Memorandum submitted by CPRE
1. CPRE welcomes the inquiry by the Trade
and Industry Committee on the impacts of motor fuel taxation.
Given the high level of car dependency in rural areas, and the
lack of effective measures to reduce the need to travel and support
alternatives, it is unsurprising that concerns are now escalating
about the rising costs of petrol. We hope that in conducting the
inquiry the Committee will consider not only the impacts on industry,
but also the key environmental and social issues at stake. In
the following paragraphs we address these issues and suggest ways
in which we believe the Government should respond.
2. The context for the inquiry is that:
between 1974 and 1998 the real price
of petrol increased by 3 per cent while, bus and rail fares increased
by over 50 per cent;
nationally, 70 per cent of households
now have a car, but the rate of car ownership is much lower in
poorer households (40 per cent). In rural areas, 20 per cent of
households are without a car; and
in 1996-98, those in the highest
income band on average travelled three times as far as those in
the lowest income band.
3. There is no doubt that rising petrol
prices are now hitting peoples' pockets. The window of opportunity
for changing travel behaviour and promoting alternatives to the
car, which was provided in recent years by low oil prices, has
closed. The Government now needs to respond to the particular
implications for rural areas.
4. This response should recognise the problems
faced by those without a car who have lost out because of increasingly
expensive public transport. It also needs to be seen in the context
of the major environmental problems caused by traffic growth and
pollution. We believe that motoring taxation has a vital role
to play in encouraging more sustainable patterns of travel for
both individuals and business. Cutting fuel duty will not address
the transport problems of those most in need (who most often do
not have a car at all) and it would undermine crucial policies
to curb global warming and traffic growth.
5. We have, therefore strongly encouraged
the Government not to reduce fuel duty. In addition, however,
compensatory measures should be introduced to offset the problems
faced by some rural communities.
6. While rural dwellers travel about 50
per cent farther than urban, and do more of this travelling by
car, they spend on average only 10 per cent more on motoring as
they are less affected by congestion and other delays.
7. Under the existing conditions of poor
public transport, dispersed development, and a lack of local services,
the worst affected are those without a car and those on low incomes
who are forced to own a car due to a lack of alternatives. These
problems are best addressed through measures to increase transport
choice, rather than by trying to make driving cheaper. This would
primarily benefit the well off who do the most driving and lead
to further traffic growth and congestion.
8. We urge the Committee to address not
only the narrow impact of fuel taxes on industry, but also the
wider environmental and social impacts of motoring and to consider
how we can implement policies to encourage sustainable transport
patterns in ways which will not disadvantage those on low incomes.
9. CPRE identifies the following approaches.
Improving Public Transport
10. Rural people have long faced a situation
of declining bus services which are increasingly expensive. The
Ten Year Transport Plan has significantly increased the funding
of rural buses through the Rural Bus Subsidy Grant to £32.5
million per annum. However, we believe a further increase in funding
is needed to around £60 million per annum, to allow all English
counties to benefit from pioneering public transport schemes,
such as the Lincolnshire Interconnect project.
11. We also believe the Rural Bus Subsidy
Grant should evolve into a Rural Transport Grant offering support
for improved bus, rail and innovative rural public transport schemesincluding
rural car clubs. These issues are examined in more detail in a
recent CPRE/Transport 2000 report, The Rural ThoroughbredBuses
in the Countryside (enclosed).
12. Unfortunately, many rural bus services
in existence before the Rural Bus Subsidy Grant came into operation,
are now being badly hit by rising fuel costs and commercial operators
are withdrawing services at short notice in counties like Kent
and across the South West. We recommend that fuel duty rebate
for buses running on ultra-low sulphur diesel is increased from
75 per cent to 100 per cent (at a cost of around £105 million)
to help reduce this problem.
Reducing other types of motoring taxation
13. Recent Budgets have reduced the rate
of VED for cars with engines up to 1,100 cc. This change will
help to offset increases in petrol costs, but further reductions
in VED in future would help to shift the burden of taxation from
ownership to use which is more likely to benefit those on low
14. We support the recent recommendations
put forward by the Institute of Public Policy Research in its
Suggested Compensation Package for High Oil Prices for a £50
cut in VED for cars up to 1,800 cc (about two-thirds of cars)
at a cost to the Treasury of around £800 million a year.
IPPR estimates that this would be worth more to the motorist doing
average mileage in both urban and rural areas than a 3p per litre
cut in fuel duty.
15. Increasing car travel in the past 20
years has coincided withand been a factor inthe
decline in services which has affected rural areas in particular.
The forthcoming Rural White Paper should deliver new funding for
rural service actions plans, which set out minimum service standards
for rural people and promote innovative forms of delivery so services
are provided near homes. In addition all villages should have
IT facilities to help business diversification and enhance access
to services without needing to use a car.
16. A Rural Services Fund, as proposed by
IPPR and financed by the additional revenue from petrol taxes
and VAT receipts from higher oil prices, could help support local
shops, rural petrol stations and other rural service in isolated
communities. We recommend that £100 million be dedicated
to this fund and spent through grants, rate relief and other methods
to increase the accessibility of essential services for rural
Helping those in need
17. We cannot duck the need to reduce the
environmental consequences of traffic growth. There is more that
can be done, however, to address the potential hardship caused
by rising petrol costs of poor rural residents in remote areas
where car use is essential. Options include: increasing the level
of means-tested benefits to incorporate a "rural travel bonus"
for claimants with rural postcodes; introducing a Rural Council
Tax Rebate for remote rural areas; and enabling employers to provide
tax-free travel vouchers that could be used on a range of travel
modes, including taxis.