With his changes to Vehicle Excise Duty, George Osborne has just told drivers that they own the roads

"You don't even pay the Congestion Charge!" Image: Getty.

There was a time when all British taxpayers paid for our roads: when cyclists could revel in the opportunity to remind drivers they don’t own the roads. That time ended 24 hours ago, when George Osborne announced that the roads do, in fact, belong to drivers.

In yesterday’s Budget, the Chancellor announced that, in a break with Treasury tradition, road taxes were to be hypothecated for road building. “From the end of this decade,” he said, “every single penny raised in Vehicle Excise Duty will be paid into a Road Fund to pay for the sustained investment our roads so badly need.”

Creating this entitlement for car owners ignores the real problem with road taxes that they are set to plummet. It’s also economically illiterate and deeply unfair to other road users, especially cyclists, who already put up with the sense of entitlement from drivers quite enough.

The problem Osborne decided to duck, once again, is that the revenue generated by motorists is rapidly declining. Partly this is the result of ever more efficient vehicles (hybrids and electric cars really keep the Treasury up at night). It’s also partly because fuel duty has not kept pace with inflation: “fuel freezes” are popular enough to make them irresistible to politicians, as yesterday proved yet again.

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The slow decline in revenues from motoring taxes. Image: RAC.

The romantic idea of a Road Fund was first used in 1920 as a way to charge drivers for construction. But it lacks economic credibility today. Ring-fencing is almost always a bad idea. As well as creating a headache for Treasury officials inundated with similar requests from other revenue raising departments, it sends mixed messages about why we tax drivers in the first place.

VED was never intended as a charge to use the roads. It was a sin tax that aimed, badly, to reduce the damage drivers cause to our health and the environment. In reality, VED is a relatively small fixed cost that has barely any influence on the choice of car purchased, and zero impact on how much you drive. The amount it raises for the Chancellor has no relationship to the cost of maintaining our roads.

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The decline in the duty on road taxes. Image: RAC

But most worrying is the precedent Mr Osborne has set by re-framing VED as a literal “road tax”. He has effectively decided the roads belong to those with a car.


They don’t, of course. Roads exist to enable people to get from place to place, and buses and bikes make much more efficient use of them (moving the most people in the least space). And the fact they cost more to build and maintain than VED can ever hope to raise shows this decision to be little more than cynical politics.

At best, bringing back a road tax will discourage more people to leave their cars behind, further clogging up the roads and making cycling less appealing. It does nothing to tackle congestion which costs the economy billions each year.

At worst it put cyclists at further risk of injury from entitled drivers who can now yell with abandon that they do indeed pay for the roads. Thatcher dreamed of her “great car economy”: George Osborne is no different.

To the Conservatives cars are a mark of independence, individuality and success. Cyclists and passengers on buses, the brave and the poor, are relegated to second place. The social good that roads provide risks being forever lost to a consumer mentality.

David Brown was a transport adviser to the Labour party, and previously worked at the Department for Transport.

 

 
 
 
 

Two east London boroughs are planning to tax nightlife to fund the clean up. Will it work?

A Shoreditch rave, 2013. Image: Getty.

No-one likes cleaning up after a party, but someone’s got to do it. On a city-wide scale, that job falls to the local authority. But that still leaves the question: who pays?

In east London, the number of bars and clubs has increased dramatically in recent years. The thriving club scene has come with benefits – but also a price tag for the morning clean-up and cost of policing. The boroughs of Hackney and Tower Hamlets are now looking to nightlife venues to cover these costs.

Back in 2012, councils were given powers to introduce ‘late night levies’: essentially a tax on all the licensed venues that open between midnight and 6am. The amount venues are expected to pay is based on the premises’ rateable value. Seventy per cent of any money raised goes to the police and the council keeps the rest.

Few councils took up the offer. Four years after the legislation was introduced, only eight local authorities had introduced a levy, including Southampton, Nottingham, and Cheltenham. Three of the levies were in the capital, including Camden and Islington. The most lucrative was in the City of London, where £420,000 was raised in the 2015-16 financial year.

Even in places where levies have been introduced, they haven’t always had the desired effect. Nottingham adopted a late night levy in November 2014. Last year, it emerged that the tax had raised £150,000 less than expected in its first year. Only a few months before, Cheltenham scrapped its levy after it similarly failed to meet expectations.


Last year, the House of Lords committee published its review of the 2003 Licensing Act. The committee found that “hardly any respondents believed that late night levies were currently working as they should be” – and councils reported that the obligation to pass revenues from the levy to the police had made the tax unappealing. Concluding its findings on the late night levy, the committee said: “We believe on balance that it has failed to achieve its objectives, and should be abolished.”

As might be expected of a nightlife tax, late night levies are also vociferously opposed by the hospitality industry. Commenting on the proposed levy in Tower Hamlets, Brigid Simmonds, chief executive at the British Beer and Pub Association, said: “A levy would represent a damaging new tax – it is the wrong approach. The focus should be on partnership working, with the police and local business, to address any issues in the night time economy.”

Nevertheless, boroughs in east London are pressing ahead with their plans. Tower Hamlets was recently forced to restart a consultation on its late night levy after a first attempt was the subject of a successful legal challenge by the Association of Licensed Multiple Retailers (ALMR). Kate Nicholls, chief executive at the ALMR, said:

“We will continue to oppose these measures wherever they are considered in any part of the UK and will urge local authorities’ to work with businesses, not against them, to find solutions to any issues they may have.”

Meanwhile, Hackney council intends to introduce a levy after a consultation which revealed 52 per cents of respondents were in favour of the plans. Announcing the consultation in February, licensing chair Emma Plouviez said:

“With ever-shrinking budgets, we need to find a way to ensure the our nightlife can continue to operate safely, so we’re considering looking to these businesses for a contribution towards making sure their customers can enjoy a safe night out and their neighbours and surrounding community doesn’t suffer.”

With budgets stretched, it’s inevitable that councils will seek to take advantage of any source of income they can. Nevertheless, earlier examples of the late night levy suggest this nightlife tax is unlikely to prove as lucrative as is hoped. Even if it does, should we expect nightlife venues to plug the gap left by public sector cuts?