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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5 responses to “Why 80mph speed limits will damage the economy

  • Andrew Turvey

    What complete tosh! Clearly if someone is better off driving slower then they have the option to do exactly that. Many people earn more than £11 per hour and would be better off – but the law prevents them from doing so!

    Surely a liberal view would be to say we should have a bias against restrictions – people in favour of them should have to demonstrate a convincing case in favour.

  • jonaholiver

    There’s a few things you miss here. Firstly, people will not drive slowly on a motorway; it’s against human nature and it’s also extremely unsafe to have cars traveling at vastly different speeds. In fact it wold probably create a far greater risk to road safety than the speed limit change itself. Also, you’re quite correct that many people earn at least £11 an hour, but that figure assumes that every minute saved on motorway driving is spent working. That will clearly not be the case, and I suspect the majority will be simply absorbed into the daily grind or used for leisure time. And yes, we do need speed limits, and liberals should support them. It is the kind of ridiculous liberalism that says we should not that has been one of the main reasons behind our lack of real electoral success.

  • Malcolm Todd

    I’m thoroughly unconvinced that raising the speed limit will bring economic *benefits* (all figures on this are inevitably founded in guesswork and huge assumptions), but Andrew’s right: your argument really doesn’t stack up. It’s not just that “many people earn at least £11 an hour”. In fact, a full-time employee earning £11 per actual hour worked would earn barely £20,000 a year, which is about 20% less than the median wage; and of course, those who are most likely to be driving up and down motorways will be disproportionately higher earners (people on low incomes can’t afford it, and jobs that require travelling around the country certainly aren’t minimum wage). Nor is the economic value of the work you do measured purely by your hourly wage. (There are on-costs, so it must be assumed that the value of your working hour at least matches the total cost to your employer of your working for that hour, and if you work for a company trying to turn a profit, as most people do, rather more than that.)

    • jonaholiver

      I don’t dispute that £11 is not that much compared to what most people earn, but that is not the point. That figure is based on two assumptions. Firstly, the amount you would need to earn is significantly more than the figure in my blog for the reasons outlined (eg. higher fuel consumption tests and rising fuel prices). More significantly, it relies on everyone using the time they save (which in most cases will only be a few minutes at a time) to work. This will simply not be the case in most circumstances. In fact I would estimate that in real life you would need to earn at least £30 a hour to make up for the extra cost. That would be closer to an annual salary of £60,000. Whatever the actual figure, the change in speed limits will clearly cost motorists dearly.

  • Claire Haynes

    1: I am self-employed – no cosy fuel allowance!! I regularly drive a 35 mile stretch of the A14 but limit my speed to 65, or 70 when necessary (i.e. late!) The faster I go, the more it me costs in fuel.
    Hourly rate is irrelevant – spend more on fuel, earn less – SIMPLE!!

    Most of the time, I travel at a similar speed to every one else, but there are drivers who insist on driving at 80-100mph – barging every (polite) driver out of the way or just flashing angrily at perfectly reasonable drivers….

    2: Variable speed limits were imposed around Heathrow so that everyone can maintain a reasonable speed. Success, as far as I know!! Rapid speed changes are a major cause of accidents – that is a fact.

    80mph inevitably means 90+ to some people, just as 70 means 70-75 to me……

    3: In nature, fauna do not understand speeds of over 40mph – which is why birds of prey have the edge over their prey – most humans cannot mentally process the speed of a vehicle over 40mph – we guess based on experience…
    The faster we are ‘allowed’ to go, the more miscalculations there are… i.e more accidents.

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