Paying for Driving: Is Doing Nothing an Option?

How we pay for driving is a thorny issue that politicians are reluctant to grasp.

However, a new report published by the Greener Transport Council and titled Paying for Driving: Is Doing Nothing an Option? argues that if more was understood about the consequences of doing nothing, doing something would be more attractive.

The report is written by Greg Marsden, an academic at Leeds University who specialises in sustainable transport, together with Glenn Lyons and Anna Rothie.

It comes out of an online workshop hosted by Mott MacDonald and the University of Leeds in June 2024, with 22 participants from the transport sector.

Context

The UK Treasury receives income via fuel duty, VAT on fuel and Vehicle Excise Duty.

Fuel duty has diminished from:

• 2% of GDP in 2000 to
• 1% of GDP in 2023

It is currently worth about £25 billion a year, but there will be a further reduction in fuel duty paid as more and more vehicles are electric.

VAT is charged at 20% on fuel, but only 5% on domestic electricity.

Electric cars have lower running costs than ICE vehicles. If home-charging, the cost is around 17% that of fuelling a petrol or diesel vehicle.

In summary, the switch to electric vehicles will:

• reduce tax revenue and
• make driving much cheaper

In that context, ‘doing nothing’ is actually doing something significant.

The Consequences of Doing Nothing

At the workshop, Futures Wheels were used to work out and discuss the consequences of doing nothing.

The implications of doing nothing include:

• cheaper per mile driving costs which will encourage the purchase of larger vehicles
• more driving and more congestion (1.5% mileage increase per 10% reduction in driving costs)
• exacerbated road danger, air pollution and contribution to global heating
• public transport undermined, reduced service provision

The cheaper motoring costs are a short-run seduction only because they:

‘…will worsen the conditions in which everyone is driving and reinforce dependence on motoring, in turn shaping land-use development accordingly’.

Options

The options for replacing lost fuel duty include:

• increasing other taxes to replace it
• local charging schemes by local authorities
• a national scheme to address how we pay for driving

Although fuel duty is not ringfenced and spent on transport:

‘a combination of higher use of roads, heavier vehicles and lower tax take [is] a recipe for a further deterioration in the maintenance of the road network’.

Conclusion

The report concludes:

‘If acting now to address this seems difficult, acting in 5 or 10 years will be even more so.

Our assessment is that it would be better to act to establish a transition plan for the next 5 or 10 years before the system becomes too unfair.

If doing nothing is preferred, then it is important that the wider implications of this for future transport and climate strategy are transparently set out…We need a joint plan for phasing out fossil fuel vehicles and phasing in electric vehicles as part of our mission to become a green energy superpower – and how we pay for driving is the centrepiece of this’.