Road tolls are coming to Britain
The idea of charging drivers according to when and how much they drive is an old idea, but one that is newly urgent given the collapse in fuel duties as we switch to electric cars. Simon Wilson reports
WHAT’S THE ISSUE?
The energy transition means that the question of road pricing can no longer be ducked. According to calculations by the Office for Budgetary Responsibility (OBR), published last week, the government is set to lose £13bn a year in revenue by 2030, and double that as combustion engines disappear altogether. After all, if nobody’s buying petrol and diesel, they’re not paying tax on it. So in a net-zero future in which our roads are full of electric vehicles (EVs), the risk for the government is that the revenue raised from drivers will head towards zero too. Chancellor Jeremy Hunt recently announced that EVs registered from April 2025 will no longer be exempt from road tax (“vehicle excise duty”, or VED). But VED is a far smaller earner for the Treasury than fuel tax, which accounts for about half the pump price of every litre of petrol, and raises a massive 4% of government receipts.
WHAT’S ROAD PRICING?
Rather than charging tax on fuel, a road-pricing system levies a charge on motorists according to how far they drive. It can also take into account what they’re driving, where they’re driving, and when they’re driving – charging more for bigger vehicles, or busier roads, or peak times, for example. The idea, from an economic point of view, is that traffic congestion should be seen as a cost like any other – and nor is it the only cost driving imposes on others. Every journey we make increases congestion, local pollution, and the risk of accidents for other people. A pricing scheme that charges more to travel at the peak times and on popular roads would encourage drivers making less pressing journeys to avoid busy periods – just like on the railways. London’s congestion charge, and its Ultra Low Emission Zone (the expansion of which is currently causing political headaches for Labour mayor Sadiq Khan), are basic forms of road charging that rely on camera infrastructure. But technological advances, including in-car telematics and GPS tracking, now make a much more universal scheme feasible, according to proponents.
WHO’S IN FAVOUR?
A wide range of voices, from motoring organisations to the Green party, have long been in favour of road pricing. The Institute for Fiscal Studies has been calling for road pricing since 2012, in a study funded by the RAC Foundation. A 2022 report by the centrist Social Market Foundation concluded that road pricing was the fairest and most efficient way of replacing fuel duty – as did a 2023 report by the centre-right Centre for Policy Studies. In early 2022, the House of Commons cross-party transport select committee published its own report calling for a transition to road pricing. But their findings got no backing, and little engagement, from the government. For many politicians, road pricing remains the tax that dare not speak its name.
“FOR MANY POLITICIANS, ROAD PRICING REMAINS THE TAX THAT DARE NOT SPEAK ITS NAME”
WHY’S THAT?
Because they’re frightened of spooking voters. The first British PM to fret about excessive congestion and order an inquiry into the practicalities of a road-pricing scheme was Harold Macmillan in the early 1960s. But with an election looming in 1964, the resulting Smeed report was kicked into the long grass for fear of angering motorists. Four decades later, in 2006, the Blair government announced that the UK would be the first country to adopt a nationwide system of road pricing and promised it would be “fiscally neutral”. It said large-scale trials would be in place by 2008-2009, going fully national by 2016. It promised a graduated scale of charges (from 2.4p on a country road at night, to £1.34 on the M25 at rush hour) with satellite tracking deployed to record every vehicle’s movement. But the whole thing got nixed by a backlash. Almost two million people signed a petition against it, and Blair’s own MPs rebelled to stop it.
SO WHAT’S CHANGED?
The economics of the energy transition and the looming fiscal black hole make road pricing a much more urgent question, and there’s evidence from opinion polls that public attitudes have shifted. Similar schemes in Australia and Singapore show that it can be done. Using a combination of in-car telematics and automatic number-plate recognition, a nationwide scheme would allow all tolls, congestion charges and emissions charges to be rolled into one system, argues Ross Clark in The Spectator. Motorists could be sent a monthly bill. There could be one set of charges that’s easy to understand, for example with the network divided into five classes of road, each with its own tariff.
WILL DRIVERS ACCEPT IT?
Privacy concerns would be a big issue, say Dillon Smith and Tom Clougherty, the authors of the Centre for Policy Studies report, “The Future of Driving”. They argue for a phased and gradual approach, rather than a big-bang reform, in which pay-as-you-drive road pricing applies initially only to zero-emissions vehicles (ZEVs). Each vehicle would be assigned a per-mile rate, based on weight, with charges collected monthly by direct debit. But they suggest a range of technological solutions that take account of different attitudes towards privacy, from the low-tech (submitting your mileage manually), and mid-tech (on-board black box) to high-tech (GPS tracking). To allay concerns about fairness, they propose a “free mileage allowance” for every driver based on where they live (people in remote areas, with little public transport, get bigger allowances). And they argue for greater hypothecation – linking revenues to specific spending – to win over the public.
IS IT GOING TO HAPPEN?
It won’t be easy, says Dom Lacey in City AM. The most pressing challenge is the sheer size of the infrastructure needed to process payment. Another, politically sensitive, issue is data privacy. Many drivers might accept the need for an overhaul of taxes, but balk at the idea of having all their journeys tracked. A third caveat is the question of jurisdiction, oversight and co-ordination across the various national, devolved and local authorities responsible for the UK’s roads. But “none of this is insurmountable” – and, importantly, there’s no alternative. It’s time to “accept that road pricing is the best – indeed only – option for closing the funding gap created by the end of current motoring taxes”.
