17. The principal objective of fuel taxation is to
ensure that motorists should bear the full costs of drivingnot
only wear and tear and congestion on the roads, but also the wider
environmental costs. Over time, the Government aims to shift the
burden of tax from 'goods' such as labour and capital to 'bads'
such as pollution.
In line with the Government's Statement of Intent on Environmental
taxation published in 1997, any environmental tax should met the
tests of good taxation:
should face the true cost which their actions impose on society;
the social consequences of environmental
action must be acceptable;
economic instruments must deliver real
environmental gains cost effectively;
environmental policies must be based
on sound economic advice;
environmental policies must not threaten
the competitiveness of UK business".
18. The Government have stated that "fuel duties
have played an important role in helping the UK meet its Kyoto
target for reductions in greenhouse gas emissions". Increased
fuel duties between 1996 and 1999 are estimated to produce carbon
savings of between 1 and 2.5 million tonnes by 2010.
The Financial Secretary told us that he was "confident that
the amount of fuel being consumed is less than it would have been
if fuel duty had been lower".
We requested further information on the tools used to measure
the impact of the fuel duty escalator: for example, whether it
seeks a reduction in the volume of fuel consumed, or the mileage
travelled for a constant volume. The Minister of Energy referred
to steps taken to encourage more economical driving habits by
lorry drivers. In supplementary evidence to us, the Government
said "the estimated size of the reduction in demand resulting
from a specific increase in price depends on a number of factors.
Different modelling approaches using different data are likely
to produce different values for the extent of this impact."
This response does not supply any further elucidation. It is
still unclear how the Government is measuring its success at meeting
its objectives; the Environmental Audit Committee's recent Report
criticises the Government on precisely these grounds.
If it has no valid means of measurement, the Government should
hardly be surprised if people conclude that revenue is a rather
more important element than the environment in fuel taxation.
22 Road fuel prices and taxation,
House of Commons Library Research Paper 00/69, 12 July 2000, p16-17