The Budget is coming up soon. I know, I know – it’s only August, but just as Back To School stuff starts appearing on our shelves in early June, so major firms and industry groups are already submitting their views on what Budget 2016 should and should not contain to Michael Noonan’s office.
One of the more interesting proposals, which only seems to occupy a couple of lines of text, was contained in the submission by Fleet Transport Association of Ireland, a grouping of trucking, haulage and logistical firms. In its submission, it said that “FTA Ireland recommends the abolition of commercial vehicle motor tax, and its replacement with a road charge, based on Maximum Authorised Mass (and other environmental factors) payable by all users of Irish roads, domestic and foreign.”
Translated into English, that means no road tax disc any more, but lots and lots of road payments. Payments per journey. Payments by the mile. Presumably heftier payments for a journey made at peak times, cheaper payments for journeys made in the middle of the night.
Pay for usage
It’s an interesting idea and one that has been floated before. After all, we already have one free-flow toll system in the country, on Dublin’s M50 motorway, which seamlessly scans the number plate of the cars passing beneath a gantry and applies a charge to each one, to be paid electronically by tag or later at a pay point or online. Such pay as you use road charges could be simply set up as a direct debit and the money would flow, unhindered, out of our accounts.
It makes certain sense. After all, we are now inured to paying as we use for gas and electricity, for phones and TV and we’ll doubtless eventually get used to doing the same for water. A road is a common good, one that must, realistically,be paid for out of public funds and therefore one which must be charged for, right?
Does it suit all drivers?
Well, not so fast. The FTA’s proposal makes perfect sense from a freight point of view, and it would certainly speed up journey times by not having to stop at toll booths to chuck €10 at the cashier. Costs would be more centralised and the whole system would make more sense. But for private users? Not so much. The UK government, some time ago, proposed a similar system but it died a political death. Not because it was going to cost the motorist too much (no, that’s usually not a consideration) but because it was going to cost too much to implement – the investment needed to scan and monitor every car on every journey was just too high.
On top of which, there were (and remain) serious concerns about privacy. Such a system would require a government department to know where everyone has driven, when they have driven and when they came back again. If you want a modern representation of Orwellian fears, it’s right there. Our freedom to travel when and if we please would be, more or less unhindered (except by cost) but would now come with the added beady eye of Big Brother on every journey.
All of which is worrying enough. Do you want to government to know where and when you’re driving? How much would each journey cost, and this on top of the existing (and inflated) costs of insurance and fuel.
Those costs also drive another, hugely significant, cost – depreciation. Depreciation is still very much the hidden cost of motoring, but it is still the single most expensive one. If you buy a mid-range family hatchback for, say, €25,000, in three years time it will be worth roughly half that amount – €12,500 down the tubes, a figure that will most certainly vastly outweigh the costs of insurance, motor tax and fuel.
The impact of changes in vehicle tax
But the motor tax figure is one that has a peculiar power to drive sales and dictate used car values. Look back to 2008 and the changeover from the old engine-size-based tax system to the current Co2-based one. The values of cars with higher Co2 emissions dropped like a rock almost overnight, and many dealers and private individuals were left with cars that simply wouldn’t sell, or could only be sold for significantly less than they would have done in 2007 – in some cases, several thousands less.
The worst part is that you simply can’t do anything about it. If Mr Noonan wants to, then Government with a stroke of a pen or the click of a mouse in October, the motor tax system could shift again – from Co2 to weight, to size, to boot volume, to colour or to how many vowels are in the badge. A silly exaggeration? Perhaps, but governments are not always sensible when it comes to taxation. After all, the current motor tax system was tweaked when officialdom woke up to the fact that the car makers were way ahead on emissions and suddenly rich drivers with BMWs were paying less tax than hard working families with Renaults. That’s stabilised for now, but the regime can change in a moment.
All we can do is watch, wait and hope that our shiny steel investment, sat on the driveway outside, isn’t going to suddenly start shedding value because the tax system changed.