Taxation Futures for Sustainable Mobility: final report to the ESRC

The existing transport tax and charging regime has stimulated limited behavioural change and has been politically problematic (as demonstrated by the September 2000 fuel duty protests). This project synthesised a range of research that has explored ways in which road user charging could replace the present regime based on taxing fuels and car ownership. In 2002, when this project was proposed, this was a fringe transport policy issue. Throughout 2003 the subject achieved a sudden prominence, with a government working party being established to explore the possibility of long-term area-wide road user charging. A tax regime change towards a car road user charge for cars has occurred, or is being considered, in societies as contrasting as Oregon State in the USA, the Netherlands, Switzerland and the UK, reflecting a range of policy considerations. For the UK, these include: the ongoing failure of transport policy measures to achieve adequate cuts in congestion and emissions; the success of the London Congestion Charge; the rise in the cost of transport policy interventions; the reduction in Treasury income of eco-reforms to the current tax regime; and the difficulties of, and equity issues relating to, taxing fuel in a future multi-fuel transport sector. The project developed tax change scenarios in conjunction with the project's user group (including policymakers, NGOs and researchers). Five scenarios were modelled using an adaptation of the Dutch Mobility Explorer program. An 'opt-in' transitional policy mechanism involved replacing VED with a small flat-rate kilometre charge for cars of 0.77 p/km. The model suggested it would have little policy impact, but could be used to familiarise car drivers with the concept of a distance charge. A fiscally neutral scenario involved the replacement of VED and Fuel Duty with a banded kilometre charge for cars of between 2.3 and 8.5 p/km (varied by the environmental performance of the vehicle type). This induced little behaviour change, reducing car driver mobility by only 4%. A further scenario, restored the tax revenues lost from post-2000 tax changes, generating an additional £3 billion or £6b per annum. These reduced car driver mobility by 9% - 14%, and total CO2 emissions were predicted to drop by 6% - 9% by 2015, compared to the base scenario. The type of change involved in the revenue-raising scenarios is significant. There would be only a small increase in the use of public transport, with the predominant response being the better utilisation of cars with higher occupancy and more linking of trips to cut distances driven. The project results suggest that road user charging may deliver more revenue stability than fuel taxation. However, clarity is needed over the policy goals – congestion reduction, emission reduction, revenue stability – for a national road user charge, because the goals are not necessarily complementary. It should also be emphasised that a change of tax regime would not remove the need the hard political decisions in this area