Since 1936, when the previous Road Fund was wound up, the UK Treasury has been vehemently opposed to any form of tax hypothecation (dedication of revenue for one purpose). The primary argument against it is that it reduces the flexibility of government in the use of its revenue, and can result in the hypothecated fund having too much money, and so spending on that purpose ends up being wasted.
It would appear that all of that has been pushed to one side with yesterday's budget by Chancellor of the Exchequer, George Osborne, who announced three measures relevant to the charging and management of roads:
- Reform of Vehicle Excise Duty for cars (the tax on owning cars);
- Establishment of a hypothecated Roads Fund in England with the revenue generated in England from VED;
- Another year of freezing fuel duty.
No, it doesn't mean that there is any move to road pricing soon. However, the setting up of a Roads Fund in particular will establish a closer relationship between what is paid by motorists (for owning a vehicle if not using it) and what is spent on roads.
