From: Thomas Wagner, Associated Press
Published October 15, 2004 12:00 AM

High Taxes at the Pump Help Britain Maintain Flat Gas Consumption

LONDON — In Britain, drivers pay nearly three times what Americans do for gasoline at the pump, and the high taxes that cause the huge difference have never managed to achieve one of the government's main goals: reducing the number of cars on the road.


However, they have dramatically increased the number of small, fuel-efficient cars that Britons drive, and as oil prices continue to climb on world markets, some Britons believe the gas-guzzling United States has to find a way of doing that too.


"Big cars are part of the culture over there. They've got to get out of that mind set," said Rob Surtees, 26, a film location specialist who pulled up at a Texaco station in central London in a Fiat Bravo on Tuesday.


"Every country has to take responsibility for the globe's environment. The Kyoto Accord is at one end of that duty. The amount of gas you use in your car is at the other."


In America, consumers now spend an average of US$1.94 for a gallon for regular fuel. In Britain, that price is $5.66, making it some of the world's most expensive gas.


For years, British governments have repeatedly raised gas taxes, often over the rate of inflation, with several goals in mind: reducing the number of drivers, improving the environment, and raising revenue.


Today, about 75 percent of the price at the pump is tax, compared to an average of about 22 percent in the United States in August. In Britain, where new cars are often expensive, drivers also must pay a heavy sales tax when they buy one and an annual fee for a driver's permit. On top of that, insurance for drivers is mandatory.


People who buy small, fuel-efficient cars are rewarded with a lower sales tax, and such a move can even reduce the amount of income tax that an employee pays for a common perk in the United Kingdom: buying one's own company car.


In 2000, the high fuel tax set off a nationwide protest by motorists and truck drivers angry that British gasoline prices were the highest in Europe. Demonstrators blockaded refineries and fuel depots, all but paralyzing the country for about a week.


In September, Prime Minister Tony Blair's government dropped a plan to raise fuel taxes again after a trade group representing about 12,000 truck companies and 100,000 drivers in Britain, the Road Haulage Association, threatened strikes and "militant action."


Richard Freeman, a spokesman for Britain's Automobile Association, said the high taxes have failed to reduce the number of cars driven or licenses issued in Britain. And the government confirmed that this week, saying both those figures have risen steadily over the last 10 years.


"There is no evidence that people don't buy a car because they can't afford the fuel tax. Even low-income families will not give one up. For many of them it is a lifeline, it is needed for their job. So they'll give up holidays, reduce their leisure activity, even downgrade the types of clothes they buy to hold onto their cars," Freeman said in an interview.


That is especially true in Britain, a country whose outmoded and overcrowded trains and subways can sometimes be frustrating.


"Britons won't give up their cars, no matter what the gas price is. They're used to it," said Michael Balla-Goddard, 52, an architect who was filling his Saab at the Texaco station. "Besides, London subways reduce one to a sardine in a tin can during rush hour."


Even Freeman, who opposes the gas taxes and thinks Britons are sick of them, admit that they have had some success and that countries like the United States should take note.


For one thing, the steep fuel prices and the tax benefits offered to buyers of smaller, gas-efficient cars have dramatically increased the number of people who drive such vehicles and the competition of automobile manufactures to make them.


From 1994 to 2003, the number of those cars sold in Britain rose from 26 percent of the total market to 34 percent, according to the Society of Motor Manufactures and Traders.


That is one reason that even though the number of cars on the road in Britain is increasing, the amount of carbon dioxide that vehicles emit nationwide has remained relatively flat for the last five years, said the Department of Environment, Food and Rural Affairs.


Overall, gas consumption fell in Britain by 2 percent last year, but it is on the rise this year, said the Petrol Retailers Association.


Given how low U.S. gasoline prices are compared to Britain's, Freeman said, American should consider slowly raising them with the goal of motivating drivers to buy — and big manufacturers like Ford and GM to make — more compact, fuel-efficient vehicles. The last time that trend materialized in the United States was during the 1970s oil crisis.


Cal Hodge, president of A 2nd Opinion Inc., a consultancy in Houston that specializes in fuel and regulatory issues, said Americans would never tolerate fuel taxes like Britain's and that politicians who approved them would soon be voted out of office.


"The British model wouldn't work in the States because we drive so dang much and drive such large, inefficient cars," he said. "I don't think there is any politician who has will to take such a risk."


Instead, Hodge said, the U.S. government should increase the sales tax on vehicles such as Humvees and SUVs and provide tax rebates on small, fuel-efficient models. Over time, that softer approach could achieve the same goal, he said.


In the meantime, Britons continue to empty their wallets at the pump.


"A car is prestige. It's like having a decent watch," said Vincent Ward, 50, who stopped at the Texaco to fill up his traditional black cab. "High petrol prices won't get people to stop driving. I can't think of anything short of really bad air pollution or the end of oil supplies that would do that."


Source: Associated Press


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