The Royal Commission on Pollution: Rise in fuel cost poses dilemma
Thursday 27 October 1994
Three-fifths of the money motorists spend on petrol is taken by the Treasury in excise duty - the taxman's share rises to three-quarters when you include VAT. The Chancellor has already promised to raise excise duty by 5 per cent a year above the rate of inflation. But to double petrol prices in a decade, this 'escalator' would have to be raised to 9 per cent.
The impact of price rises on petrol use, pollution and government revenue depends crucially on how motorists react. Department of Transport studies suggest an annual rise of 9 per cent in excise duty would cut petrol use by 2-3 per cent a year. But Phil Goodwin, of Oxford University's Transport Studies Unit, believes the long- term effect of each annual rise in excise duty would be twice as large because people will buy more fuel-efficient cars or choose to live closer to their work.
Because the fall in petrol use is less dramatic than the rise in price which prompted it, the overall amount motorists spend on fuel will rise, thus increasing the Government's revenue from excise duty. Petrol duty is already expected to raise pounds 15bn during this financial year, equivalent to the revenue of nearly 10p on the basic rate of income tax. The Treasury estimates that raising petrol duty by 5 per cent on top of inflation would raise pounds 855m next year. Others suggest this may be an underestimate.
'If the Government wanted to maximise its revenue, it would raise the rate of excise duty considerably higher,' Stephen Smith, of the Institute for Fiscal Studies, said. 'But that is a political judgement'.
However, price increases might need to be even more draconian than the Royal Commission has recommended if pollution targets are to be met and the economy improves. This is because vehicle use tends to increase as people become better off.
- 2 California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
- 3 School kitchen manager 'fired from Colorado school for giving hungry students free lunches'
- 4 Amy Schumer: 'I'm 160lbs and can catch a d**k any time I want'
- 5 Isis executes three gay men by dangling them from top of 100ft building and letting go
Amber Peat: Body found in search for missing 13-year-old who left house after argument with her parents
School kitchen manager 'fired from Colorado school for giving hungry students free lunches'
Amy Schumer: 'I'm 160lbs and can catch a d**k any time I want'
Isis executes three gay men by dangling them from top of 100ft building and letting go
Alton Towers crash: Four guests seriously injured as Smiler ride carriages collide
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
£40000 - £47000 per annum: Recruitment Genius: A 3rd Line Virtualisation / Sto...
£26000 - £35000 per annum: Recruitment Genius: A successful national service f...
£15000 - £25000 per annum: Recruitment Genius: This is an opportunity to join ...
£17500 - £20000 per annum: Recruitment Genius: We currently require an experie...