With more and more cars becoming less polluting, the Government can see that the revenue generated from Vehicle Excise Duty is set to decrease year by year. Car tax will no doubt be restructured to account for this but there’s also a very strong argument that motorists should pay to use the roads they damage. Many motorists believe they already pay to use roads via ‘road tax’ or the ‘road fund licence’. Both are the same thing, both were abolished in 1937. Motorists haven’t paid directly for roads since then, and only paid for two short stretches of new roads before the tax was abolished. But read the letters in the red-tops, or do a twitter search on ‘road tax’, to be confronted with ignorance of what actually pays for roads. (And hate, too, many motorists believe their payment of a pollution duty – mistakenly believed to be a ‘tax that pays for use of the roads’ – gives them more rights to be on roads than “tax dodger” cyclists, but same drivers don’t bang on about those motorists who pay zero VED).
The most vociferous proponent for road pricing is the RAC Foundation. In its latest report, published today, the RAC Foundation again calls on the Government to stand up to nay-sayers (1.8 million motorists signed a petition against road pricing in 2007) and introduce a pay-per-mile system.
Interestingly, the Institute of Fiscal Studies, which produced the report for the RAC Foundation, said:
“Road use generates costs which are borne by wider society instead of the motorist.”
Read that again. This is the RAC Foundation and the IFS admitting that motoring generates what economists call “negative externalities”. The orgs omitted “negative”, but still, this is ground-breaking stuff. Here’s more from the report:
“These ‘externalities’ mean that in the absence of taxation or pricing, there is an inefficiently high level of road use. Taxes can help bring private demands into line with the socially desirable level. Several different externalities are associated with motoring. Some, like carbon emissions from burning petrol and diesel, are easily addressed through fuel duties as the costs depend entirely on fuel use. Others, notably congestion but also the costs of noise and accidents, vary enormously according to where and when someone drives.”
The rest of the report then goes off to lobby for road pricing. The executive summary is very careful to talk about VED, rather than “road tax.”
But let’s explore those “externalities.”
The 2009 Transport Select Committee report, Taxes and Charges on Road Users, calculated the total taxes and charges on UK road users as £48 billion per annum. The report quoted the typical annual expenditure on roads as about £8-9 billion.
In the same report, the Department for Transport estimated that the average marginal external cost of driving a car an additional kilometre is 15.5 pence allowing for the congestion (estimated at 13.1 pence per kilometre), infrastructure, accidents, local air quality, noise and greenhouse gases. This compares to 3.6 pence per kilometre paid in fuel duty and VAT.
However there are other costs to society as a result of our existing car-dependent transport patterns. In 2009 a Cabinet Office Strategy Unit report on urban transport attempted to quantify the costs of our existing urban transport patterns. Working with the Department for Transport, the Department for Communities and Local Government, the Department of Health and the Department for Environment, Food and Rural Affairs (Defra), they arrived at the costs shown here:
When will drivers start paying the full costs of motoring? – I Pay Road Tax
With more and more cars becoming less polluting, the Government can see that the revenue generated from Vehicle Excise Duty is set to decrease year by year. Car tax will no doubt be restructured to account for this but there’s also a very strong argument that motorists should pay to use the roads they damage…. [Read More]