Research from the RAC reckons the annual take from motoring taxation will drop by £13bn by 2029 while traffic will grow by 50%
The problem facing the government over infrastructure is not whether we need it. From nuclear power stations to new runways in south-east England, there are compelling arguments for a multibillion pound spending programme that would span a decade. The issue is how to pay for it.
The story of the M6 toll road will not persuade investors to back motorway projects. It is not just the heavy debt burden, but the problem of competition on a small island where a rival road is never far away. The M6 is a busy, clustered road, but too many drivers would rather put up with it than pay £5.50 for a traffic-free ride on its privately financed rival. Nonetheless, the government would do well to take toll roads or road-user-charging seriously. Not only will we need more roads in the years to come but the economic trajectory of motoring also points to the end of the current road taxation system.
The consequences of this are outlined in a report by the Institute for Fiscal Studies , commissioned by the RAC Foundation. Revenue from motoring taxation will drop by £13bn a year by 2029 as fuel duty takings reduce thanks to growth in use of electric, hybrid and fuel-efficient cars. This will leave the exchequer with a tax take from motoring of £25bn, compared with £38bn currently. Over roughly the same period, traffic will grow by nearly 50%. A tax base needs to be replaced and the best way to do it, according to the report, is to tax road use. This can be done through M6-style toll roads or schemes involving automatic number-plate recognition, like the London congestion charge.
The Treasury is not a winner in the short-term because these pay-as-you-drive earnings would be ploughed back into the infrastructure, as happens with other utilities such as water, airports and energy. But a 50% increase in traffic will create a requirement for more roads and manipulation of traffic to head off jams. Road user charging and tolls will achieve this by raising funds and giving the government, or road owner, the ability to limit traffic with, for instance, peak-time charges. With better roads the UK economy will ultimately benefit. But the Treasury will have to adjust to a dent in its tax base and whoever is prime minister at the time will be castigated. So it’s a long shot. But there will be a need for bold thinking soon, regardless.