Memorandum submitted by the Confederation
of British Industry
1. This evidence forms the relevant section
taken from the "CBI recommendations for the 2000 Pre-Budget
Report", published on 23 October 2000.
2. The Government's announcement of a 10-year
£180 billion transport investment provides a very welcome
commitment to long term investment in transport in line with CBI
recommendations. The private sector—which itself will play
a major role in financing the plan—is keen to ensure that
delivery of the programme occurs cost-effectively and to time,
and looks forward to working with Government to this end.
3. Agreement on the amount which needs to
be invested in transport, however, only serves to focus attention
on the inadequacies of how users pay for transport, and in particular
road transport. There is wide recognition of the poor link between
the taxes paid by road users and the quality of service (for example,
in terms of journey reliability, which is particularly important
to business) delivered by the network. There are also serious
questions about the failure of the current tax system adequately
to distinguish between urban and rural road users, and about its
effectiveness in delivering environmental goals.
4. The CBI has also stressed in its 1999
and 2000 Budget submissions the need to address the effect on
UK competitiveness of the high level of duty on diesel. Welcome
developments in the 2000 Budget included an end of the automatic
fuel duty escalator and cuts in vehicle excise duty for HGVs,
but UK hauliers still operate at an overall cost disadvantage
of 5-10 per cent, compared with non-UK rivals, putting upward
pressure on costs for UK business as a whole. UK diesel prices—the
highest in Europe and of which 80 per cent is tax—contribute
to this disadvantage.
5. Furthermore, the CBI continues to believe
the Government's proposals for reforming company car taxation
have been poorly thought out (the manner of consultation has been
particularly poor) and offer few environmental benefits. The lack
of clarity is demonstrated by the addition of a higher rate of
tax for diesel-engined cars which produce lower CO2 emissions
than petrol engines yet the objective is to encourage the use
of cars with lower CO2 emissions. The proposals will also hit
genuine high business mileage users hardest.
6. In short, the current tax system is failing
business and new developments—not just on company car taxation,
but also the likely introduction in some areas of congestion charging
and the poorly-considered workplace parking levies have significant
potential to add to its inadequacies. The CBI therefore strongly
urges the Government to commit, by the time of the 2001 budget,
to:
— Address with immediate effect the
continuing impact of the high level of transport taxation on business
competitiveness. Options for serious consideration should include
some of all of the following:
— introduction of a UK vignette,
with compensating VED reductions for UK hauliers;
— a review of the indexation of
taxation on diesel fuel used by HGVs;
— a review of the levels of VED,
and tax on diesel fuel used by HGVs.
— Begin a radical yet careful review
of all road user taxes (as proposed in the 1998 CBI report Roads
to the Market), with a view to securing a taxation regime which
works better with other transport policies to deliver economic
and environmental goals. This review should, among other things:
— promote fair competition between
different modes of transport;
— take account of the balance between
fixed and variable user costs;
— consider the interaction of taxation
and new forms for payment for use, eg congestion charging;
— ensure road users get a fairer
deal from the combined level of taxes and charges which they pay,
and the quality of service which they receive.
24 October 2000
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