Study suggests “compelling” case for UK road charging

A report by the Institute for Fiscal Studies (IFS), funded by the RAC Foundation, has suggested that a “radical overhaul” of road taxes is needed. It says there is a “compelling” case for introducing road charging in the UK to replace the current system funded by fuel taxes. Currently, fuel and vehicle excise duties raise about £38bn a year, but they are set to fall.

The introduction of tolls to new roads could have a negative effect on smaller delivery companies, as it would be an additional cost to factor into their journeys on top of fuel costs. The Treasury has said that possible new ways of funding roads would not involve pricing or tolls on existing routes, which may be of some comfort to couriers working for small delivery companies.

The Office for Budget Responsibility predicts that tax revenues from duties will fall by £13bn a year, at current prices, by 2029. This is due to increasing numbers of vehicles becoming electrified and other developments in fuel-efficiency. According to the IFS, plugging the gap would require a 50% rise in fuel duty. It recommends a nationwide system of road charging, including road tolls, to account for the loss of revenue. If the IFS’s solution were introduced, couriers would be charged by the mile. There would be higher pricing in congested areas at peak times. Consequently, couriers who work primarily in the countryside would be likely to pay less.

The Treasury and Department for Transport are in the process of carrying out a feasibility study looking at “new ownership and financing models” for the UK’s roads. The results are due in autumn. Meanwhile, Prime Minister David Cameron has suggested that private money be used to improve England’s road network. UK delivery companies could benefit from efficiency improvements brought about by better maintained roads, but smaller delivery companies could be further stretched if required to pay tolls in order to keep their courier services competitive.

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