DP15153 Transport policy for a post-Covid UK

Author(s): David M G Newbery
Publication Date: August 2020
Keyword(s): fuel taxes, infrastructure investment, Road pricing, transport policy
JEL(s): D62, H23, R41, R48
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15153

Transport policy needs reform. Future Government investment and fiscal policy needs re-orienting to stimulate the economy after the Covid-19 lock-down. Prices used in project appraisal must include all external effects, committing to proper social cost-benefit analysis. In consequence, fuel duty rates need to be more than doubled as a prelude to proper road pricing. Transport investment needs to be increased even with proper road pricing and more allocated to walking and cycling, guided by benefit-cost ratios, following Eddington's recommendations. The paper gives five reasons for raising fuel duty rates, more on diesel than petrol, and estimates the desired levels.