First we need to cut fuel duty, then we must redesign our road taxes entirely
In early 2011 at The Sun, I pestered the editor for long enough about rising petrol prices that he decided the newspaper should be doing something about it.
A campaign to freeze fuel duty was born – with all the old-school trimmings. We even took post bags full of petitions signed by readers up Downing Street to the door of Number 11.
Faced with calls to “Do Your Duty”, then Chancellor George Osborne went one better – to all-round back-slapping he cut a penny off duty and froze it at the lower level by ditching Labour’s hated “escalator”.
It’s been there ever since – 57.95p per litre – largely down to The Sun’s campaigning and the efforts of motoring groups such as the AA, Fair Fuel UK and Tory stalwarts like Rob Halfon MP.
The reason I’m bringing fuel duty up now is two-fold.
Firstly, as Russia’s invasion of Ukraine sends petrol prices to record levels, there is more reason to cut the tax again now than at any point since 2011.
The Treasury likes to moan that the decade-long freeze has “cost” £86bn compared to the revenues it would have got if the escalator had stayed in place, but the tax still generates a whopping £30bn a year.
Current Chancellor Rishi Sunak also has the headroom for a move. The Treasury could bag at least an extra £850m this year from the VAT receipts it also nabs from every litre of unleaded sold at the pump.
The second reason I mention duty, however, is that the government needs to start thinking about what it’s going to do in a decade’s time when revenues from fuel duty could well dry-up.
It’s hard to imagine – granted – but let’s remember, No10 wants to ban the sale of new petrol and diesel cars by 2030 to incentivise the switch to electric vehicles.
While this transition makes sense and deserves far greater ministerial attention – not least given the current paucity of charging points – the end of fuel duty will blow a whopping hole in the Treasury coffers.
As Huw Merriman, the impressive Tory chair of the Transport Select Committee, points out, some 80 per cent of the £30bn that fuel duty generates is used away from transport on front-line public services such as schools and hospitals.
So, what to do?
The government could of course slap fuel duty on airlines – which believe it or not currently escape the tax altogether (Net Zero eh?).
But the other suggestion that’s gathering momentum is road pricing. As one insider said: “High-ranking officials in the Treasury are sticking their heads in the sand, but the ones below know something has to happen.”
Huw Merriman is among those to have gone public.
He recently talked about the need for a smart road pricing system using apps to charge motorists based on the miles they do and where they drive. He said this could incentivise people to use cars at less congested times of the day.
Given ministers’ notorious ability to lurch instead for the easier option, many expect the government instead to go for road tolls – such as the one on the M6, which can cost as much as £7 for a car.
The problem is that such a policy will need to be sold to a generation of motorists who simply don’t trust policymakers and believe they’re seen as nothing more than cash cows.
Exhibit A in their argument is the Dartford Crossing, the M25 bridge over the Thames built in 1991 to relieve congestion in the Dartford Tunnels.
Under the initial PFI contract, the government promised the crossing would be toll free by 2003. But lo and behold, when the time came the Highways Agency decided to introduce a new “charge” instead. It’s been in place – and steadily rising – ever since.
Then you have London Mayor Sadiq Khan’s desire to roll out the ULEZ zone across Greater London – is this really about air quality or the health of TfL’s balance sheet?
Merriman makes the point that if ministers don’t make some decisions soon, Britain will become a patchwork of local congestion zones, ULEZ schemes and parking levies. No coordinated central plan.
The onus is once again on the Government to take hard decisions – something that’s been sorely lacking in energy for 20 years.
Fuel duty has proven a quick popular win for the Tories over the past decade.
Now, the “win” will be cutting the tax and designing something that can successfully replace it in a decade’s time.