Cheaper Vehicle Excise Duty for non-motorway users considered

A general view of traffic on a motorway Reforms to road tax follow concerns that increased fuel efficiency could lead to a fall in revenue

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A two-tier Vehicle Excise Duty, with a lower rate for those avoiding motorways and other main routes, is among options being considered by the government.

The plans would not necessarily mean those using motorways pay more than at present, a Treasury source said.

The government is currently looking at a number of different ways that roads could be owned and paid for.

The plan has yet to be considered by the prime minister, who had called for "innovative approaches" on the issue.

In March, David Cameron launched the review by saying there was a need for an "urgent" increase in private investment to improve England's road network.

Fresh ideas were needed, he said, to finance road improvements at a time of tight government finances and set the Treasury and Department for Transport to work on a feasibility study.

Under the two-tier plan, part of a driver's Vehicle Excise Duty payments would go to private companies managing and investing in the road network.

Falling revenue

Cameras using number plate recognition technology would be used to catch motorway users who had not paid the higher rate.

Reforms to the duty - often referred to as road tax - follow concerns that increased fuel efficiency could lead to a fall in revenue from it as motorists switch to more environmentally-friendly cars which qualify for lower rates.

Forecasts from the Office for Budget Responsibility show that while tax receipts for Vehicle Excise Duty are expected to remain broadly flat at about £6bn a year over the next five years, they could fall as a percentage of GDP from 0.4% in 2010-11 to 0.1% by 2029-30.

Under the current system, cars fall into 13 payment bands depending on their level of carbon emissions, with more polluting vehicles taxed more heavily.

The duty is paid annually, but a higher rate is payable in the first 12 months of the vehicle's registration.

Cars with the lowest levels of carbon emissions, such as hybrid cars registered in or after March 2001, are exempt from paying the duty.

European regulations aimed at reducing carbon emissions from new cars and improvements in technology are expected to lead to a higher proportion of cars qualifying for the lower bands of VED in the future.

The Daily Mail reported that other options being considered by the government include changes to the duty's payment bands or making the tax a one-off up-front charge on new vehicles, instead of charging annually.

However, linking how much motorists pay with how far they drive on motorways, or their use at peak times, has been ruled out, the newspaper said.

A spokesman for the Department for Transport said: "The department and Treasury are currently carrying out a feasibility study to review new ownership and financing models for the strategic road network.

"This is looking at how best we can secure investment in the network to increase capacity and boost economic growth.

"The government has made clear it will not implement tolls on existing road capacity and has no plans to replace existing motoring taxes with pay-as-you-go road charging."


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  • rate this

    Comment number 745.

    Historically there was an argument for the Road tax in that it 'forced' car owners to get insurance and MOT's - now that both insurance and MOT's are directly available to the law enforcement bodies, why bother with the costs of having such a tax.
    There is already enough taxation based on vehicle useage to pay for it's complete abolition.

  • rate this

    Comment number 563.

    What a complete waste of monies, Millions would be spent on cameras, I.T and Admin....why?

    Introduce road tolls full stop. You use you pay same as in France, Spain ect, ect.

    This plan is a sneaky way to introduce big brother for motorists, because if done the Gov will have to have cameras that identify your vehicle and speed and everything else that goes with it. NO NO NO

  • rate this

    Comment number 548.

    It is obvious how to deal with tax for road use. Every MOT take the mileage and charge for the number of miles a car is driven, so the tax disc and MOT are a single administrative job. Problem solved.

  • rate this

    Comment number 434.

    So how much of the money that this daft scheme would raise will be wasted on installing the necessary big-brother-style cameras and computer systems to monitor and track where we drive? I can see how the plan benefits IT contractors, and how the surveillance-society lobby benefits - and of course how the rich benefit from less crowded motorways - but what is the benefit to the rest of us?

  • rate this

    Comment number 432.

    PLEASE stop saying "Road Tax". There is NO SUCH THING and there hasn't been since the 1930s when Winston Churchill abolished it.
    The payment is Vehicle Excise Duty and it does NOT get used for building or repairing roads any more than a shotgun licence pays for birds to be bred.
    There are many classes of motor vehicles that quite legitimately pay NOTHING for various reasons.
    It's a LICENCE.


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