October 28, 2012 5:19 pm

Ministers look at two-tier road tax system

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Ministers are looking at a two-tier system of road tax under which motorists who use motorways and main trunk roads pay more than those who do not.

The proposed overhaul of vehicle excise duty, which raises £6bn a year for the exchequer, would see those paying less confined to driving only on local and smaller A-roads.

The transport department and Treasury are finishing a review of how to fund Britain’s congested road network, ordered by David Cameron, prime minister.

A Whitehall insider said the idea had been discussed but was not a frontrunner among a number of options.

George Osborne, chancellor, recently floated the idea of privatising the Highways Agency and Britain’s main roads and motorways as well as introducing tolls on some new or widened routes.

In July, the chancellor said the government would introduce tolling on an expanded section of the A14 in Cambridgeshire to help fund the upgrade, if an acceptable model – likely to include some state funding – could be found.

Mr Osborne has also floated the idea of putting road tax towards a new privatised roads agency. That proposal is controversial within the Treasury given that “hypothecation” of taxes – earmarking certain revenues for specific funding – is almost unheard of in Britain.

The idea has been panned by some senior figures, however, including Justine Greening, who was transport secretary until just weeks ago.

Some insiders expect that the government may end up with a more modest set of final proposals including some tolls on a few specific roads and greater freedoms for the Highways Agency that stop short of complete privatisation.

A final decision is expected at the earliest in the December growth review.

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