Funding Transport

Once Coronavirus has passed we will be left with familiar transport policy problems including: finding more cash for local road maintenance, bus services and other local transport; funding ambitious national infrastructure plans; and the imperative to reform road fuel taxation as transport is decarbonised.

It will be a challenge to fund the ambitious spending committed in the 2020 Budget, especially in the light of the additional public spending in response to the Coronavirus. Further, devolution of powers and duties to city regions and other subnational transport bodies is developing and locally-elected politicians are frustrated by not having control of funds for which they can be responsible. The unavoidable need to reform road taxation creates an opportunity to align local authority funding with the spending needs faced by local and regional government.

We seek politically and technically feasible measures that could be implemented within a few years. We do not propose distance-based road charging because the public would resist, but any immediate solution must be compatible with that aspiration. Our proposals do not require reduction in net funds available to the Exchequer.

There has been a systematic reduction in fuel duty after allowing for price inflation from about 80 pence per litre in the late 1990's to 58 pence per litre. This creates headroom to partially restore it to generate new revenues. Unlike some new taxes or charges fuel duty has desirable characteristics: administration is long-established and routine; cheap to collect; hard to evade; and it provides incentives for modal shift, fuel efficiency and lower carbon emissions. But it is unpopular.

A way to make such an increase less unpopular would be to ensure that a significant portion of the increased revenue would be ring-fenced for roads and other transport.

To achieve this the revenue would be allocated as secure income for independent, public interest transport funding bodies, analogous to the public benefit corporations common in North America or the public trust funds that have been common in the past in the UK. Suitable governance structures for such bodies have been established in English law for a long time. They would be able to borrow on the markets and service the debt. They would release funding to their "client" local authorities for purposes within their statutorily defined objects. This would make increases in road taxation more palatable because the revenues would be transparently dedicated to local roads and other transport.

A commensurate share of the extra fuel duty revenues would be allocated to the Greater London Authority and other large metropolitan regions.

For the Strategic Road Network a National Roads Fund could be funded out of a share of VED (as now) and fuel duty revenues. In the medium term, simple pay-as-you-go charging would be straightforward and a fairer way to manage capacity and generate funds.

The new funds would offer monies for local road safety and to provide an appropriate level of enforcement of traffic laws, in addition to reversing the highly unpopular long-term worsening of local road conditions.

  • (L) David Bayliss is an independent consultant;
  • Stephen Glaister is Emeritus Professor of Transport and Infrastructure at Imperial College London and Associate, The London School of Economics and Political Science (LSE);
  • (R) Tony Travers is a Visiting Professor in LSE Department of Government and Director of LSE London.

The details of these proposals are set out in a paper, "Funding Transport" by these authors.

View full paper here

This blog was published as part of the Decarbonising Transport series with Greener Transport Solutions