Economic instruments and traffic restraint

Tax and Transport Policy: In recent years there have been increasingly strong linkages between national fiscal systems and environmental/transport objectives. Within the European Union, European Commission (EC) policy has been outlined in documents such as ‘Towards Fair and Efficient Pricing’ (1), and ‘Fair Payment for Infrastructure Use’ (2). In summary these well-researched documents advocate that transport infrastructure charges should normally reflect the marginal social costs at the point of use. These marginal social costs should include not only marginal wear and tear costs on infrastructure, but also ‘external’ costs imposed on society, the environment and the wider economy through accidents, pollution, emission of climate change gases, congestion etc.. While regulatory and physical design mechanisms are also recognised as having an important role to play, it is tax and charging instruments that the European Commission and national states see as being most effective at encouraging efficient and sustainable transport systems in the longer term. In practice, moving towards such a strategic policy aim has proved problematic. In the first place, transport taxation is an increasingly political sensitive subject, as the autumn 2000 ‘fuel price’ protests in several European countries showed. Furthermore, it seems unlikely that marginal changes in the fiscal framework would provide sufficient encouragement to make a real difference in consumer behaviour. It requires a major restructuring to address the issue of environmental performance. This chapter therefore explores the potential to move towards more radical actions in a way that might succeed in overcoming the shortcomings experienced by more short term strategies. Structure of the Chapter: This chapter first considers the purposes of taxation and the implications of this for the use of fiscal policies in the new transport agenda of managing transport demand. It then considers the fiscal policies that can be used to influence consumer behaviour in acquiring and using different forms of transport, before going on to explain how these policies have – or have not – been used in the recent past in the UK. The chapter then argues that the use of fiscal policies has been quite limited, particularly in comparison to other countries. It therefore advocates and examines the implications of the adoption of a wider range of fiscal policies, as part of a wider package of economic instruments and regulations to achieve transport demand management in an effective manner that also recognises the political sensitivities involved.