Treasury Fuel Duty Revenue should help pay Local Authority Flood Costs

Friends of the Earth Cymru (FOE Cymru) has called on Environment Minister Sue Essex to request that Treasury fuel duty revenues should help fund the recent flood damage costs incurred by local Councils, and future flood defence work (1). Local Authorities are currently hoping to apply under the 'Bellwin formula' for emergency aid from the Assembly.

The environmentalists say that part of the rationale for the fuel duty escalator was to account for the 'external' costs of motoring including environmental and social costs including a climate change contribution (2). External costs include significant health costs due to air pollution, road injuries and noise, road maintenance (track costs), ground and water pollution, crop and building damage, lighting and policing, and a
climate change contribution.

FOE Cymru say that Government and the National Assembly should make and explain the link between fuel duty and the environmental and social 'external' costs of motoring and explain 'polluter pays' taxes. The environmentalists say that the recent Budget cuts have meant the hauliers and motorists are paying less towards meeting these costs thereby undermining fiscal measures to encourage responsible lifestyle choices.

Neil Crumpton, transport spokesperson said:
"The Treasury should use fuel duty revenues to help cover the recent flood costs that Local Authorities have had to bear. The fuel duty is supposed to include a contribution to tackling climate change and other environmental and social costs although this point is not well understood by the public. Only by ensuring that the polluter pays can we achieve a fair tax on fuel and the costs of tackling extreme weather events needs to be fully included."

The damage of road haulage to roads and the environment has recently been calculated by consultants NERA for the Government (2). Each 5-axle 40 tonne lorry, which the Freight Transport Association (FTA) calls "the workhorse of the industry", costs £28,588 per year overall including a contribution to their environmental and social impacts. The FTA calculates that such a vehicle pays £25,500 per year in fuel duty and VED. This is over 10% less than its real cost and last weeks budget cuts will reduce the overall payment by up to£4,000 per annum. Environmentalists say that the NERA figures are conservative.

Neil Crumpton said:
"The recent across the board fuel duty cuts will undermine efforts to address global warming."

FOE has also called for a Royal Commission to assess and update the environmental and social costs that motoring imposes. The Commission should propose ways to achieve polluter pays principles in a reasonable timescale bearing in mind new technology including cleaner, energy efficient vehicles and measures like lorry tracking by onboard CD or satellite systems.

Notes

1) Letter to NAW Environment Minister
2) The all-party House of Commons Environment, Transport & Regional Affairs
Committee concluded in their 15th Report: The Road Haulage Industry 1999

"We have not accepted the principal argument advanced by our witnesses from the road haulage industry, that fuel prices and VED are too high, and should fall. We believe that in the past haulage rates have been unrealistically low, and have not reflected the true costs imposed by the road haulage industry on our society. The real increases in fuel duties, although imposed too rigidly in the face of rising oil prices, have gone some way to creating a sustainable market in road freight transport. If our objective is a safe and clean road haulage industry ... then haulage rates must rise to reflect the true costs of freight transport".

Friends of the Earth Cymru

To: Environment Minister
National Assembly for Wales
Cardiff

14.11.00

Dear Sue Essex AM,

Flood Damage Costs in Wales

Friends of the Earth Cymru call on yourself and the Environment Committee to request that the costs of the recent floods to Local Authority budgets and loss of agricultural produce should be directed to the Treasury. We cite the reasons below for our call.

The fuel duty collected by the Treasury should be in part a contribution to tackling climate change. Climate change is one of the various 'external' environmental and social costs of road transport which are a major justification for increasing fuel duties over the past few years via the road fuel escalator. Consequently, flood costs incurred by Councils recently, as well as compensation for crop losses, and future flood defence work should partly come from the fuel duty revenues collected centrally by the Treasury. Road transport accounts for most of the 25% of UK greenhouse gas emissions from the transport sector.

FOE Cymru also calls on the Assembly to request a Royal Commission to update the external costs of motoring with the aim of achieving polluter pays principles. The Commission should consider new technology including lorry tracking, cleaner fuels and energy efficient vehicles. Charging motorists and hauliers for the external costs of motoring in a reasonable timescale should be a government aim, and one which does need to be explained to the public.

To support our calls we cite the recent all-party House of Commons Environment, Transport & Regional Affairs Committee report which concluded that:

"We have not accepted the principal argument advanced by our witnesses from the road haulage industry, that fuel prices and VED are too high, and should fall. We believe that in the past haulage rates have been unrealistically low, and have not reflected the true costs imposed by the road haulage industry on our society. The real increases in fuel duties, although imposed too rigidly in the face of rising oil prices, have gone some way to creating a sustainable market in road freight transport. If our objective is a safe and clean road haulage industry ... then haulage rates must rise to reflect the true costs of freight transport".

The damage of road haulage to roads and the environment has recently been calculated by consultants NERA for the Government. Each 5-axle 40 tonne lorry, which the Freight Transport Association calls "the workhorse of the industry", costs society £28,588 per year. The FTA calculates that such a vehicle pays £25,500 per year in fuel duty and VED. This is over 10% less than its real cost. The duty cuts announced in pre budget statement will further reduce hauliers external costs payments by up to about £4,000 per annum.

If flood damage payments along with a range of other external costs are not covered by fuel duties then the costs may well be paid for from other revenue streams such as income tax. We believe that this would unfairly penalise income tax payers who may shop more locally and who travel less by private vehicle. So reducing fuel duties only undermine efforts to promote local produce and responsible lifestyle choices.

Thank you for your time.

Yours sincerely,

Neil Crumpton, Transport & Energy Spokesperson, FOE Cymru