Tuesday, July 15, 2008

Tories abandon belief in the market

In their current proposals for a fuel price stabiliser the Tories are stating that the government has a duty to fix the price of petrol so that people can plan ahead..... sound familiar anyone?

Maybe this can be extended to bread, milk, shoes and so on and we can have a fully socialist command economy.

Of course the implication of the Tories proposal is potentially very expensive, if the price of petrol goes up and people buy less of it it implies a big loss to the exchequer. For all that I am not against a 'modified stabiliser' which includes a fuel tax escalator where the price of fuel does not rise with inflation.

Having fuel duty go down makes, quite frankly, for chaos both for the exchequer (i.e. resources for public spending on vital services) and for the 'price mechanism' (which is supposed to have a role in giving feedback on relative scarcity).


  1. You fool you. Tax is 80% of the value of fuel and the govt automatically collects more when oil prices rise.

    Not all consumers can simply drive less overnight and so cushioning the blow of higher prices makes perfect sense.

  2. Seems to me that there should be some stability in public finances and I'm not sure the govt should start setting commodity prices.

    And of course there may well be price elasticity of demand though I don't claim expertise in such matters.

  3. The government tax rake is already the lion's share of the petrol price. I simply don't see how a policy that moderates the swings caused by the price movements in the commodity is more or less interventionist than what happens at present. That's why I took issue with the thrust of the post.