Report: Taxes and charges on road users

24 July 2009

The Government must improve the way in which it justifies taxes on road users to rebuild public trust, says the Transport Select Committee in its latest report, Taxes and charges on road users, published today.

Launching the report, Committee Chairman Louise Ellman MP said:

"The Government handled a phased set of increases to Vehicle Excise Duty so badly they tarnished the image of environmental taxes.

"We believe taxation based on car usage - through fuel duty - remains fairer than any approach based on car ownership and does more to encourage fuel efficiency or reduce CO2 emissions. We recognise that economic factors will limit how much revenue can be raised by this method. We call on the Government to develop other measures to address the problem of congestion.

"Stronger linkage between Treasury policy and Transport Ministry policy is essential if Government is to send clearer signals to UK motorists about congestion and carbon emissions while encouraging walking, cycling and greater use of public transport.

"Effective reform will however elude any Government until the public is given explicit and comprehensive information detailing how much money is raised through this route and how it is used."

Government spending on roads has almost doubled in real terms since 1999–2000. In their report, the Transport Select Committee supports greater investment in transport, including the road network, and concludes that expenditure on transport will need to rise further as part of the Government’s efforts to stimulate the economy.

MPs also warn that road investment should be justified only on the basis of wider transport policy objectives, need and benefits. They reject the notion of hypothecation for transport taxes, arguing it provides a poor basis for public expenditure decisions and ignores the social costs associated with road use - policing, accidents, pollution and carbon emissions. Equally, they argue there is a case for earmarking revenue from specific local schemes for spending in a given geographical area when such an approach will earn public acceptability and help ensure fairness.

In the absence of any plans to introduce road pricing for cars, the Committee calls on the Government to resurrect proposals for a low-cost pay-per-mile lorry charge for UK and foreign-registered vehicles.Without some form of toll or vignette system the Committee concludes that UK freight operators will continue to face unfair competition from foreign-registered vehicles able to take advantage of cheaper diesel.

With regards to investment made available under the Transport Innovation Fund, the Committee argues that access to this funding should no longer be tied to implementation of road pricing projects, since such schemes have proved unacceptable to many local electorates unwilling to vote for additional charges.

Responding to that challenge the Committee calls on the Government to develop voluntary road pricing schemes, where Vehicle Excise Duty or fuel duty may be traded for per-mile charges. This, say MPs, could facilitate complementary systems, such as pay-as-you-drive insurance, and would help build a new consensus for how to curb congestion.

MPs also question the use of parking charges for wider policy purposes. Where they cover more than the cost of parking and are used to generate revenue for other services MPs argue parking charges must be proportional, explicit and justified. In a similar vein, the Committee warns ministers that penalty charge notices must retain their credibility as an enforcement tool and must no be used as a blatant method for raising extra revenue from motorists.

The Government should issue guidance to help ensure a greater proportion of the revenue raised through Penalty Charge Notices (PCNs) is directed to resolving the problems that give rise to them such as inadequate loading or parking facilities and poor signage.

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