Monday, February 26, 2007

Advantages of Electronic Road Pricing in the UK

1. Raises Revenue for the Government.
If the governments gets more tax revenue it can mean either:

  • a. other taxes can fall,
  • b. the government can spend more on public transport
  • c. or the budget deficit can reduce.

Nobody likes new taxes, but whether money is collected from new or old taxes makes no difference to the disposable income of the tax payer.

2. Increase social efficiency. In a free market the consumption of cars are overconsumed. When driving people ignore the negative externalities of congestion and pollution. The social cost is much greater than the private cost. Therefore it makes sense for the government to charge a much higher price of driving in congested areas.

3. Congestion is Inefficient Congestion costs the UK economy over £20 billion a year in lost output and wasted time. This should be tackled.

4. Reduce pollution and global warming. Pollution from cars is a significant contributor to CO2 emissions in the UK. Road charging should encourage people to look for other forms of transport which don’t pollute as much.

5. Save Journey Time - If you earn £15 an hour, why would you not like the idea of paying £7 to get home an hour earlier? Who enjoys sitting in a traffic jam?

Arguments against Road Pricing that are no good.

1. It is an intrusion on liberty. To drive you need countless documents. When you use electricity the electric companies measure exactly how much electricity you use. When you make a telephone call the telecom company know exactly whom you ring and charge accordingly. Why should driving be any different.

2. Govt is just using it to raise money. Is that not a purpose of income tax, VAT and every other type of tax? Raising money from a new tax enables other taxes to be lowered or spending to be increased.

3. Economic output is more important than Global warming. We shouldn’t worry about the future, the most important thing is keeping taxes low for the current motorist. Read the Stern Report.

4. Increases Inequality. This is true to an extent. A road pricing charge is a higher % of tax for those on low incomes. But so is the cost of buying a car and petrol. If concern about equality of distribution is an issue the govt can alter other taxes and benefits. A tax which increases efficiency need not be stopped on equality grounds. It is always possible to compensate the effects to others.

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