Opinion: Can road pricing really replace fuel tax?
The idea of road tolls is being discussed in the House of Commons. Could it be a viable alternative to Fuel Duty?
Happy 60th Birthday to the Smeed Report. Commissioned by the Conservative government of the time, it was intended to come up with ways of directly charging motorists for road use.
Even though mass car use had only just started to really accelerate in the UK, the planners and economists were already looking for a way to control vehicle use, thinking that variable road pricing might be a way of ‘nudging’ driver behaviour, reducing peak-time congestion and so on.
Clearly, the technology didn’t exist in the 1960s to allow for variable road charging, and it wasn’t even used when central London got the flat-rate Congestion Charge in 2003. Efforts to extend road charging to Greater Manchester and Edinburgh in the 2000s were defeated in local referendums.
Despite planners and politicians being so keen on road-pricing, the average motorist is well aware that 59p in tax is added to every litre of fuel sold and then VAT added to the whole bill.
It’s a hefty tax by any measure, but it’s also one that's uniquely easy to levy. Some even call Fuel Duty ‘the perfect tax’, because it's so cheap to recover and the Treasury has a near-100% success rate in doing so.
It’s for this reason perhaps that road charging has never really taken off in the UK. As the London Congestion Charge has shown, road tolls can be very expensive to levy and they don't have a great record in emptying the streets in any case.
This uneasy truce between the planners and the public could be finally about to be broken, due to the rise of the electric vehicle.
Last week, a House of Commons committee put out a new report on ‘reforming motoring taxation’ under the catch line ‘zero emissions shouldn’t mean zero tax revenue’.
As the report freely admits, the government's intention to ban the sale of new ICE vehicles by 2030 (and allowing only long-distance plug-in hybrids to exist until 2035) could result in the tax take from drivers nose-diving.
The Commons committee says that the Treasury currently gathers £35 billion each year from motorists and only £7bn of that (raised from ‘road tax’ on ICEs) is ring-fenced to be spent solely on the roads network. The other £28bn raised goes into general spending.
If, by 2030, new cars sales are dominated by EVs and plug-ins, fuel tax will enter a sudden decline that accelerates year on year.
Although the recommendations in the report start by suggesting that any new tax system "must be revenue-neutral, with motorists paying the same over less than today", it inevitably then drops into complicating political considerations.
This new road-pricing technique must also not prevent progress towards active travel (buses and bicycles) and any "data captured should be subject to rigorous oversight to protect privacy".
Cynical motorists might ask just how future governments will both keep hold of £35bn in tax and encourage people to drive less, as well as ponder the likelihood of drivers being happy to have their journeys tracked and recorded.
Even so, committee chair Hugh Merriman spells out that "schools and hospital will be impacted if motorists don’t continue to pay".
But the desire to management driver behaviour that began with the Smeed Report remains at the heart of the latest attempt to bring in road pricing. "by using price as a lever, we can offer better prices at less congested times and have technology compare these directly to public transport alternatives".
To my jaded eye, adding the complexity of behaviour ‘nudging’ to the new tax is where it will probably flounder. The glory of fuel tax is that everyone pays the same and the more you burn, the more you pay.
Merriman does, though, make one very important observation. With the growth of local road taxation schemes such as the new ‘clean air’ charges being rolled out across the UK, if central government doesn’t move very quickly to bring in a post-fuel driving tax for the whole of country, it might become impossible because of the the established ‘patchwork’ of new local government road charges.
I really wouldn’t like to be the politicians or civil servants who have just eight years to replace the ‘perfect tax’ with some form of complex technology that has to raise £35bn per year by tracking drivers and communicating variable charging across ten of millions vehicles, many of which will not be connected to the web.