We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive all cookies on the Business Car website. However, if you would like to, you can change your cookies at any time
The start point for the best source of fleet information |
How would you feel if you had to give up your job or move house because of a 100-year-old theory formulated by someone you'd never heard of? Welcome to Pigovian economics...
Welcome to Pigovian economics. Or why higher motoring taxes are unpleasant but the alternatives are probably worse.
Pigovian theory was invented early in the 20th century by an English economist, Arthur Pigou, who created a model for cutting pollution by taxing the activities that caused it.
In today's terms, Pigovian theory says that if you push up the cost of driving high enough, using CO2 taxes, people will change their behaviour. For example, they will buy cleaner vehicle, or switch to public transport, or move closer to their place of work.
The problem with all this is that no-one knows whether Mr Pigou's ideas will work. Two world wars and other priorities meant that no-one put them to the test. Air pollution continued to kill thousands of Britons each year until the smog was cured in the Fifties: not by gradual taxation but by imposing the Clean Air Act on everyone.
Half a century later, Pigou's ideas are back in fashion due to the perceived threat from climate change.
Politicians love them because they offer the prospect of a solution (gradually pricing voters out of 'excessive' car use) that is merely deeply unpopular, rather than one (outright motoring bans of various kinds) that would be political suicide - not to mention terminal for the economy of the country.
Whether we like it or not, fleets seem to be the laboratory mice - or is that guinea pigovians? - in the first large-scale test of Pigounomics, hence the current barrage of suggested impositions on fleet operators. Last week it was speed limiters for company cars; this week it's the Conservatives' plan for new taxes on at-work driving; next week - who knows?
All three main political parties are now singing from the same Pigovian hymn sheet, so there's little to discourage any Government from seeking the answer to the remaining mystery of Pigounomics, which is 'how high do you set the price of pollution?'
My guess is that, for fleets and businesses anyway, the answer is 'pretty high'. Certainly high enough (and soon enough) to be painful for any firms that haven't prepared travel plans; fleet cost controls and green guidance for employees on coping with steeply rising costs of car use.
Worryingly, research suggests that 75% of companies haven't done so yet.
Time is not on their side. Pigovian theory offers politicians a dream ticket of salvation through taxation instead nightmarishly forcing the motoring equivalent of a Clean Air Act on the country. How many will be able to resist the temptation to go the whole hog on Pigou?
BusinessCar magazine ©2019
Business Car Magazine © 2020 | Business Car is part of NS Media Group.
