Report on Motoring 2015: 1. What's on motorists' minds?

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Report on Motoring 2015: 1. What's on motorists' minds?

Over the past 12 months, the overall economic situation in the UK has improved while in May, voters elected a majority Conservative government for the first time since 1992.

With wages gradually rising and forecourt prices down, the cost of fuel – although still a significant drain on motorists’ disposable income – is not quite the burning issue it was in 2014.

Apart from this, there have been few drastic changes in the areas of greatest importance to drivers since last year’s RAC Report on Motoring was published.

Other major concerns have not changed dramatically over the past 12 months. Motorists remain particularly concerned about the deteriorating state of local roads. Meanwhile road safety issues are high up the list of concerns and particularly the illegal behaviour of other drivers; the use of mobile phones while driving, is a top four concern for the largest number of people.

In contrast, concerns about young driver safety and the environmental impact of motoring, which often feature prominently in the media, rank surprisingly far down the list.

1.1 The price of fuel

A sharp decline in global oil values, caused by an extended period of supply outpacing demand, sent the cost of fuel in Britain to a five year low last winter with petrol even falling below £1 a litre in one or two retail outlets. While the price of both petrol and diesel rebounded 10p a litre by the summer, prices were still on average 15p lower than the previous year, and it looks likely that we are set to enjoy a sustained period of lower pump prices as OPEC – Organisation of the Petroleum Exporting Countries – continues pumping crude at above demand levels in a bid to maintain its market share.

Despite this, the cost of fuel remains at the top of the list of issues most frequently cited by drivers as their number one concern, though the state of local roads now matches this. One in every ten drivers (10%) say the price of fuel is their top concern, while just over a quarter (26%) list the cost of petrol or diesel among their four main worries. This represents a significant drop, however, when compared with the 47% of motorists who included fuel prices as a top four issue in 2014 or the 63% who did so a year earlier.

The change is explained, at least in part, by the fact that in early 2015 the cost of petrol and diesel fell to levels last seen in 2010: at the start of February, the average price of a litre of unleaded was 106.09p, with diesel at 113.92p (3).

This represented a fall of almost 25p per litre for petrol and just under 23p for diesel in six months, caused by a decline in crude oil prices. Brent crude oil, for example fell from $115 a barrel in mid-June 2014 to a six year low of just over $45 in January this year.

While the cost of a litre of unleaded did fall below £1 at a small number of retailers earlier in the year, this level is widely viewed as an effective price floor because of the large amount of duty and VAT imposed by the Government. On a £1 litre of petrol, only 25% of the price represents the actual cost of fuel, including distribution costs and profit for the producer and retailer, with the rest going to the Treasury.

An improving economy and rising wages have also helped reduce concerns about the cost of running a car, though there remain concerns about the cost of insurance, particularly among younger drivers. The Office for National Statistics (ONS) said the UK economy grew by 3% in 2014, and that GDP was up 0.3% in the first three months of this year. Meanwhile, the ONS has also reported that wage growth reached 2.7% in April 2015.

Perhaps as a result of a growing “feel-good factor”, two-thirds of motorists say their expenditure on fuel has either fallen or stayed the same over the past 12 months. However, the cost of fuel remains a particular concern among drivers who cover high mileages, as well as some less affluent motorists where there is little or no practical alternative to the car for essential journeys.

But motorists are unlikely to be complacent about the cost of filling up given the price volatility seen over recent years. By June this year, the price of petrol had crept back up to 117p a litre while diesel was 120p on average and it would only require a fresh increase in world oil prices or a drop in the value of sterling against the dollar to drive the cost of fuel back towards the levels seen in mid-2014 and back up the list of motorists’ concerns.

Another issue for motorists is the large difference in prices charged by retailers. Competition between supermarkets appears to help keep prices low, and the presence of a supermarket tends to ensure the prices charged by other fuel retailers within the area are competitive. But the significantly higher amounts typically charged by motorway service stations urgently needs to be addressed by the Government. Research carried out recently by the RAC found that motorway service stations were charging up to 15p a litre more than retailers elsewhere.

At the start of 2013, an investigation by the Office of Fair Trading into the fuel retail market recommended that signs should be used alongside motorways displaying prices at upcoming services to help drivers seek the cheapest provider.

The coalition government said two years ago that it would introduce such measures, but although a pilot scheme on a section of the M5 in the South West has been announced, progress on this matter remains frustratingly slow (10).

And in another example of a dysfunctional fuel retail market, drivers of diesel vehicles failed to see any benefit when the wholesale price of diesel dropped below that of petrol in the second quarter of 2015.

RAC figures from June this year highlight the problem: during the month, retailers were paying distributors between 1p and 3p a litre less for diesel than petrol. Yet unleaded typically remained as much as 5p a litre cheaper and only in July did we start to see retailers bringing diesel prices down to below petrol prices. With such pricing aberrations still a feature of the market, the RAC believes that the Competition and Markets Authority should re-examine the retail motor fuel market.

There is clearly a strong argument for greater transparency in the prices charged at the pump in the interests of fairness both to retailers and the motoring public.

The price-competitiveness of individual filling stations is typically judged according to the price they charge for a litre of unleaded petrol, so it may be that retailers have been artificially keeping petrol prices low at diesel’s expense. But with the volume of UK diesel sales running 60% higher than petrol at the moment, this practice is proving extremely costly both for private motorists and for businesses, particularly Small to medium-sized enterprises (SME) that are too small to benefit from bulk purchasing arrangements. At the end of July, UK diesel prices were around 10p/ litre higher than in any other EU country and in most cases the gap was far greater than this. With road transport contributing to the cost of most goods and services, this inevitably has a knock-on effect on the competitiveness of the UK.

“Improving economic conditions and rising average wages are surely an important backdrop to the decline in concern about fuel costs. Motorists think of the price of petrol and diesel relative to their income, so fuel costs may not have changed dramatically but if earnings are going up, it is likely to affect motorists’ perceptions.”

David Davies, Executive Director, Parliamentary Advisory Council for Transport Safety (PACTS)

1.2 Fuel duty and motoring taxes

Awareness amongst motorists of what proportion of pump prices goes to the Government in the form of tax is relatively low. Only four in ten (39%) motorists correctly identified that between 60p and 79p of a 105p litre of petrol would go to the Treasury in the form of duty and VAT. The number that underestimate the amount of tax paid was 34%, while 18% think that 80p or more per litre is paid in tax.

The more experience drivers have, the more likely they are to have an accurate idea of what proportion of fuel prices is tax with 53% of those with over 40 years driving experience identifying the amount correctly.

The RAC would still like to see till receipts for fuel itemised so that the amount paid in tax is clearly highlighted.

The freeze on fuel duty implemented by the coalition government in 2011 remains popular and has helped keep the cost of petrol and diesel under control. Almost half of motorists (46%) agree that the freeze should remain in place for the foreseeable future, and in his Summer Budget Chancellor George Osborne confirmed the freeze would be extended until at least the end of 2015. But by failing to extend the freeze further than the start of 2016, the Government does invite concerns that an increase might be on next year’s agenda, despite the proven link between fuel prices and economic growth. The RAC calls therefore upon Government to extend the freeze on fuel duty for the full-term of this parliament.

“Despite fuel prices coming down in 2015, the Report shows that the cost of fuel remains a top concern for motorists. This is a timely reminder to the Chancellor that whilst he has frozen duty for the remainder of 2015, he risks a huge backlash from motorists if he proposes an increase in 2016. With the UK having some of the highest fuel prices in Europe, the economic arguments favour a reduction rather than an increase in duty and indeed with so much overwhelming evidence that low fuel costs stimulate economic activity there’s now no credible fiscal reason to ever justify raising fuel duty again.”

Quentin Willson, Motoring Journalist, Broadcaster and FairFuelUK Campaigner

Meanwhile, 18% of drivers think that fuel duty should be cut and other motoring taxes – for example motorway tolls – introduced to make up any shortfall. And 14% would like to see a cut in fuel duty offset by increased general taxation such as income tax or VAT.

There is limited support for a rise in duty: 12% of motorists think this would be a good way of raising tax revenues to help fund the likes of the health service or education, while one in ten (10%) feel that higher duty could help to encourage road users to purchase more fuel-efficient vehicles.

The RAC, however, believes that fuel duty is a very inefficient way for the Treasury to raise revenues because of the direct impact it has on economic growth. A report published by the Centre for Economic and Business Research and the National Institute of Economic and Social Research on behalf of FairFuelUK in 2012 found that increases in fuel duty had a direct impact on economic growth and led to a reduction in employment, lower consumer spending – resulting in reduced VAT receipts – and higher benefit payments due to the associated impact on jobs.

The extension of the Government’s rural fuel rebate scheme has been a welcome development this year: in addition to the five islands originally covered by the rebate, 17 more mainland communities are now eligible for a 5p-a-litre reduction in duty. These areas – mainly in the Scottish Highlands and the north of England – have low population densities and are remote from refineries and fuel distribution centres, and therefore face relatively high petrol and diesel costs.

1.3 The state of Britain’s roads

For one in ten motorists (10%), the condition and maintenance of local roads is their top concern, making it an issue as significant as the cost of fuel.

A further 20% of drivers say the state of local roads is one of their four biggest worries. It is clear that, despite a £6bn investment announced in late 2014 by the Government, there remains much more to be done.

Half of motorists say that the state of roads in their area has deteriorated over the last 12 months. Of this group, 99% blame potholes and problems with road surfaces. A majority of drivers think that dealing with local road issues should be a priority when transport investment decisions are made, while 30% think this should in fact be the Government’s number one transport spending priority.

There is less concern about the state of the nation’s motorways: this is the top issue for just 3%, while a further 10% cite it as a top four concern.

Across the general motoring population, congestion and journey times appear to be less of a problem than might be expected: 5% of drivers say this is their number one concern, while overall 18% think it is one of their four main worries, which represents a small decrease on the 21% reported in 2014. For people who drive a company car or whose car is part of their business, the picture is quite different. Among this group, 12% say slow-moving traffic and delays to journeys is their biggest concern, while another 25% of business or company car drivers cite congestion as one of their top four issues.

1.4 Driving standards

There is widespread concern among motorists about the potentially hazardous behaviour of other road users. Particularly worrying is the use of mobile phones while at the wheel: 34% say that drivers who talk on their phones without using a hands-free kit are one of their top four concerns. The same proportions cited texting or using mobiles to browse the web as a major concern.

Certain other dangerous or antisocial practices appear to be less of a worry in 2015. For example, a quarter of motorists (26%) are concerned about uninsured and untaxed drivers but this is considerably less than the 35% recorded in 2014 or the 37% in 2013. Lower concern about drivers who are not properly insured reflects figures from the Motor Insurers’ Bureau which suggest that the number of uninsured drivers has halved over the past decade.

But the RAC is concerned that the new computer-based vehicle excise duty system, which was ushered in last autumn, may lead to more drivers trying to evade paying VED given they no longer need to display a tax disc. As the purchase of VED involves the DVLA checking that the car in question is insured, this could in turn lead to a rise in the number of uninsured vehicles.

Meanwhile, there has been a sharp decline in the number of people who think the cost of car insurance is a major concern. In 2015, only 18% cite it as one of their top four issues, against 28% in 2014 and 35% the year before.

However, in the summer 2015 Budget, the Chancellor George Osborne announced that the insurance premium tax that applies to general insurance policies including motor cover will be increased from 6% to 9.5% from November 2015. As a result, drivers are likely to see their premiums rise, and concern about the cost of cover may therefore rise in future years.

There has been a slight increase in concern about younger drivers under the age of 21, who, insurers’ statistics tell us, are more likely to be involved in road traffic accidents. Overall, 8% of motorists say this is a top four issue they are worried about, a rise on the 6% recorded in 2014. However, the general level of concern on this subject remains surprisingly low given the high level of visibility of this issue in the media.

And more people are concerned about older drivers – those aged 70 or above.

One in ten motorists (10%) cite this as one of their four main worries. Department for Transport figures published in March this year show there are 4.3 million full licence holders in the UK aged 70 or over – this is more than a tenth of all drivers. The figure includes 1.2 million aged 80 or older, 83,000 over 90, and 226 drivers who have celebrated their centenary. And with an ageing population, these numbers are set to rise in future years.

According to the Department for Transport, there was a sharp increase in accident rates among car occupants aged 60 or over in 2014: the number of those killed or seriously injured rose by 10%, double the rate of increase (4.8%) in all age groups (14).

There has also been a small rise in concern about cyclists’ behaviour on the road – for example, jumping red lights, riding on the pavement, or cycling without lights or high-visibility clothing. This year, 16% of motorists say this is a top four concern, up from 13% last year. Finally, the environmental impact of using a car remains surprisingly low down the list of motorists’ priorities: only one in 50, or 2%, of drivers say this is their primary concern. And only a further 5% say it is one of their four leading concerns, indicating that environmental issues are no more important to motorists today than they have been in previous years despite the publicity received over the last 12 months relating to air quality concerns in our towns and cities and the associated impact on our health.

“I’m interested that concern about behaviour of cyclists on the road has gone up a bit. I think that’s probably because there has been a lot of media coverage of it, and also there are some places that have seen a lot more cyclists on the road, so they are more noticeable. To avoid pitting cyclists against motorists, we need to make sure the roads are safe for all who use them.”

Stephen Joseph, Chief Executive, Campaign for Better Transport



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