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Taxes and Charges on Road Users House of Commons Transport Committee Taxes and charges on road users Sixth Report of Session 2008–09 Report, together with formal minutes, oral and written evidence Ordered by the House of Commons to be printed date 14 July 2009 HC 103 (incorporating HC 1175 of 2007–2008) Published on 24 July 2009 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Transport Committee The Transport Committee is appointed by the House of Commons to examine the expenditure, administration and policy of the Department for Transport and its associated public bodies. Current membership Mrs Louise Ellman MP (Labour/Co-operative, Liverpool Riverside) (Chairman) Mr David Clelland MP (Labour, Tyne Bridge) Mr Philip Hollobone MP (Conservative, Kettering) Mr John Leech MP (Liberal Democrat, Manchester, Withington) Mr Eric Martlew MP (Labour, Carlisle) Mark Pritchard MP (Conservative, The Wrekin) Ms Angela C Smith MP (Labour, Sheffield, Hillsborough) Sir Peter Soulsby MP (Labour, Leicester South) Graham Stringer MP (Labour, Manchester Blackley) Mr David Wilshire MP (Conservative, Spelthorne) Sammy Wilson MP (Democratic Unionist, East Antrim) The following were also members of the Committee during the period covered by this report: Clive Efford MP (Labour, Eltham) David Simpson MP (Democratic Unionist, Upper Bann) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/transcom. Committee staff The current staff of the Committee are Annette Toft (Clerk), Jyoti Chandola (Second Clerk), David Davies (Committee Specialist), Marek Kubala (Inquiry Manager), Alison Mara (Senior Committee Assistant), Jacqueline Cooksey (Committee Assistant), Stewart McIlvenna (Committee Support Assistant) and Hannah Pearce (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Transport Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6263; the Committee’s email address is [email protected]. 1 Contents Report Page 1 Introduction 3 Background 3 The purpose of motoring taxes 3 Raising revenue for Government expenditure 4 Managing demand: Green taxes 4 Equality 5 An inconsistent message 6 2 Are motorists overtaxed? 6 Revenue from taxes and charges on road users 6 European comparisons 10 Declining cost of motoring 11 3 Should expenditure equal revenue? 12 Roads and transport 12 Regional disparities 14 Externalities of road use 15 Hypothecation 17 4 What measures have been tried? 18 Road fuel taxation 18 The road fuel escalator 19 Vehicle Excise Duty 20 London congestion charge 21 London Low Emission Zone 24 Parking 25 5 What options might be tried and why? 26 Tackling congestion 26 Road pricing 28 A national road pricing scheme 29 Local congestion charging schemes 31 Finding a consensus 32 Road pricing in the Netherlands 34 Voluntary pricing schemes 36 Workplace parking levy 37 6 Road freight 38 Issues for the road haulage industry 38 Taxation and externalities 38 Ensuring fair competition 39 Lorry road user charging in practice 42 Penalty Charge Notices 43 2 7 Conclusion 43 Conclusions and recommendations 45 Annex—Road pricing in the Netherlands and Germany 50 The Hague 50 Mobility Policy 2004 50 Road Pricing in the Netherlands 52 The road freight industry in the Netherlands 55 Hannover 56 The ‘Maut’ 56 LGV enforcement 59 Formal Minutes 60 Witnesses 61 List of written evidence 62 List of Reports from the Committee during the current Parliament 64 3 1 Introduction Background 1. The surge in world oil prices in 2007 and 2008 focused attention on the Government’s policy regarding fuel duty increases. Changes to Vehicle Excise Duty announced in the 2008 Budget, designed to help meet climate change commitments, also proved to be contentious. At the local level, a number of authorities have been developing plans for congestion charge schemes, which are required in order to access the Government’s Transport Innovation Fund. Most have been abandoned after failing to win public support. 2. Taxes and charges on motorists and the freight industry can have a substantial impact on individuals and companies and shape transport outcomes. Taxes and charges are—or should be—integral to transport policy. The purpose of our inquiry was to examine the links between taxation and transport policy. We report our findings and recommendations in two parts: those relating to motorists and those to freight. 3. HM Treasury is responsible for taxation matters and the Department for Transport for charges on road users. Whereas taxes remain the responsibility of HM Treasury throughout the UK, legislative powers regarding some road charges are devolved to Scotland, Wales and Northern Ireland.1 We explain the distinctions between taxes and charges later in the report. 4. A valuable part of our inquiry was our visit to the Netherlands and Germany in November 2008. We went to the Hague to learn more about the Dutch proposals to introduce a national price-per-kilometre charge for all vehicles; and in Hannover we examined the experience of the lorry toll scheme that operates on German motorways. A note on our visit is provided in the Annex. 5. We are grateful to all those who provided written and oral evidence to our inquiry, both within and outside the UK. We also wish to acknowledge the contribution of Professor Chris Nash of the University of Leeds who advised the Committee throughout.2 The purpose of motoring taxes 6. Taxes can serve three general purposes: • To finance Government spending. There is normally no relationship (hypothecation) between the activity on which the tax is levied and the area of expenditure. 1 Ev 215 and Ev 219 2 Professor Chris Nash declared the following interests as of July 2009:(a) Posts held: Research Professor at the Institute for Transport Studies, Leeds University; Visiting Professor, Molde University College, Norway; Guest Researcher, VTI Sweden. (b) Current projects: an EPSRC funded project on understanding rail costs and the role of technology in reducing them; a European Commission (DGTREN) project on road and rail infrastructure cost allocation; advising Department for Transport on the valuation of sensitive lorry miles; advising the World Bank on rail investment in China; advising the Chinese Ministry of Railways on the social costs of transport; advising Network Rail on its study of New Lines, and advising the Community of European Railways on progress in implementing the 2001 White Paper and its impact. (c) Memberships: Fellowship at the Chartered Institute of Logistics and Transport, and a member of its Strategic Rail and Road Capacity and Charging Forums. 4 • To reduce or manage demand for ‘undesirable’ goods and services. Typical examples are taxes on alcohol, tobacco and gambling. The consumption is usually deemed undesirable because of the negative externalities. In this sense, taxation can help to improve economic efficiency through improved resource allocation. • To reduce inequality. Progressive rates of tax on income, inheritance or wealth, or, potentially, on goods and services, can be used to reduce inequalities. Raising revenue for Government expenditure 7. A major purpose of taxes on road users is to raise revenue to finance government expenditure, not only for roads but also for other purposes. As the Exchequer Secretary, Angela Eagle MP, told us: I do not think we have ever tried to pretend that motoring taxes should merely be used to cover the costs of providing the road infrastructure. They do contribute to our general revenue-raising capacity.3 8. Some charges go directly to fund infrastructure—usually bridges and tunnels—such as tolls on the Dartford crossing and the M6 Toll. Local authority parking charges fund car park provision and enforcement and may indirectly contribute to other public services. The net revenue from the London congestion charge—£137 million in 2007–08—must, by law, be spent on measures to further the Mayor’s Transport Strategy.4 Later in this Report (paragraphs 63–64) we show how the Government’s justification for increases in fuel duty has varied. Managing demand: Green taxes 9. Taxation policy can have a significant effect on the impact of transport on the environment. Transport contributes about 23% of UK domestic carbon dioxide (CO2) emissions and road transport is responsible for 93% of this.5 The Climate Change Act 2008 commits the Government to reducing emissions CO2 by 80% by 2050 and transport will have to contribute to this reduction. The Department for Transport’s objectives include commitments to reduce congestion, CO2 emissions and pollutants, as well as road casualties.6 Fuel duty, Vehicle Excise Duty (VED) and other taxes and charges can, to varying extents, be used to help achieve these objectives. 10. Fuel duty has proven to be an effective way to reduce CO2 emissions from road vehicles. It influences the amount of fuel purchased, the types of vehicles purchased and, to a lesser extent, mileage driven. The changes to VED rates were a further move by the Government to encourage purchase of cars that emit less CO2. 3 Angela Eagle Q 552 4 Ev 190 5 Department for Transport, Towards a Sustainable Transport Strategy, October 2007, p 29 6 Department for Transport, Delivering a Sustainable Transport Strategy, November 2008, p 19 5 Equality 11. The reduction in income or wealth inequalities amongst people in the UK has not been a purpose of taxes and charges on road users. However, there may be unintended impacts on equality and we considered this possibility in our inquiry. 12. Transport is important to people at all levels of income, including those on low incomes.
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