Select Committee on Trade and Industry Appendices to the Minutes of Evidence


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 schemes—including rural car clubs. These issues are examined in more detail in a recent CPRE/Transport 2000 report, The Rural Thoroughbred—Buses 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 incomes.

  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.

Improving services

  15.  Increasing car travel in the past 20 years has coincided with—and been a factor in—the 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 dwellers.

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.

November 2000

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