Road user charging and taxation

Recent changes in road user taxation and the prospect of road pricing through Transportation Innovation Fund schemes make a review of road taxes and charges timely. The reasons for imposing charges on road users are examined and a regime comprising a set of charges for infrastructure provision and maintenance as well as relevant external costs of road use is proposed as an alternative to the present arrangements. Depending on the assumptions made about the nature and scale of external costs, road users would pay more than they do currently but less than if the 6% per annum fuel duty escalator had been maintained. The efficiency of the road system would be significantly improved and its externalities reduced. The operation of the scheme would be enabled by the creation of a regulated utility entity—a national roads agency—responsible for the main road system, but with other roads remaining the responsibility of local highway authorities.