The potential tax income shortfall should spark radical rethinks on how we pay for our roads

By Alisdair Suttie 16 May 2012

Wednesday 16 May 2012. Fleet Voice Column.

The UK’s government is set to become a victim of its own success when it comes to encouraging car makers and drivers to reduce their carbon dioxide output.

By 2029, it looks likely the government, of whichever political hue it will be in 17 years’ time, will face a £13 billion shortfall in revenue from motorists due to reduced income from fuel tax and road tax, more officially known as Vehicle Excise Duty.

The reason is simply cars are becoming ever more efficient. As they travel further than ever before on a gallon of fuel and emit less and less carbon dioxide, the opportunities for the government to tax on at these points is reduced.

This is great news for the British driver, who has been much put-upon in recent years as a seemingly endless source of revenue for governments.

These self-same governments have been the ones pointing an accusatory finger at car drivers, saying we’re responsible for all the world’s ills. On this guilt-induced basis, we’ve stumped up billions more than before and been brow-beaten into thinking we have no moral right to refuse or complain.

Shrinking pot

Okay, so we grumble and sigh every time the Chancellor puts up fuel duty, but we’re so used to it now that it hardly seems worth making a fuss over.

Well, according to the Institute for Fiscal Studies (ISF), the pot of money is going to be considerably smaller for government to plunder. It won’t disappear altogether, but on current projections there will be £13 billion less raised from drivers than the current £38 billion.

Bear in mind that is just fuel tax and road tax, not the VAT we pay on everything car-related or any other charges we incur through driving. So, you can see why the government is keen to explore other avenues of jemmying money out of the British driver’s pocket.

The ISF’s solution is a ‘compelling’ case for road charging and a radical overhaul of present day fuel taxation.

Few governments ever try anything radical and those that do tend to instigate proceedings at gun point, so we can be glad we live in the United Kingdom on this front. However, action is needed and tackling the currently iniquitous road tax system is a good place to start, followed by fuel tax.

Scrap it

The government would do well to abolish road tax altogether and introduce a system where drivers simply pay per use, based on mileage, route and region.

If you drive only six miles to work, but those six miles are in stop-start urban congestion, you are not using your car efficiently. This means the smug hybrid driver who gets off scot-free when it comes to road tax and London’s Congestion Charge Zone would find themselves paying a far heftier slice of tax for using a car in clogged up roads where they still have a bigger effect than a normal petrol- or diesel-fuelled car on an open road.

Free-flowing roads would incur a much smaller charge, while other roads could have variable pricing in the same way some motorways have variable speed limits. By varying the charge according to peak hours and congestion, it would encourage drivers to use the roads at more cost-effective times or look for more financially appealing routes or forms of transport.

There will always be those who argue they can only use these roads at peak hours. Fair enough, if your work demands this, then a small discount should be offered on producing evidence this is the case.

For many business drivers, this might mean leaving earlier or later to continue using the same roads as now. It might also mean covering fewer miles to make better use of each journey, so one trip might be longer than at present but you’ll make fewer trips overall to reduce the mile count.

The IFS reckons this is the way forward and says drivers in rural areas would pay less to compensate for having to cover larger mileages for essential travel.

This is so much more sensible that a flat rate of road tax, dependent on carbon dioxide emissions that does little to deter people buying the more polluting cars. The bottom line here is that wealthy people can afford to run more polluting cars and pay the attendant road tax. They are not discouraged from running a fuel-guzzling, emissions-expelling car.

In its study, the IFS said: “Introducing a mileage-based taxation system would generate substantial economic gains from reduced congestion, reduce the tax levied on the majority of miles driven, leave many (particularly rural) motorists better off, and provide a stable long-term footing for motoring taxes without necessarily raising net additional revenue from drivers.”

Pay either way

Sounds like a fair and even-handed plan. We’ve seen the result of road charging already in the UK with the M6 toll section of motorway. It’s free-flowing and congestion free as many drivers reckon the added cost of using this road is worth the time-saving.

At the moment, the government says it is looking at all sorts of measures to improve roads, congestion and travel.

Among these plans is an idea to lease existing motorways and sections of road to private firms. These firms would then collect revenue from the motorist as a business. Whether we’d see as much of this money reinvested into maintenance and improvements is not clear.

At least with all roads falling under the responsibility of local and central government, we know who to look to for culpability. We need only look at the mess the railway network is in to realise that private industry rarely, if ever, has the best interests of its consumers at heart when it comes to transport.

Another solution is for roads to be free at the point of use but for the government to pay private firms to run the roads based on how much traffic uses the road. Again, this just seems like too good an opportunity for private business to make easy money rather than improve the lot of drivers.

Whichever way the government decides to jumps, or successive governments decide to jump in another direction, you can guarantee one fact: we’ll be paying for it one way or another.

Alisdair Suttie

Categories: Fleet news , Fleet Voice , Features

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