Motorists are massively over-taxed

Allister Heath
BRITISH motorists are massively over-taxed. In 2009/10, 66p in each pound spent on petrol and diesel was pocketed by the Exchequer, with just a third going to retailers and oil companies. Taking just fuel and vehicle excise duty (and ignoring other taxes, including value added tax) the government raises about £31.5bn a year from motorists. Spending on building and improving roads was just £10bn at last count. The social cost of motoring has plausibly been estimated at £3.5bn a year in the form of noise and pollution. If this were so, green taxes would be too high to the tune of £18.1bn, or £293 per person. But even if this estimate of the social cost were three times too low and the real cost were £10bn, the tax take would remain £11.6bn a year too high. There are lots of other ways motorists are under attack, including Westminster Council’s wrong-headed new evening and weekend parking charges, which are bound to destroy the viability of numerous theatres, restaurants and shops. The problem, of course, is that most other activities in today’s Britain are also heavily over-taxed. The tragic truth in the current intellectual and economic climate is that the situation will probably get even worse before it eventually improves.

IT is not all bad news. The American economy is showing signs of life again. The best indication was that Wal-Mart, the giant US retailer, finally reported its first quarter of increased US sales, breaking a dismal nine quarter run of declines. This improvement is industry-wide, as witnessed by the 0.5 per cent month on month rise in retail sales in October. The latest manufacturing surveys aren’t bad either, suggesting expansion in factory output. Jobs numbers have been revised upwards going back a few months. The economy is likely to expand at a semi-decent rate in the fourth quarter, as it did in the third. Given the importance of America to global demand, this is also very good for Britain.

This doesn’t mean that the US is our of the woods; it faces, among other problems, the possibility of renewed budgetary paralysis. Millions of people remain affected by unemployment or under-employment, wealth levels have plummeted and morale remains subdued. America’s level of economic output is now slightly higher than it was at the peak of the boom, before the recession. This is in stark contrast to the Eurozone, Japan and Britain, where output has yet to catch up. It is bizarre, therefore, that America still feels even more scarred by the downturn than Britain.

So much for today’s dose of relative optimism. There is an interesting follow-up to yesterday’s column, where I bemoaned Britain’s culture of excessive private and public sector leverage (still at 291 per cent of GDP excluding financial firms), and predicted years of depressed consumer spending as we slowly readjust.

Andrew Lilico of Europe Economics estimates that the UK’s sustainable rate of growth over the next decade may have fallen to just 1.1 per cent a year. Yet the Office for Budget Responsibility still estimates sustainable growth to be 2.35 per cent per year, falling to 2.1 per cent by 2015. Somebody has got it wrong; if, as I suspect, it is the OBR the coalition as well as Labour will have to revise all of their spending plans.
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