Tag Archives: Phillip Hammond

Why 80mph speed limits will damage the economy

Much has already been written about the environmental and road safety implications of Phillip Hammond’s plan to raise the speed limit on motorways to 80 mph. It’s been correctly argued that the increase will lead to a rise in serious accidents and carbon emissions, but hardly anyone has so far looked at what economic effects it might have. In fact, this is where the greatest consequences may lie.

Let me explain. Last year in Britain, cars travelled  a total of 243.8 billion miles, roughly 48.3 billion of which were on motorways. If we take average fuel consumption for these journeys at a rather optimistic  46.4 MPG (the average of official overall fuel consumption figures for new petrol and diesel cars) then drivers on motorways alone used 4.8 billion litres of fuel in 2010. In itself that is a colossal figure, but what difference will the speed limit make? Studies vary, but the general consensus is that the rise to 80 mph will increase fuel consumption by 10- 20%. If we use 15% as a reliable average, 720 million more litres of fuel will be used each year as a result of the change. The environmental impact of this has been well documented, but the cost aspect has not.  Fuel prices currently average around 137.2 p a litre, which means that the increase will cost British motorists £988 million every year. And that’s not the worst of it. These figures are optimistic, based on new cars in laboratory conditions. In the real world the fuel bill is likely to rise even further.

Of course, the Department for Transport has a counter-argument; that the change will save everyone time and therefore get the economy going again. Not only does this point rely on a rather tenuous link between quicker journeys and productivity, but it also falls apart when the figures are examined. The 86.2 million hours that the speed limit increase appears to strip from journey times seems quite impressive, until you realise that to make up for the cost of additional fuel that is being used motorists would have to use that time to earn at least £11 extra per hour saved! Clearly there will only be marginal, if any, economic benefits from 80 mph speed limits.

So why is DfT pushing ahead with a plan that will hurt the environment, the economy and road safety all at once? The answer is surprisingly simple. Through fuel duty and VAT increased fuel use from the change will net the Treasury at least £615 million per annum, more than a half a billion pounds. Far from getting Britain moving or revitalising the economy the speed limit rise is little more than a stealth tax. For me, such a small gains can hardly be worth the damage it could do to both to family budgets and Britain’s attempts to cut greenhouse gas emissions.

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