22 July 2008

A really cool way to reduce fuel prices

I'm generally in favour of letting the price mechanism operate. Fuel prices are rising because demand exceeds supply, so the rising prices are a necessary signal to help us adjust to using less fuel. Subsidising fuel will just lead to shortages and postpone the inevitable; it's generally a waste of taxpayers' money.

Still, when governments jack up fuel prices by 40% over the weekend, it blows a hole in commuters' budgets (and hurts anyone who needs kerosene for cooking or heating). This happened in Côte d'Ivoire two weeks ago and I saw how bus and taxi fares immediately jumped to reflect the higher costs. Still, transport operators staged a strike: they claimed the government wasn't letting them raise fares by enough to cover the cost of fuel.

The government's response was to cut ministers' salaries in half and curtail foreign travel for government officials. The money saved will pay for a reduction in fuel tax. Fuel will still cost more than before, but only by 30%, not 40%.

Cynics might call this an election-time gimmick, but I think it's fantastic. I doubt the ministers will be thrown into poverty by the cut and it probably won't last long, but it sets a great precedent.

Who should be next? Maybe Kenya, where the government had to raise taxes to pay for their hair-raising 40 ministers (that's power sharing for you). But I would start with the European Parliament, whose members receive probably the most ludicrous travel allowances of any organization in the world. They can fly to Brussels on Ryanair for €99 but charge the round-trip business fare on, say, Air France (€500? €1,000?) and pocket the difference. The EU has already imposed a travel ban on President Mugabe and his entourage; wouldn't it be nice if we imposed it on EU parliamentarians too?


Scarlett Lion said...

After having a blog for too long without a list of links, I've finally put up a 'Web Readings' section on the side bar of www.ugandascarlettlion.blogspot.com and I’ve linked to you.

SL (Glenna)

Some recent posts...
Thinking twice about political blogs in Uganda

The problem with African Woman magazine: From Fistula to Fab!

Housing in Kampala

Newspaper Dating Adventures

Lunch at Luzira Prison

Kevin Carter, the Kireka Quarry, and Karamoja: thoughts on the limits of photography

Molly Kinder said...

Rupert, I love this! Same is true for the US Congress -- instead of just whining about opening our protected reserves (which are protected for a reason!), perhaps some of my country's Republican congressmen can offer such a reduction in travel perks. I won't hold my breath....

MikeT said...

Not cool Rupert, us civil servants live for the travel budget...

Seriously though, this must hit bureaucrats hard. I understand that travel and subsistence payments are a significant source of income for those travelling to our conferences in Nairobi.

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