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9.7.18 Thus although the Centra! economic growth projection combined with constructionof the full highway programme recommended by CTS-2 appears to show acceptabletraffic conditions in 1996, the current high growth rate of the economy and thedifficulty of achieving the completion dates of highway projects show that there areno grounds for complacency.9.8 Package 1: Car Ownership Taxes9.8.1 The first policy package examined was an extension of the existing controls on carownership through increased vehicle taxation. The results are shown in Table 9.2.9.8.2 An increase in taxation on private cars and motor cycles in terms of annual licencefees and First Registration Tax of 50% was investigated, making an averageannualised increase of about $5,000 per vehicle. This would reduce the projectedunrestrained car and motorcycle fleet in 1996 from 280000 to 233000. Thiscompares with a fleet size at the end of June 1988 of 165 000, and shows an annualaverage growth rate of about 5% per year.9.8.3 Under conditions of Central economic growth and construction of the fullrecommended CTS-2 highway programme, this policy package results in veryeffective congestion relief. Traffic conditions would be as good if not better than in1986 based on a comparison of traffic speeds.9.8.4 While significant savings are brought about in operating costs for all transportoperations, this policy suffers by the massive disbenefits to would-be private carowners who can no longer afford this luxury. Under this policy, the private motoristpays a heavy price for the benefits brought to the rest of the community.9.8.5 While the policy is effective in traffic operations terms under Central economicgrowth and the full highway programme, the situation is not so good underconditions of higher economic growth or less highway construction. The 50%increase in taxes discussed above would have a much reduced impact on the size ofthe vehicle fleet and traffic conditions would be much worse than in 1986particularly in the peak hour. Even increasing the taxation on private cars and motorcycles by 120%, to reduce the vehicle fleet to the same size estimated under Centraleconomic growth for a 50% increase in taxation, would not improve traffic conditionsto 1986 levels. This is principally because of the estimated high growth in goodsvehicle traffic under conditions of High economic growth.9.8.6 Private car and motor cycle ownership restraint has the merit of being a familiar andtested policy in Hong Kong. It is simple to administer, effective in reducing vehicleownership and hence in tackling general congestion. However, it is non-selective asit is not directed at times and places where congestion is particularly a problem.Under conditions of High economic growth, other measures would be required inaddition; in particular controls on goods vehicle growth.9.9 Package 2: Fuel Tax9.9.1 The second package of options still concentrated on the control of car traffic,examining the impact of a doubling of petrol tax from $2.30 per litre to $4.60. Onlythe impact on car travel was examined although it is recognised that some light vanshave petrol engines. The results are reported in Table 9.3.9.9.2 The results in terms of traffic operations are quite similar to the effects of increasingcar ownership taxes although the impact of doubling petrol tax was less effectivethan a 50% increase in car ownership tax. It is emphasised though that the impactsof petrol tax are a little uncertain; it would be a new approach to traffic control andthe impacts of such an increase in tax would require careful monitoring.9.9.3 Economic benefits from savings in vehicle operating costs, travel time and publictransport operations were obtained at about one third of the level obtained from carownership taxes tested in Package 1. However, a petrol tax does not suffer from themassive economic disbenefits associated with car ownership taxes.182