Pay per mile fairer funding
As VED income drops road-pricing needed to replace shortfall
A new road-pricing system is urgently needed. This is the only way to make transport policy more fair and fiscally sustainable, new research suggests.
The conclusions come in a new report endorsed by Lord George Young, a former transport secretary. It has been produced by the Social Market Foundation (SMF).
The growth in electric vehicles (EVs) will eventually leave the Treasury with a £30 billion gap in tax revenue. This equates to around 2p on the basic rate of income tax, states the SMF.
To avert that shortfall, “courage” is needed by ministers to shift to road charging. The new scheme is described as “inevitable and sensible”.
More people support (38%) than oppose (26%) road pricing as an alternative to fuel duty. The poll, included in the SMF report ,was carried out by Opinium, with a sample size of 3,000.
Unfair fuel tax
The SMF also conducted focus group research. This showed that voters regard fuel duty as more unfair than other taxes. It is a view is supported by analysis showing fuel duty is regressive, falling more heavily on lower-income drivers.
These motorists drive fewer miles than richer ones. However, their fuel duty costs make up a greater share of their disposable income.
Not just potholes
The change is needed to fill the growing hole in the public finances and address unfairness in roads policy. The SMF believe ministers should introduce a “simple” national road pricing regime with a fixed per mile charge. The scheme could be “revenue neutral”, meaning it raises the same sums as fuel duty but distributes the cost in a fairer way.
The report also makes the case for including a free “mileage allowance” akin to the tax allowance. This would mean low-use drivers would not pay any charge, while high-mileage drivers would make a contribution proportionate to their use of the roads.
A road-pricing regime with a flat rate for each mile driven and an annual ‘free’ miles allowance for every driver would cut annual costs for almost half of all motorists, the SMF said.
Time to drive forward
Lord Young of Cookham referred to the SMF report in the House of Lords.
He said: “Successive administrations have looked at the case for road pricing and found it perfectly reasonable and sensible – then done nothing because they believe the public will not accept the change.
“This report challenges that assumption. It shows that, as so often, the public are more sensible and mature than political debate gives them credit for.
“When voters think about the challenges ahead for transport and tax, they accept that road pricing is a prudent and necessary step to take.”
He continued: “The public are open to innovation because they know that the world has changed and will continue to change, so policy must change too.
“The welcome shift towards electric vehicles raises a clear question about the future of fuel duty levied on petrol and diesel.
“The unpopularity of that duty has grown steadily too. As this report shows, a well-designed system of road-pricing would be fairer and more popular than the status quo.”
Waiting for an official response
Ministers are preparing to respond to the House of Commons Transport Select Committee. Earlier this year it said that the Government should start work on a road-pricing system “without delay”.
Scott Corfe, SMF research director describes the current system as “unfair, unpopular and unsustainable”.
“A properly designed road-pricing regime will be fair, popular and good for the public finances and the environment. Voters know this, and privately so do the politicians. All that’s needed is the political courage to accept that road pricing is inevitable and sensible.
“The costs of driving are a factor in the cost-of-living crisis hitting many households, and fuel duty hits low-income people hardest.
“Road-pricing would be a progressive alternative, taking some of that burden away from those least able to pay it.”
The SMF report, Miles Ahead, was supported by a research grant from the European Climate Foundation.