The Contribution of Benefit-in-Kind Taxation Policy in Britain to the ‘Peak Car’ Phenomenon

Abstract

Car use per person has historically grown year-on-year in Great Britain since the 1950s, with minor exceptions during fuel crises and times of economic recession. The ‘Peak Car’ hypothesis proposes that this historical trend no longer applies. The British National Travel Survey provides evidence of such an aggregate levelling off in car mileage per person since the mid-1990s, but further analysis shows that this is the result of counter trends netting out: in particular, a reduction in per capita male driving mileage being offset by a corresponding increase in female car driving mileage. A major contributory factor to the decline in male car use has been a sharp reduction in average company car mileage per person. This paper investigates this aspect in more detail. Use of company cars fell sharply in Britain from the 1990s up to the 2008 recession. Over the same period, taxation policy towards company cars became more onerous, with increasing levels of taxation on the benefit-in-kind value of the ownership of a company car and on the provision of free fuel for private use. The paper sets out the changes in taxation policy affecting company cars in the UK, and looks at the associated reductions in company car ownership (including free fuel) and patterns of use. It goes on to look in more detail at which groups of the population have kept company cars and in which parts of the country they have been most used, and how these patterns have changed over time. A preliminary investigation is also made of possible substitution effects between company car and personal car driving and between company car use and rail travel. Clearly, the role of the company car is only one of many factors that are contributing to aggregate changes in levels of car use in Great Britain, alongside demographic changes and a wide range of policy initiatives. But, company car use cannot fall below zero, so the effect of declining year-on-year company car mileage suppressing overall car traffic levels cannot continue indefinitely.