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Posts Tagged ‘cost of motoring’

The work we have published today shows just how much money the poorest car-owning households are spending on owning and running a vehicle; for some 800,000 families it is as much as 31% of their disposable incomes. A great part of this is probably down to the significantly above inflation rises in operating costs such as insurance, petrol and diesel, and maintenance.

Cost_of_motoring_over_past_ten_years

(An interactive version of the change in the cost of motoring over time is available here.)

However it is also worth looking at how much rail and bus fares have increased over the past decade and the picture is that they too have gone up way beyond the change in the cost of living.

Cost_of_travel_chart_over_ten_years

(An interactive version of the change in the cost of transport over time is available here.)

Note that the cost of motoring is an amalgamation of both purchase cost and operating cost. The former has fallen in real terms over the past decade while the latter has increased in real terms.

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When the Chancellor delivers his Budget next month and it comes to the thorny issue of the cost of motoring in general and the rate of fuel duty in particular we hope he will have read the latest set of official statistics from the ONS.

A set of numbers – previously unpublished but requested by the RAC Foundation – collected as part of the Living Costs and Food Survey show once again just how much money the poorest households are spending on buying and running a car.

The data suggests around 800,000 car-owning households spent at least 31% of their disposable incomes on buying and running a vehicle in 2012, the latest year for which official data is available.

In the previous year they spent 27%.

These very poorest families (with the lowest tenth of household incomes in the country) had a maximum weekly expenditure of £167.

Of this £167, £51.40 (31%) went on the purchase and operation of a car.

Of the £51.40:

  • £16.40 was spent on petrol and diesel
  • £9.50 on insurance
  • £6.10 on repairs and servicing

Whichever way you cut it this puts them deep into transport poverty.

These figures are about as definitive as you can get. They give the official picture of the financial sacrifices being made by the UK’s poorest families to remain mobile.

They aren’t estimates of what people are spending. They aren’t models. They are the real world experience of people in the UK, collected as part of an authoritative survey of household outgoings.

It is of course true that these numbers are historical, in the sense that they relate to 2012. And since then there has been some marginal relief at the pumps and reported falls in insurance prices. But if you are spending almost a third of your disposable income on staying mobile then seeing prices retreat slightly from their highs – welcome though this is – will not radically alter your world.

Before Christmas the RAC Foundation detailed how record numbers of people now commute by car, including more than half of workers in the most deprived areas of the country, this data shows the cost of transport is a big hurdle to taking up employment.

For the poorest car owners there is unlikely to be much opportunity to reduce their motoring costs further. They will already be driving as little as they can and will have cut back on things like maintenance. Nor are they likely to be able to afford to swap their car for a newer model with better fuel economy and reliability.

Before tax we have some of the cheapest petrol and diesel prices in Europe but when you add in fuel duty and VAT the picture changes dramatically.

The Chancellor rightly points out that he has frozen fuel duty since March 2011 yet almost 60% of the pump price still goes into his pocket.

The chart below shows how the cost of motoring has changed over the past decade. While the prices of new and used cars have actually fallen, running costs have increased far faster than inflation. (To see an interactive version of this chart, click here.)

Cost_of_motoring_over_past_ten_years
The Budget is scheduled for Wednesday 19th March. Given the data we have highlighted today the Chancellor is going to come under a lot of pressure from politicans and campaigning groups (like FairFuelUK) to go further than freezing fuel duty and actually cut it again.

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At first glance the numbers seem incredible, but there they are in black and white, courtesy of the Office for National Statistics. The poorest car-owning households in the UK spend at least 27% of their weekly disposable income on buying and running a vehicle.

Scaling up the figures, this suggests that some 800,000 of the least-wealthy homes in the country are mired in transport poverty. If we are concerned, rightly, about fuel poverty, then we should be extremely worried about this.

The previously unpublished data, collected as part of the Family Spending survey, show that of a maximum total weekly expenditure of £167, these households spend £44 on purchasing and operating costs related to a vehicle.

£16 of this is used to buy petrol and diesel, another £8.30 goes on insurance.

For those families who regard it so important to run a car that they are willing to make an outlay of such staggering proportions – and we have always argued that for most of us car use is an absolute necessity – it is clear that every rise in costs merely adds to an already mammoth burden.

Yet for many, what choice is there? In metropolitan London people might be well served with buses, tubes, railways and taxis – but out of the capital, for most people, most of the time, the car is public transport. It is what most of us, rich and poor alike, rely on to access vital services. The difference between groups is that while owning and running a car is merely a financial headache for most, for a significant minority it is an economic nightmare, the proportions of which this data reveals.

Surely if there was a viable alternative (convenient and reasonably priced) then people would take it. To suggest that people happily pay 27% of their income to have a car because they are in any way addicted seems farfetched. They must do it because there is no option.

It is true to say that in real terms buying a vehicle has fallen slightly over the past decade, yet replacing a car is often a discretionary spend, running it is not. People have to buy fuel. They have to insure their vehicle. They have to tax and MOT it. And all these costs have risen far above the rate of inflation.

When the Chancellor makes his Budget statement on March 20th he would be well served by looking at this official data. In a way it doesn’t matter whether the figures are completely accurate or not; whether it is 27% of income that goes on car ownership, or 37% or 17%. All are of such large proportions as to be of concern.

Fuel costs are clearly only part of the equation, but it is a significant part. We would hope George Osborne remembers this when he makes his next pronouncement on the level of duty.

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After years of news reports about the economic troubles in Greece, it is all too easy to ignore or forget the scale of the problems there.

The figures on vehicle ownership and new car registrations in Greece offer an interesting perspective on just how much impact the economic crisis is having on daily lives, and on how people get around.

In 1990, Greece had the lowest number of passenger cars per head in the EU of the time (170 cars per 1000).  In contrast, the UK had more than 2 times that figure.  In the 1980s, Greece had very high taxes on cars – cars were expensive items for fairly wealthy families and run into the ground to get the value from them.  Most people relied on motorbikes, scooters, taxis and the bus.  Where there were affordable cars, they may well have been made out of bits of old scrap.  With a particularly old parc, vehicle emissions were exacerbated and vehicle safety was poor.

Greece then experienced a remarkable degree of motorisation, as EU rules opened up the car market and EU money improved the roads.  From 1990 to 2009, Greece had the largest percentage increase in per capita car ownership in the EU outside the Eastern Bloc countries.

New vehicle registrations went up, and households that used to have one motorbike began to have one or more cars as well.  But as the economic crisis took hold, the car has experienced a precipitous decline.  New vehicle registrations have collapsed (down by about 40% in each of the last two years).  In 2011, the UK had 31.3 new vehicle registrations per 1000 people, Greece had 8.6. In addition to car buying, car trips, as with all other expenditure, have been drastically reduced.

However, with some of the highest fuel prices in Europe (5th highest petrol, 7th highest diesel), serious car tax rises to help fix the deficit, and increasingly unaffordable public transport costs, many cannot afford to go back to motorcycles either – step forward the bicycle.  The Greek bike industry appears to be booming, as people turn to the bicycle to get around.  While other businesses close, bicycle shops are doing well.

These aren’t MAMILs (middle-aged men in lycra) or people making a lifestyle choice.  Cycling has had a very poor image in Greece.  The former Prime Minister was widely mocked for his interest in cycling (apparently not macho enough), and, given the bad infrastructure, heat and hills, many – perhaps understandably – can’t imagine cycling at all.  But mobility is vitally important, and there seems to be a turn to the bicycle as many Greeks are priced out of most other ways of travelling.

The Mayor of Athens, George Kaminis, recently announced a pilot scheme to rent public bicycles in the historic centre of the city .  While the mayor is looking at cycle hire schemes, perhaps he should also be looking at car sharing and car clubs for those still struggling to pay for their cars.  As recent RAC Foundation work has shown, these schemes bring traffic emission reductions and give people and businesses access to an automobile when they need it, on a pay-as-you-go basis.

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Every picture tells a story and the same applies with graphs. The chart below illuminates just how much the running costs of motoring have increased over time, over and above the rate of inflation. It is true that the cost of purchasing a car has fallen in relative terms leaving the ‘all motoring’ index pretty much in line with general inflation. However while a car purchase (such as changing vehicles) is often a discretionary spending choice which can be delayed, running a car tends not to be: you have to fill up the tank and insure your vehicles no matter how severe your financial situation.

The second graph shows how public transport fares have changed. They too have risen above inflation but not by as much as the running costs of cars.

Perhaps the main, depressing, conclusion to be drawn is that all travellers have seen costs shoot up.

Note: data comes from Office of National Statistics CPI charts.

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The age old ‘cost of motoring’ debate has been once again raised this morning on the tenth anniversary of the  fuel protests by the Campaign for Better Transport. They are of course in one sense right – the relative cost of motoring has fallen over the past decade, but you need to look beyond the headline figures to understand what is really going on.

A recent report for the RAC Foundation on the Cost of Motoring found that:

Over the past 10 years, the cost of motoring has risen by 25% and the cost of public transport fares by 57%, compared with a 41% rise in all prices (all as measured by the retail price index). However, the cost of using a car has risen faster than public transport costs while the cost of buying a car has fallen sharply.

So the facts tell us that ownership costs have reduced, but running costs have increased substantially. As motorists tend to only focus on running costs, often because other sunk costs are not generally visible, few will agree that travelling by car is getting any cheaper. With fuel duty set to rise in both October 10 and April 11, and with VAT increasing to 20% from next year, the real cost of motoring (i.e. what people feel and react to) will still be felt in consumers pockets.

Now many will of course argue that increasing running costs is a good thing if you want to ‘encourage modal shift’, but it has also been proved time and time again that because car travel is highly valued by so many, and there are often few available alternatives to the car, households tend to absorb these costs and cut down on other expenditure. In any case continuing to increase costs on a particular energy user, without consideration to how energy is priced in other sectors, is, at best, unwise.

If the country is serious about cutting carbon emissions, transport undoubtedly needs to play its part, but this must be set within the wider context. Road users are in fact paying may times over for the cost of carbon, whilst other sectors such as home energy use pay reduced rate VAT, even though it is arguably an area where positive carbon improvements can have less social and economic consequences. Car travel is afterall not the preserve of the rich, with almost 50% of low-income households having access to a car (See: Low income drivers).

And what does it mean now that cars are getting more fuel efficient? This is undoubtedly good news for the consumer and the environment. Some will express concerns that this only leads to increased travel as people can take advantage of going further for less. In the main people have very fixed travel time budgets and if they do decide to drive further than before the cost of fuel, although inportant, may not overule other deciding factors that might make up peoples life decisions, such as where to live, where to work, accessing friends and family etc.

So the cost of motoring, what does it all mean? Well to start bald statements about the falling cost of motoring is too simplistic to be helpful and if we are to have real progress on reducing carbon emissions any policy for the cost of fuel or motoring in general needs to use agreed costs of carbon applied across all energy sectors. As people don’t tend to consider the ‘sunk costs’ of car ownership a more pay-as-you-go approach to motoring may well be needed…but this is, I fear a discussion for another time!

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