Government examining proposals for replacement of VED; options for road funding
Fri 05 October 2012 | Back to news list
The 'think-tank' CentreForum has proposed that Vehicle Excise Duty (VED) should be replaced by a one off charge levied on a sliding scale according to emissions for new cars. Meanwhile, the CBI has proposed a road-user charge to relieve congestion and finance road building; and the LowCVP has responded to an inquiry by the Environmental Audit Committee into Budget 2013 and fiscal support for the green economy.
In its report, CentreForum proposes a revenue neutral scheme in which the Government would set an annual emissions "pivot point" equal to the emissions of the best performing one per cent of cars the previous year. Cars with emissions below the one per cent level would receive a subsidy. Cars above this level would attract an emissions charge.
CentreForum says its scheme will give car manufacturers a big incentive to produce more efficient vehicles. This in turn will lower costs for motorists, who over time will see a reduction in their fuel costs. The think-tank calculates that the scheme will cut fuel use by around 450 gallons over a 100,000 mile lifetime, saving motorists around £2,700 and reducing total UK carbon emissions by 2.6 per cent after 15 years.
The report, by Tim Leunig for Centre Forum, received support from Ed Davey, Secretary of State for Energy and Climate Change and from Kate Barker, former chief economist at Ford Europe who said: "This is a great proposal with strong rationale."
In a related move, the MP for Richmond, Zac Goldsmith, recently tabled an Early Day Motion calling for the adoption of a 'feebate' scheme to replace VED. On 30 October, the motion - which is sponsored by MPs from each of the three leading parties - has received the support of 21 MPs.
Meanwhile, the CBI has issued a new report which includes proposals for road charging and tolls for motorists on some major English routes to "ease the burden of clogged-up roads". The CBI also suggests that the English road network should be taken out of the Government's budget.
The CBI proposes that users would have a proportion of their motoring taxes converted to a user charge - which would be controlled by an independent "roads regulator" - to access the strategic road network comprising England's motorways and major A roads. This charge would provide a funding stream for private operators - licensed by the regulator - who would operate regional sections of the network. But the CBI said that in the long-term the charge alone might not be sufficient to leverage the levels of future investment needed to finance bigger capacity projects.
Launching the report, CBI director-general John Cridland said: "It's clear we need a gear change in how we manage and pay for our road network in the 21st century. A lack of investment means we are really struggling to increase road capacity, let alone adequately maintain what we already have."
The new proposals are a response to the growing awareness that Treasury is examining road transport taxation as revenues from the sector are stagnant and projected to fall as vehicles become more efficient and fuel sales decline.
In a related development the Environmental Audit Committee, a cross-party group of MPs, is looking into the Government's record on green taxes and formulating proposals for Budget 2013 with the help of input from stakeholders. In its submission to the EAC, the LowCVP says: "Any moves towards weakening or removing the incentives to cut carbon from vehicles and fuels which are currently embedded in UK fiscal policy would be a retrograde step in terms of environmental protection and would also damage the UK’s commercial interests."
To view the LowCVP's full submission to the EAC, please click here.
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