Would you put the brakes on more road tolls?

The Treasury and the Department of Transport are finalising a feasibility study looking at ‘new ownership and financing models’ for roads. The aim is to attract private investment to fill potholes, increase traffic capacity and reduce congestion, which the government claims is costing the UK economy £7bn a year.

Two-tier car tax system

So what options are there? A ‘two-tier’ system for Vehicle Excise Duty (VED) has been suggested recently. The idea is that drivers would pay a higher VED rate to use motorways and trunk roads.

On the surface, that might sound like a good idea, as heavy and long-distance users would pay extra. However, the two-tier system does sound a bit like a first- and second-class travel system for our roads. The AA argues that a third of motorists would be priced off motorways if they had to pay more VED to drive on them.

In fact, the government has said that it’s ruling out implementing tolls on existing roads, and has no plans to replace existing motoring taxes with pay-as-you-go road charging. But it could build new toll roads, as many other countries have, including France, Italy and Australia.

Other options on the table include a major overhaul of VED bands, or making VED a big, one-off up-front tax on new vehicles, rather than an annual charge.

Why do we need to change ‘road tax’?

The problem is money, of course. The Treasury is facing falling revenues from VED, as average carbon dioxide emissions fall. The estimated £6bn the government receives from VED annually represents around 0.4% of GDP, but that’s forecast to drop to 0.1% within 18 years.

Fuel tax revenues are also falling: the RAC says that 2.27bn fewer litres of fuel were sold in the first half of 2012, compared with the same period four years ago.

Would it make sense to abolish VED completely and simply put all vehicle tax on fuel? The argument that VED stops people dodging MOT and insurance is no longer valid, as the whole system is computerised. Only taxing fuel would mean that the more you use, the more you’d pay in tax. But would it unfairly penalise, for example, countryside dwellers who do more miles than average on largely uncongested roads?

At least it’d be simpler. The current system, based on how much carbon dioxide your car pumps out, has a complexity that’s almost baroque. The sliding scale of bands totals 13, not including discounted bands for alternative-fuel vehicles. Many drivers now pay zero VED as their car emits under 100g/km of CO2, while others pay more than £1k if their car is a gas-guzzler.

Britain already has several toll roads, but their history so far hasn’t been illustrious. Ignoring the London congestion zone, easily the biggest toll road is the parallel section of the M6 to the north of Birmingham. But this hasn’t seen nearly as much traffic as initially projected, and the profits barely make it viable for the road’s private operator.

So, what do you think is the best way of enhancing the road network?