It’s a shame that the annual Budget-related wrangling over fuel duty seems to be turning into largely ineffective ritual.
Each year it gets more like a Punch and Judy show. The protagonists are the same, the arm-waving as predictable as always, the script still hasn’t changed and the ending isn’t seriously in doubt.
I’m not saying that fuel taxes aren’t an important issue. But the problem for the UK isn’t whether to add or subtract three pence per litre of diesel. It’s about the need to devise a different national strategy for liquid fossil fuels. One designed for 21st century realities.
Everyone in the world is competing for gradually dwindling supplies of exported oil. Counter intuitively, the winning bidders these days are China and other fast-developing economies. At the same time the UK is trying to devalue its currency competitively; pushing up the cost of importing oil and thus sending pump prices even higher.
It means running the economy on less, more expensive energy, which in turn leads to higher prices for a lot of things. But neither side in the fuel tax debate shows much inclination to face up to these issues.
The Treasury won’t address the effects of automatic tax increases – especially on fuel – on an economy tightly coupled to motoring. Meanwhile, the tax campaigners ignore the global rise in oil prices (or blame it on speculators as if that somehow negates its effect) while telling us that we can have our cake and eat it too.
“If you made fuel cheaper,” they say, “people would drive more and you would get more tax.”
I can’t imagine George Osborne falling for that one.
Think about it. Fleet manager to drivers: “Osborne’s just dropped the price of fuel by 5%, lads. Go out and burn 10% more diesel so the Government will come out ahead on the deal.” Not going to happen.
Somehow, we need to align our plans and expectations to the fact that this country will go on using less and less oil every year whether we like it or not. The Government needs to recognise that motoring won’t be the place to go looking for higher revenues in future.
Where will that leave fleets? I think the answer will be ‘doing more with less’. It’s something we are already well-practised in. Fuel efficiency improvements have offset perhaps half of the 33% real increase in fuel prices over the last 1o years – at least as far as car fleets go.
Freight is another matter. Commercial fleets have a lot less wriggle room on fuel consumption and mileage than most car operators. The UK can’t shuffle its infrastructure around like deckchairs to overcome the increasing cost of transport.
For that reason, the current coalition of freight and motoring groups pressing for lower fuel taxes could soon splinter. The pressure on the commercial organisations to cut a special deal on tax is getting greater every year.
The motoring organisations have more voters but the weight of the economy, job protection and the laws of thermodynamics are on the freighters’ side in the long run.
Liquid fuel consumption in the UK will go on falling, with non-commercial users gradually taking a smaller share of the shrinking cake. But of course it’s only liquid fuel that we are talking about here.
As well as using less petrol and diesel through better fuel efficiency and new solutions for managing mobility, car fleets also have the prospect of migrating increasing numbers of users and journeys to alternatives, particularly electricity.
After building momentum slowly but steadily, electric mobility is starting to step up through the gears (although that is surely the wrong analogy).
I’ll look at some of the issues that raises in my next post.
