it would apply to all HGVs, including those coming over from Europe. With access to red diesel they would have a level playing field with their European counterparts. Road pricing is also much more effective for tackling congestion as different prices can be applied to suit the varying road types. Inner city and residential roads should have higher prices per km, rural and trunk roads should be lower.
Of course there is a problem with this proposal: the government does not have an infrastructure in place for road pricing and is intending to make use of Galileo. Yet there’s no reason why an initial infrastructure could not be based off Navstar-GPS. It would take a couple of years, even if they kept it simple, yet I’m sure they could work out some interim arrangement. The real issues are: whether the hauliers would buy it, and perhaps more importantly, does the government have the balls?
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