Examination of Witnesses (Questions 143
WEDNESDAY 10 JANUARY 2001
143. Good afternoon, Mr Dawson. Good afternoon,
Mr Stubbs. Thank you for coming along this afternoon. We are very
grateful to you for coming along. Thank you also for presenting
your memorandum in response to the Committee's request. As you
know, we are looking at fuel duty and in particular the Chancellor's
position as he outlined it in the Pre-Budget Report last November
or December, whenever it was, which was very interesting, to say
the least. I would like to ask, first of all, before we ask you
a few questions arising from your stated position, as it were,
and the memorandum you have given to us, whether there is anything
you would like to say by way of introductory remarks?
(Mr Dawson) I think merely this, Chairman,
just to say that we do very much welcome the thrust of the Committee's
work in demanding more rigorous standards of environmental assessment.
I think although both this and the previous Prime Minister have
emphasised the role of sound science in environmental advance,
the AA have certainly felt very lonely over the last five or ten
years, seven years certainly, in calling for better research and
assessment. We have found ourselves sometimes offering the only
research which both Government and, indeed, all interested parties
have used to justify particular positions, and that cannot be
healthy. Of course, on top of that, we have also had to research
and report the opinion of our ten million or so AA members. I
can report to the Committee that although they do give us considerable
licence and they trust us in matters of road safety and the environment
generally, they give us absolutely no licence whatsoever in matters
of fuel and taxation. That is my opening position to support sound
144. Just coming back on that. We had Stephen
Timms in front of us in a session before Christmas and he more
or less had to agree that the Government in making a decision
in the Pre-Budget Report about fuel duty had not subjected their
decisions to any serious appraisal in the sense of environmental
appraisal or any other kind of cost benefit appraisal. Do you
feel the Government is doing sufficient research in this area?
You have stressed that you are doing research, do you think the
Government is not doing as much as it should in this area?
(Mr Dawson) If we go back to the 1992-93 period, and
indeed the five or six years thereafter, it was a wretched time
for us. We were offering continuous research and we wanted to
discuss and debate these issues. The fuel tax escalator was a
particularly distressing experience because there was no evaluation
of what its purpose was.
145. There was no evaluation by the Government?
(Mr Dawson) No evaluation.
146. By any Government, Conservative or Labour?
(Mr Dawson) No evaluation by any Government and, worse
than that, there was no evaluation of the alternatives and what
might be cheaper and more cost effective for families to achieve
the same goals. One of our earlier pieces of research was where
we commissioned the UK Centre for Economic and Environmental Development
to give us a list and a price of the various CO2 reduction
measures that were possible and how much they would cost relative
to one another given that CO2 is a uniform pollutant.
The fuel tax escalator just came out as an appallingly cost ineffective
measure for families at about £2,000 per tonne whereas actually
some of the measures were net benefits, things like insulation
for example, insulation measures in homes.
147. Leaving conclusions aside, not that you
come from a particular position, you felt that objectively there
was insufficient research being done into this area?
(Mr Dawson) Absolutely.
148. That is a view you would still hold, even
(Mr Dawson) In the last two years, I have to say since
we stepped up campaigning, as it were, to actually make explicit
what the rate of fuel tax actually was, that seemed to change
everything. As soon as we told the public what the rate of tax
on fuel was, suddenly there was a great interest in the research
and assessment of the measures. We did that to some extent because
our German sister organisation said that we were letting Government
get away with blue murder in terms of being too rational and too
scientific, we were not engaging on both sides of the equation.
149. Is it still the case that the objective
independent research commissioned by the Government is still lacking?
(Mr Dawson) It is lacking but it is getting better.
They are now genuinely interested. We have serious discussions
about the cost effectiveness of different measures, what they
are likely to achieve and, if you like, a culture which cares
about the environmental impact is coming into play.
150. In view of what you have just said about
the importance of research, can I just ask you in terms of the
research that the AA has done, or commissioned, how you actually
look at the impact of time on that research? It might very well
be the case that perhaps in the present situation with the present
fuel duty within the present constraints, within the present confines
of policy, one alternative way of doing things might not be acceptable
or even perhaps understood by people. How are you taking into
account in the research that you have done the effect that time
would have so that people perhaps having acclimatised or got used
to alternative ways of doing things could think that might be
a better alternative?
(Mr Dawson) I think time is actually very important
in this because our fundamental position has developed that it
is actually technology reinforced by a benevolent taxation system
that is the key to this. Again, it was remarks by our German sister
organisation that drew our attention to the impact of technology
when they said that the Federal Government was going to have difficulty
in maintaining its revenues from fuel tax in the face of the increasing
fuel efficiency of vehicles, remembering that the German vehicle
fleet is more efficient. So the time dimension is important because
things like the EU/ACEA agreement gives the manufacturers and
the EU and consumer time to say "These are the clear goals".
When we were able to lobby effectively for the 2005 Euro IV regulations,
and the 2008 EU/ACEA agreement, we knew that time was absolutely
fundamental. The industry, whether the oil industry or automotive
industry, has to have clear time to see what the goals are going
to be. And this also applies to safety as well, which is the third
goal. Toxic, greenhouse and safety are the three areas where we
have been lobbying for these longer term goals so that, if you
like, the tax system can then reinforce what the manufacturers
are able to offer.
151. That is something I would like to see more
factored into the research and policy initiatives which come out
of that. Just following on from that, can I just ask you a little
bit about the social impact of raising fuel duty because that
is something which has been of a great deal of concern, I think,
to a lot of people. Do you see any alternatives to address these
except by reducing petrol prices?
(Mr Dawson) It is very interesting, the research that
we did in October and November was strugglingwe had the
political position we hadand we were struggling to find
measures which actually were going to reinforce and be helpful
to environmental and transport policy as well as actually being,
if you like, acceptable to the public at large. What we found
was that a reduction in road tax and a reduction in fuel tax mixed
together was the most popular with C1/C2 socio-economic classes,
particularly the people who were being hardest hit. In other words,
it was not all about petrol prices. Unlike the higher income groups,
the C1/C2s actually preferred the blend of a £50 reduction
in road tax alongside the fuel tax reduction. I think everybody
who was benevolent seized on that because clearly we all know
that fixed prices can come down and help the family budget and
a tendency to keep variable charges higher, and there are various
ways that you can do that within a tariff of taxation, is a better
transport and environmental mix.
152. Is that not really just relying on some
kind of populism as a basis for tax policy?
(Mr Dawson) No, no. It is actually very well grounded
in the economic theory for transport and environmental management.
Higher marginal costs and lower fixed costs for the same tax take
are much more efficient in transport and environmental terms.
The lower you can make the fixed costs and the higher you can
get people to accept the variable costs, providing that is the
right policy mix, tends to be more efficient.
153. How much would you say that is set against
other policy options, other transport options, that people can
then choose things?
(Mr Dawson) It works its way into things like graduated
vehicle duty in particular because there is almost no case for
having other than a small administrative charge for the smallest,
cleanest vehicles. If the Government and local authorities want
to move forward with things like urban congestion charging the
corollary is that fuel taxes can come down quite happily for the
same overall revenue take.
154. Can I just ask you as well about the polluter
pays principle and that is something which I think many people
subscribe to. Do you feel that as a premise, in relation to the
private motorists, is one that should be pursued, the private
motorist should meet the cost of pollution?
(Mr Dawson) The AA has no problem with the principle
of polluter pays with the huge proviso that it is non discriminatory.
The problem with the polluter pays principle is it is often applied
in a rather discriminatory way. Indeed, we commissioned David
Newbery from Cambridge University to actually set out some principles
for taxation. One of his three principles was that we should press
for a non discriminatory taxation, so if it applies for all sectors
of the economy why should it not apply for motoring, but not just
for motoring as a convenient argument.
155. Why did you go on then to describe the
Government's position on the fuel duty escalator as green rhetoric?
Do you still hold that view?
(Mr Dawson) It is rhetoric in the sense that you have
to be extraordinarily protected from the real political world
not to know why and how the fuel tax escalator arrived. There
was not a commentator, to put the short version, on the day after
it was announced who did not talk about the green rhetoric and
green cloak. It was basically a revenue raising measure dreamt
up by the Treasury without any assessment for the purposes of
raising revenue with some environmental wording in cover up.
156. Just going back to my opening comments
about time. Surely people would need to have time to take account
of how their behaviour could change in response to changes in
policy? Was that a factor that the AA took into account?
(Mr Dawson) There are some underlying assumptions
in that question, that people have to change their behaviour in
some particular way, and I am not clear
157. You do not think they do have to change
(Mr Dawson) No. This is a serious question, what are
the goals? If we had not had an assessment and we do not know
what the objectives of the fuel tax escalator are, how can we
assess whether over time it has any value? If the goals are to
reduce emissions, if the goals are to reduce congestion, if the
goals are to reduce traffic, let us set those out and then test
the fuel tax escalator against those goals and then look at the
alternative measures we could adopt to achieve the same effect.
It is only with the ten year plan that the Government has begun
to put those tests forward and that is why you see the technological
option just streets ahead of any of the others.
158. Finally, can I just ask you what your objectives
would be for the fuel duty escalator?
(Mr Dawson) We think that the fuel duty escalator
is unnecessary. The environmental goals can be achieved through
a mixture of regulation, technology and revenue neutral tax adjustments.
159. We are told that one of the bits of logic
behind the fuel duty escalator is at least it gives a long term
signal from Budget to Budget rather than uncertainty. Do you think
there is any merit in that?
(Mr Dawson) I think the first thing is what is the
goal? If the goal is to meet the Kyoto targets, and, for example,
we spell out that as what our objective is, then the ACEA/EU agreement
is a phenomenally effective method and virtually all but achieves
those Kyoto targets for the motorist. I think the underlying assumption
is that the fuel tax escalator is necessary. There is no alternative
is the kind of message I hear, but I do not accept that from a
professional point of view at all. There are plenty of alternatives
in order for us to hit, for example, greenhouse emission targets.
We have hit the toxic emission targets and talk has completely
dropped off the agenda. You only have to look at what the impact
of Euro IV is, which is introduced in 2005, to see we are talking
about three per cent for things like NOx of just a few years ago.
Now we are actually being explicit and we have a Kyoto target
the manufacturers are being bullied, if you like, by formal agreements
into producing vehicles which will actually meet those clear targets.
We must be explicit about what we are trying to achieve and not
just argue for a fuel tax escalator because somehow that is good.
Good for what and what are the alternative ways of achieving that
objective which people might accept and support? Happiness for
us was going on national television to support the Chancellor
and explain to our members that graduated VED meant that gas guzzlers
would pay more and smaller, cleaner vehicles would pay less in
a revenue neutral package. That is happiness. Happiness is not
standing in front of cameras complaining and railing at all and
sundry because of the wretched fuel tax escalator. We must steer
away from policies which gratuitously hurt.