The fumes of failure
‘W e have no plans not to implement our budget’: the double negative employed by Phil Woolas, the Environment Minister, on Tuesday’s Newsnight, and the familiar ‘no plans’ formula, told you all you need to know about this government’s collapse of confidence. On the matter of retrospective Vehicle Excise Duty (VED) increases, ministers are desperate to execute a U-turn as quickly and as painlessly as possible — one which, in any case, they fear they will be forced into sooner or later. Equally, Gordon Brown does not want to be seen to be bowing — yet again — to popular pressure, so soon after the 10p tax debacle. It is hard to reconcile ‘long-term decisions’ with budgets rewritten on the back of an envelope. Truly, this government is collapsing under the weight of its own contradictions.
This week, in scenes reminiscent of the 2000 fuel mutiny, truckers converged on London to protest over the separate issue of fuel duty. The Prime Minister’s instinctive response was to internationalise the pain of the motorist (so eloquently expressed by Bryan Forbes on page 20). ‘The global economy is facing the third great oil shock of recent decades,’ he wrote in Wednesday’s Guardian. ‘There is no easy answer to the global oil problem without a comprehensive international strategy.’ It is certainly true that Opec is a relic from the 1970s, when there was a prevailing distrust of free markets and a mistaken belief that protectionism guarded the creation of wealth. But Opec’s general secretary, Abdalla Salem El-Badri, is probably right to say that a sudden increase in production would not guarantee the desired fall in the price of crude oil, which last week breached $130 a barrel. Rising demand from China, which has been widely blamed for the current surge in prices, is part of the story. But another, hugely important, dimension is speculation, which has driven the price of many commod ities in recent months, as worldwide investors flee from the previous bubble: property.
As for retail fuel prices in Britain, however, the essence of the problem is the tax take — and Mr Brown is kidding himself if he thinks the voters do not know this. Three quarters of the price of a gallon of petrol drawn at the pump goes straight into the government’s coffers. Moreover, the amount of tax levied on fuel has increased directly with the price of crude oil: the VAT element of fuel duty is charged as a percentage, meaning that a 10p rise in the underlying cost of petrol will result in an extra 1.75p in revenue for the Exchequer. Why, then, given that petrol prices have risen by nearly 20p since the beginning of the year, does the government also need the additional 2 per cent rise in fuel duty planned for September?
The Treasury has feasted on high oil prices via direct revenues from North Sea oil: the accountancy firm Grant Thornton estimates that the government has received a windfall of £810 million since budget day (12 March) alone. Fuel duties could be cut — and still the government would be in profit. Yet rather than do this, the Prime Minister attempts to shift the entire blame for high pump prices on to Opec, calling it a ‘scandal’ that 40 per cent of global oil production lies in the hands of the organisation.
There is a horrible contradiction in this outburst. The government clings to the conceit that motoring taxes are ‘green taxes’ — they are necessary to persuade us to drive less in order to lower carbon emissions. Yet — logically — if Mr Brown’s principal concern were indeed the environment he would be praising Opec for refusing to increase oil production. High crude oil prices have done more to persuade Britons to insulate their homes and buy smaller cars than years of hectoring from environment ministers.
The government’s plans for ‘green taxes’ are a policy muddle with only one clear objective: to fleece the motorist. Proportionally, taxes on smaller cars will rise by more than those on larger cars. Even a modest Nissan Micra will soon cost more than £200 a year in car tax. Moreover, charges will rise most sharply on cars bought between 2001 and 2006 — thereby hitting hardest precisely the sorts of families which are already feeling the pinch. Those who can afford to change their cars regularly will be less vulnerable. Not so the less affluent, who will be victim to an outrageous retrospective levy.
And yet the increased car taxes will do little to persuade motorists to switch to other forms of transport, because the alternatives are also increasing sharply in price. From this autumn, the rail companies, with not a peep of protest from the government or the rail regulator, will abolish day returns and penalise passengers who change their plans after buying advance tickets. Proposed tram systems have been cancelled in several cities, and the government has declined to entertain the case for a highspeed north-south rail link.
When the government first mooted a national road-pricing scheme, the idea was that it would replace existing motoring taxes. Now, the national scheme has been dropped and in its place individual authorities have been invited to submit plans for local roadpricing schemes — with the important difference that these will run on top of, rather than instead of, existing motoring taxes. Since April, local councils have been granted powers to fine motorists up to £120 for motoring offences — and to keep the money, ensuring themselves a new revenue stream: the devolution of stealth taxes, so to speak.
Motorists are paying, in effect, for the ‘integrated transport system’ that Labour promised in 1997 but has never come anywhere close to delivering. They are also paying for the profligacy of a government that has spent untold billions on public services with feeble results. The best news is not that the government will change its mind on VED, as welcome as that would be. It is that the electorate as a whole seems minded to put an end to all the dithering at the earliest possible date.
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