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This document was submitted to the UK House of Commons Select Committee to inquire into

taxes and charges on road users by the Drivers’ Alliance on 25th September 2008

Responses to questions posed by


The Taxes and Charges on Road Users Committee

September 2008

The Drivers’ Alliance is a membership organisation representing the views of road users. We actively
seek the opinion of our members and represent their interests as accurately as possible.

Transport committee enquiry into Taxes and Charges on Road Users


Evidence of the Drivers’ Alliance
Summary

 Personal transport has evolved continuously for over one hundred years with unremitting
and innovative scientific and engineering advancement.

 The United Kingdom has for most of this period been at the forefront of the drive to improve
efficiency and effectiveness of the private motor vehicle.

 As personal transport has become more affordable, we have experienced a steady increase
in the number of vehicles on our roads and today this is causing some concern.

 In the years leading to 1997, we followed the ‘predict and provide’ approach to the provision
of transport infrastructure; which over the decades has provided the UK with the roads and
rail systems we enjoy today. This philosophy has largely been abandoned in recent years
with the idea that we should manage demand through pricing and restrict personal mobility
through people’s ability to pay rather than strive to enable freedom of transport choice to
all.

 During the early years of vehicle use and road building, road users were charged through
direct taxation. The Finance Acts of 1909 and 1910 stipulated that money raised from
vehicular taxation should be 'hypothecated' for road maintenance and construction.

 Hypothecation ended many years ago and today road users’ taxes contribute around £50
Billion annually to the treasury with spending on roads and infrastructure at £5.88 bn. (DfT
figures).

 Whilst the call for internalising the external costs of motoring strikes a chord with groups
who wish to marginalise private transport, it is very clear that road user’s are already paying
far more in real terms than the costs associated with providing the facilities necessary to
enable people to go about their daily lives without let or hindrance.

 To increase the cost of transport further is counterproductive and could very well do
significant damage to the economic viability and wellbeing of the UK.

Transport committee enquiry into Taxes and Charges on Road Users


Evidence of the Drivers’ Alliance
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1 Introduction

1.1 The Drivers’ Alliance was formed in 2008 to represent the opinions and views of road users.
The alliance is a membership organisation committed to campaign for improved roads and
transport infrastructure which minimises congestion and hence cost, including the removal of
unnecessary traffic lights and the overhaul of known congestion blackspots.

1.2 The Drivers’ Alliance is a full time organisation funded primarily from membership
subscriptions and donations. It was conceived and founded following the petition to Downing
Street against road pricing in 2007 which saw 1.8 Million signatures in just twelve weeks. This
groundswell of public opinion was a warning to policy makers who continue to believe the
costs associated with personal mobility are too low and strive to push them higher still.

1.3 The Drivers’ Alliance believes that enhancing road safety through driver education, well
engineered roads, junctions and vehicles is of paramount importance, as is the efficiency of
modern motorised transport to maximise the benefit to society with minimal impact on the
environment.

2 Current taxes and charges raised from road users

2.1 The current level of taxation raised from road users is approximately £50 Billion and comes
from the following sources:

Fuel Tax £23.6bn


VED £5.1bn
VAT charged on vehicles £6.9bn
VAT charged on fuel £6.8bn
Company car tax £2.6bn
Decriminalised parking charges £1.2bn
Vehicle first registration fee £125m
Total: £45.325bn

With the additional taxes paid on servicing and repairs, plus the charges for NHS parking, the
income to government or governing authorities is probably in excess of £50bn annually.

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Transport committee enquiry into Taxes and Charges on Road Users


Evidence of the Drivers’ Alliance
2.2 Spending on the road networks in the UK is woefully inadequate and has fallen well below
that necessary to provide the infrastructure and capacity needed for the population and
economic growth of the United Kingdom. Figures for 2007/2008 obtained from the DfT
suggest the following:

Capital (new roads) £2.693bn


Current (maintenance) £3.185bn
Total £5.878bn

The ‘current’ value includes ‘shadow tolls’ which are those paid to companies owning private
road infrastructure such as the M40 and A1(M) North of Huntingdon. As can be seen from
these figures, road users today are paying some eight times more than the cost to provide the
transport network. The £50bn in road user taxation taken by government already is more than
enough to cover any external costs.

3 Impact of the current charging regime

3.1 With the current high levels of taxation on personal mobility, we are adding substantially to
the debt of families and companies across the United Kingdom. Employees need mobility to
seek work and can be dissuaded when the cost of getting to work outweighs the benefit of
working. With the penal levels of tax levied on vehicles and drivers today, we are also adding
significantly to the cost of goods and services. From the plumber who fixes your leaking tap to
the price of bread in the supermarket; transport taxation impacts significantly on every part of
the economy and adds significantly to inflationary pressures.

3.2 The Drivers’ Alliance believes the cost of vehicle ownership should reduce but the cost
associated with use increased. It is for this reason we recommend the transfer of the £5.1bn
taken in VED annually to fuel tax. This would remove VED evasion and drastically reduce the
cost of enforcement. It would also result in vehicle usage costs increasing, thereby reducing
short and unnecessary journeys.

4 External costs

4.1 There has been a lot of discussion around ‘external costs’ incurred through road use and
motoring. What is not being considered is the external benefit from road use and the ability to
travel freely which provides such a large contribution to our economy. Consider what would
happen if we stopped all road use tomorrow. The economy would cease to operate instantly
and the value of this economic activity is seldom taken into account when those seeking to
marginalise vehicle use evaluate the ‘cost of externalities’.

4.2 Road users pay many times over for the use of our roads and increasing this cost still further
will add to the already simmering resentment from drivers. Congestion is by far the largest
external cost which is arguably the result of underinvestment in the road network and not a
cost which should be assigned to the road user.

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Transport committee enquiry into Taxes and Charges on Road Users


Evidence of the Drivers’ Alliance
4.3 The Stern review investigated emissions of C02 and concluded a price of £44 per tonne was
sufficient to cover the economic cost of climate change. A modern car which emits around
154gkm C02 will do about 50mpg. (Ford Mondeo 1.8l Diesel used in example). This car will
travel 4,058 miles before releasing one tonne of C02. In travelling this distance the driver will
use 81.17 gallons of fuel or 369.32 litres. As fuel tax is currently £0.68p per litre, the driver
pays £251.14p for each tonne of carbon released. This is already nearly six times the level
recommended by Stern and does not take into account all other motoring related taxes levied
on road users.

5 Purpose of taxes and charges on motorists

5.1 The taxation levied on road users should be used primarily to provide the roads and transport
infrastructure needed to ensure congestion free and efficient journeys. There is some
justification for adding specific externalities to this charge such as the cost to the NHS for
treating transport related injuries and policing.

5.2 The principal of the ‘user pays’ should not be extended to costs remote from the activity
involved and using the road user to subsidise and fund general taxation is unwelcome. We do
not for instance find excessive taxation on home heating systems or public transport users.
Indeed motoring taxation is used to subsidise the public transport industry by several billion
pounds as stated by Tony Blair “We have more than doubled investment since 1997, spending
£2.5 billion this year on buses and over £4 billion on trains”. This £6.5bn is far more than spent
on the entire road network and goes a long way to explaining why we suffer from congestion
and crowded roads.

5.3 The strategic road network in the United Kingdom is inadequate to support the demand
placed upon it. We have far less motorway miles per person than any comparable EU country.
It is hardly surprising then that our roads are congested. As can be seen from the graph Fig 1 we
have 17 thousand people per km of motorway whilst Germany has seven thousand and France
five thousand.
Fig 1

Thousand people per km of motorway

Spain

France

EU-15

Germany

Italy

UK

0 2 4 6 8 10 12 14 16 18

5.4 There is good reason to invest in building new strategic roads. This would reduce congestion,
emissions and significantly reduce the external costs associated with road use.
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Transport committee enquiry into Taxes and Charges on Road Users


Evidence of the Drivers’ Alliance
6 Impacts on different categories of road user

6.1 The current system of road user taxation is predominantly fair but is far too high.

6.2 VED charges do not reflect vehicle use and should be abolished. Highly efficient, zero rated
(for VED purposes) vehicles used every day for a long journey have more impact on the
environment than a large class M vehicle for occasional use. It is therefore fundamentally
unfair to tax vehicles by class when the duty cycle is unknown.

6.3 Charging showroom taxes and very high levels of VED based on vehicle type and emissions
does not reflect the real environmental cost. A consequence of this policy is the difficulties
being experienced today in the British motor industry. Vehicles manufactured in the United
Kingdom are generally higher specification, high margin but low volume for specialist and
niche markets. By adding penal levels of taxation on vehicles manufactured here we risk
destroying these companies along with the jobs and economic benefits they bring. If we lose
Land Rover, Jaguar, Aston Martin and Bentley along with several others, the cost to the
economy will far outweigh the income from taxation levied on their vehicles and the
companies themselves.

7 Alternative charging methods

7.1 The Drivers’ Alliance was founded on the groundswell of public opinion against road pricing in
last year’s petition to Tony Blair. We believe the costs surrounding the implementation of road
user charging far outweigh any perceived benefits.

7.2 Time and time again, the public are asked through surveys and occasional referenda their
opinion on road pricing. The result is always similar - even when the question includes the
promise to use the money raised for improvements to public transport, around 74.4% vote
against (Edinburgh 2005). When the question is simply do you support the introduction of
road pricing or congestion charging, the response is nearly 100% opposed as witnessed in a
poll conducted in Manchester by The Drivers’ Alliance and Memogo. The results were:

For a congestion charge = 16


Against a congestion charge = 2105

7.3 The current methods of charging for road use are efficient and cheap to administer. Replacing
VED with a small increase in fuel duty would add to this efficiency by removing the need for
enforcement and the administration cost associated with collection.

7.4 Removing VED and adding the tax to fuel would send a positive environmental signal and help
those occasional users who today pay for unused garaged vehicles. It would be fair for
pensioners and charge more for long distance travellers driving inefficient vehicles. It would
be a just and fair way of charging for road use.

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Transport committee enquiry into Taxes and Charges on Road Users


Evidence of the Drivers’ Alliance
8 Foreign registered vehicles

8.1 It is our belief that foreign registered trucks using the UK’s roads should contribute towards
their maintenance and upkeep. How to achieve this is open to debate, but the simplest and
most efficient method would be to charge a landing tax at the point of entry. An alternative
could be tolling roads immediately outside ports for trucks only.

8.2 Widespread Lorry Road User Charging (LRUC) would bring benefits in providing the ability to
charge for actual distance and road use, but as with general road pricing this is a very
expensive and inefficient way to administer a tax. With the infrastructure costs, enforcement
costs and administration costs the efficiency of the system to raise revenue is severely
diminished.

8.3 With higher fuel costs in Britain than other European countries, foreign hauliers are able to fill
their tanks abroad and avoid paying fuel tax in the UK. This is unfair on British hauliers and
places them at a disadvantage. We do believe trucks entering the UK should contribute
through taxation but feel it is unwelcome to charge the holidaymaker or businessman as these
people generally contribute by purchasing fuel in the UK.

Conclusion

Road users in the UK already pay many times over with £50bn taken in taxation and just £5.88bn
spent on our roads. Congestion is the highest external cost attributed to road use but the causes of
congestion are not so much the number of vehicles, but the unwillingness of government to provide
the roads needed for our mobile society.

Demand Management through road user charging will do little or nothing to prevent people from
making the same journeys they do today. What will happen is the expectation that congestion will
reduce and this is unlikely without additional spending on capacity. If new roads are to be built, it is
our submission these are funded from existing transport taxation with the benefits from reduced
congestion removed from ‘external costs’ calculation.

Those calling to ‘internalise the externalities’ of road use are ignoring the massive economic benefit
from road use. Without the transport of goods, services and people, economic activity would stop
overnight and this huge benefit would be lost. It is unwise and unfair to weigh the cost of transport
externalities in favour of increasing taxation whilst ignoring the value to the economy from road
transport.

To do nothing is not an option. But what is done is important and drivers today have reached the
end of the road. They expect and require government to invest existing tax contributions in the road
infrastructure to alleviate congestion and with it, emissions.

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Transport committee enquiry into Taxes and Charges on Road Users


Evidence of the Drivers’ Alliance