Road pricing

Fuel duty and vehicle excise duty raise some £35 billion a year. Approximately 20% of that revenue is disbursed on maintaining and developing the roads. Neither fuel duty nor vehicle excise duty are currently levied on electric vehicles. The Government is phasing out the sale of petrol and diesel cars by 2030. Under the current system of fuel duty and vehicle excise duty, that policy will reduce tax revenues obtained from motoring to zero over the next 20 years. Without radical reform, policies to deliver net zero emissions by 2050 will result in zero revenue for the Government from motoring taxation. A failure to replace existing motoring taxes with an alternative road charging mechanism will lead to either decreased investment in public services, including road maintenance, or increased Government borrowing.

The Government must start an honest conversation with the public on the funding implications for road development and maintenance and for other essential public services of decreased revenue from vehicle excise duty and fuel duty.

To promote fairness and public acceptance, any alternative road charging mechanism must (a) entirely replace fuel duty and vehicle excise duty rather than being added alongside those taxes; and (b) be revenue neutral with most motorists paying the same or less than they do currently.

Zero fuel duty and vehicle excise duty help motorists to offset the higher purchase price of electric vehicles compared with petrol and diesel alternatives. Those prices are predicted to decrease as sales of new and second-hand electric vehicles increase. As prices decrease, more motorists will purchase electric vehicles, which will in turn decrease fuel duty and vehicle excise duty yields.

In signalling a shift to any alternative road charging mechanism, the Government must make it clear to motorists who purchase electric vehicles that they will be required to pay for road usage, as is currently the case for petrol and diesel vehicles. It must ensure that any alternative road charging mechanism incentivises motorists to purchase vehicles with cleaner emissions while contributing tax revenues to support the maintenance of the road network.

In designing a replacement for fuel duty and vehicle excise duty, the Government must examine how an alternative road pricing mechanism can use price as a lever for change while subjecting motorists to fair levels of taxation. To that end, it may seek to make concessions in the interests of societal fairness, such as providing an annual allowance of free travel miles or gearing the system to support vulnerable groups, such as those with mobility issues, and people who reside in the most remote areas.

The introduction of an alternative road charging mechanism that supported motoring and motorists might work against the Government’s ambition for half of all journeys in towns and cities to be walked or cycled by 2030. In designing an alternative road pricing mechanism to vehicle excise duty and fuel duty, the Government must ensure that any road pricing scheme does not undermine progress Road pricing 15 towards its targets on active travel and public transport modal shift.

The Government must set out a range of options to replace fuel duty and vehicle excise duty. Those options should be revenue neutral and not cause drivers, as a whole, to pay more than they do currently. One of those options should be a road pricing mechanism that uses telematic technology to charge drivers according to distance driven, factoring in vehicle type and congestion. If motoring taxation is linked to road usage, the Committee has not seen a viable alternative to a road pricing system based on telematics. The Government’s preferred options should be submitted to an arm’s- length body for evaluation [see paragraph 44].

The taxes imposed by fuel duty and vehicle excise duty are increasingly duplicated by local schemes that charge motorists for entering congestion zones and clean air zones. New taxes, and particularly those that rely on new technology, take many years to introduce. The patchwork of devolved schemes may make it impossible to deliver a national road pricing scheme. The simultaneous operation of local and national road pricing schemes would subject drivers to confusion and unfair double taxation.

The Government must examine how an alternative road pricing mechanism can be delivered alongside devolved local road charging schemes, while respecting the existing devolution settlement. Any alternative road pricing mechanism must be revenue neutral to the Government rather than causing drivers, as a whole, to pay more than they do currently. Such a mechanism should be phased in before fuel duty and vehicle excise duty decline to zero. The situation is urgent; work must begin without delay.

The Government must examine the role that telematic technology can play in delivering a replacement road pricing mechanism that sets the cost of motoring based on the duration and time of the journey and vehicle type and size.

The Government must assess the potential effect of telematic technology on changing drivers’ behaviour and delivering its wider policies on air quality, congestion, public transport and public health.

The Government must assess the potential effect of a road pricing mechanism based on telematic technology on high-mileage drivers, such as road hauliers and those in rural communities, and on those least able to adapt to increased motoring costs.

The successful implementation of a national, technology-based road pricing scheme is contingent on the Government explaining how data capture will work in practice, ensuring that data management is subject to rigorous governance and oversight and reassuring the public that their privacy will be protected.

The Government must work on a cross-departmental basis to ensure that equal focus and policy ownership is placed on the delivery of more zero emission vehicles and the continued funding and maintenance of the road network. The Treasury and the DfT should set up a joint unit including Ministers and officials from both Departments to co-ordinate that shared policy space. (Paragraph 39) 16 Road pricing

Bearing in mind the partial devolution of transport policy, consultation and agreement between the UK Government and the devolved Administrations will be key to developing and implementing an alternative road charging mechanism.

To fulfil their respective and connected responsibilities for managing congestion and maintaining the public finances, the DfT and the Treasury must jointly establish an arm’s-length body with an appointed individual to evaluate its preferred options to replace fuel duty and vehicle excise duty [see paragraph 26]. The body should consult experts on road planning, taxation and telematic technology, and it should consider international experience. It should be tasked with recommending an alternative road charging mechanism to replace fuel duty and vehicle excise duty by the end of 2022. (Paragraph 44) Road pricing 17