Thursday, November 01, 2012

Two-Tier Vehicle Tax System Considered

It has come to light that one of the Treasury’s think tanks has had the wonderful idea of introducing a two-tiered form of vehicle excise duty (VED) and the reform plans have sent many economists and the general public up in arms.

The plan is to charge a higher rate of road tax for those drivers wanting to use ‘high-traffic roads’ including the UK’s main motorways. Another standard tax rate would see the lower tier of drivers consigned to local and B-roads.

Currently the VED brings in £6 billion a year for the Treasury, but even with year-on-year increases as more people take to the roads it is still not enough to mitigate the budget cuts that have to be made. On top of this, while more people are heading onto the roads, larger families are buying cars that incur less road tax due to being hybrid or environmentally-friendly cars.

This is only a natural thing, in fact the policies that they benefit from were introduced to try and reduce the UK’s carbon footprint and getting more people using green vehicles. It has had an impact on the VED income though and the Treasury have been trying to figure out how to make back the shortfall.

This two-tier system was one of their plans, and would see a staggered road tax system for green cars, like before, but it will also have a higher-tax band for those wishing to use motorways. Some left-wing commentators have pointed out the issues of having the richer motorists commuting on faster routes, leaving those with lower salaries struggling to get to work as quickly because of using B-roads and increased congestion along those routes.

Thos travelling on motorways without the proper road tax could be caught out by traffic cameras and licence-plate readers and levied with considerable fines.

Another alternative from the Treasury is creating more toll roads, privatising large amounts of the UK’s motorways and road system. They feel that they could generate almost £150 billion from the sale of such roads and save money as private companies become responsible for the upkeep of high-traffic areas. It would also fall to local communities to take care and maintain their local roads (as is the case in Sweden).
Again, this idea has been met with fierce resistance as the Institute of Economic Affairs (IEA), who proposed these ideas,  is a free-market think tank that would expect these companies to remain unregulated and hindered by government intervention. We could see a huge expansion in our road systems, but as America has seen with its highway system, more lanes does not mean less congestion. In fact, it can cause quite the opposite.

Either way, times are worrying for prospective drivers who already have to face soaring petrol prices and insurance premiums (even with comparison sites being more popular than ever) and it seems there’s no easy way out of this.

If the two-tier VED does become implemented, we are sure to see a huge physical backlash and resistance of the ideas.


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