I was interested to read about a recent ‘I Pay Road Tax Campaign‘ (I have talked about this before – Should cyclists pay road tax?) Here are some more thoughts on the issue.
I Pay Road Tax
The original road tax was abolished in 1937, but the name has stuck around. Most adults with a car have to pay the annual Vehicle Excise Duty (which is often popularly referred to as Road Tax. The Post Office calls it a car tax).
As this good BBC article explains – Is there anything such as Road Tax in the UK?, it could be better described as a pollution tax. The amount of vehicle excise duty you have to pay is dependent on the amount of pollution that a car creates. If your car is in pollution Band A (up to 100 g/km) you pay £0 tax a year. If you’re vehicle is in the highest pollution band Band M (Over 255 g/km) then the cost is £1,065 for the first year and £490.
What it means is that quite a few car drivers don’t pay this ‘road tax’ or vehicle excise duty as it’s properly called.
Vehicle excise duty goes to the Treasury and is not earmarked for paying for roads.
Cyclists are often criticised for not paying ‘road tax’, and quite a few drivers have the opinion that if you don’t pay road tax that gives you less rights on the road (e.g. cycle in the gutter). It can feel like a losing battle to explain that road tax doesn’t exist. It can be frustrating because:
- Many adult cyclists will be paying a huge range of taxes, including VED.
- The amount of tax you pay, shouldn’t influence the way people drive on the road. You don’t run over a pedestrian because they haven’t paid as much tax as you.
The Vehicle excise duty is an attempt to make drivers pay some of the external costs of driving (namely pollution). Pollution is an external cost because it effects everyone on society. The tax is an attempt to make the cost of motoring reflect the true social cost.
These external costs of driving include include:
- - Congestion – estimated to cost the UK economy in the region of £22bn a year. A huge economic cost and also high personal cost of being stuck in traffic jams,
- - Pollution – For example, CO2 emissions which contribute to global warming. Higher rates of asthma e.t.c
- - Accidents. Motorised vehicles cost the lives of over 2,200 a year. Typically, cyclists may cause the deaths of 0, 1 or 2 people a year.
- Wear and tear on roads which increases disproportionately with vehicle weight.
For driving a car the social cost is much higher than the private cost. To get an efficient allocation of resources – to help reduce congestion, pollution and accidents, – the cost of driving should be much higher than the free market price. Petrol tax helps redress the balance, but, it is not enough to reflect the social cost.
External cost of driving
By contrast, cycling doesn’t have the same negative externalities. You could make a strong case to say that cycling can have various external benefits
- Improved health
- Reduced congestion
- Reduced risk of serious accidents.
- Less impact on roads (less frequent need to repair potholes)
In an ideal world, there is a case for subsidising goods with positive externalities – and if not subsidising, at least not taxing at the same rate as cars which create more pollution and congestion.
In a free market, we get an overconsumption of cars (best illustrated by interminable traffic jams). When deciding to drive people ignore the external costs of driving. When cycling people underestimate the social costs. Therefore we get under-consumption of cycling.
The problem is that people don’t like paying taxes. But, without some attempt to include external costs of congestion and pollution, we get gridlock and poor health.
Vehicle excise duty is partially good in that it is an attempt to discourage cars with higher levels of pollution. There is a clear incentive to buy a car which has a low pollution band. However, pollution is only one of the external costs of driving. That is why we should also be including costs of congestion e.t.c.
BTW: I am a motorist, and do pay £160 a year in VED – but, generally would welcome higher taxes on driving. To make it more politically appealing, it would be good to earmark, these taxes to improve transport – fill in potholes, provide alternatives to congested city centres.
Dear tejvan,
How about this for an attitude against cyclists posted in the Yorkshire Evening Post 9/sept/13
Ban cyclist on some roads.
Whilst appreciating the benefits of cyclists reducing the number of cars on the roads,could they not be banned from using certain roads?
The Moortown ring road Leeds for example where I was stuck in a very long tailback because a cyclist was riding at 10 mph!
Vehicles take thier life`s into their hands trying to overtake these cyclist and it can end in serious accidents.
A limited number of major roads where there is no room for a cycle lane could be made NO ENTRY for cyclists making a quicker and safer journey.
I cannot believe this letter.
Ken
I detest all this special pleading on behalf of interested parties. All tax, with the exception of the TV licence is collected to top up the main income and spending taxes and is distributed by HMG as it sees fit. With regards to roads, this means providing an infrastructure which can support civilised life as we know it. This mostly means lorries I’m afraid. They may be hated but everything you have in your home and your fridge depended on one and without them civil war would break out in days. The tree-hugging qualities of bicycles are a pin-prick on the damage caused by trucks and as I see it are mostly used to salve the angst-ridden consciences of the middle classes. Pay tax. You can afford it.
Motor vehicles cost 2,200 lives a year as mentioned in the article. Instead to arguing about cyclists under tax slab for enjoying driving space on roads, we should offer incentives to people to adopt cycling as WAY of life. Also, young people who use bicycles would be unnecessarily burdened by such a tax
Another anomaly is that owners of “classic cars” registered before 1973 pay a zero-rate of VED. So, in theory a cyclist who emits no CO2 from burning fossil fuel on their journey is at parity with the owner of an E-Type Jaguar with 5.3 litre V12 engine …
As a cyclist emits <100gm/km CO2, the only argument is about the paperwork. I pay as much VED on my car as I do on my bicycle, but I still have to go through the process of clicking through the DVLA website for the privilege of paying them nothing for running the car, which makes it a net loss for the public finances, which is worse than the bike.
It really annoys me this argument about road tax (I have made the same point in another blog post). At home I have a large Mercedes and BMW sitting on the drive – I pay a higher rate than most for road tax on them because of their size. Yet I cycle into work every day (on the days I don’t, I use the train). All told I probably average 15 miles a week driving and about 150 miles on the bike.
So here I am subsidising the other drivers – paying road tax and not using the car on the road – they should be thanking me – not pulling this dull old argument out. I don’t think I am very different from many cyclists except maybe the younger ones – really this argument is just too pathetic for words.
Interesting read. However, I was unaware that there was serious enough argument that cyclists should pay road tax. Still, this is a good defence if I ever come up against it.
I would take issue with this:
“aggressive motorists who would like to see cyclists pushed off the road, because occasionally they have to slow down to overtake someone.”
That’s a pretty comprehensive over-simplification which overlooks the sins of most cyclists (not that drivers are blameless).
Many cyclists are car owners. Whilst they are cycling their car is idle.
Note too that cyclists hardly wear the road at all. Road wear goes as the fourth power of axle load. Say a bike is 100kg and a car is 1tonne and is balanced the same, then a car does 10,000 times as much wear.
If 1 pound of a car’s tax is for road wear then a bike should be paying <1/100p/annum. But their mileage is much lower so something of the order of 1/500p/annum.
So the sales tax that your grandparents may have paid for some brake blocks have overpaid for your lifetime's use of the road.
There is always the old fashioned, simple slogan on the back of the jersey that says “One Less Car”.
Seriously though, if the government wanted to tackle Global Warming seriously if should consider extra subsidies for cycling commuters, or people who use their bike for work instead of their car during the day. My work place offers a flat rate of £1.20 a day for bike use, but 40p per mile for car use related to work. While it’s welcome, it barely covers the cost of wear and tear on the bike and is hardly an incentive to ride for work.
>Pigou Velo – internalising your externalities
Excellent Gareth! like it
Can’t fault the argument – slightly worried that the slogan might not catch on. How about:
Pigou Velo – internalising your externalities
Cyclist do pay for the roads, just like everybody else. Some drivers don’t (have to) pay VED, but shouts at the drivers of new VW Polo’s, “you don’t pay tax get off the road!”
Love it! How about I put “Higher Pigovian taxes for Motorists! Subsidies for cyclists! Let’s try and achieve a Pareto optimal outcome on our roads!” on the inside pocket of the jersey?
a facinating article.
thanks
That’s a very good post. The “lets tax cyclists” argument has been raising it’s head since the turn of the century. They should also give me a rebate on my car tax (well Company car anyway), because it only does about 8000 miles a year. During the winter it does about 10 miles a week and sits on the drive. In fact, my bike does more miles a year than the car does!
That’s one of the best arguments against taxing cyclists that I’ve ever read. Thanks!