Budget 2015: Osborne drives ahead with road improvements

THE Chancellor has pledged to improve the condition of the UK’s roads infrastructure with the introduction of a new roads fund, paid for with the proceeds of new Vehicle Excise Duty rates.

Mr Osborne said four fifths of all journeys in the UK were by road and yet the country ranked behind Puerto Rico and Namibia in the quality of its network.
He said a new solution was required if the UK was to achieve a higher quality infrastructure.

“In the last Parliament I increased road spending, even in difficult times, and set out a plan for £15bn of new roads for the rest of this decade,” he said.

“But we need a long term solution if we’re going to fix Britain’s poor roads.”
He said Vehicle Excise Duty (VED) had been used to fund roads maintenance but this was no longer the case and because so many new cars now fell into the low carbon emission bands, by 2017, over three quarters of all new cars on UK roads would pay no VED at all in the first year.

“This isn’t sustainable and it isn’t fair,” said the Chancellor.

He said if people could afford a brand new car, including some of the most expensive models available, you could pay no VED and if people could only afford an older, second-hand car, then they had to pay more tax.

To reform this, he said that from 2017, for brand new cars only, the government would be introducing new VED bands.

The duty in the first year will be set according to emissions, like today, but updated for new technology.

Thereafter there will be three duty bands – zero emission, standard and premium.
For standard cars – that covers 95% of all cars sold in the UK – the charge will be £140 a year, which he said was less than the average £166 that motorists currently paid.

There will be no change to VED for existing cars so no one would pay more in tax than they do today for the car they already own.

“In total we’ll only raise the same amount of revenue from VED in the future that we do today – but that revenue will be secure for the long term,” he said.

He pledged that the tax would be used for the purpose it was originally intended.

From the end of this decade, every penny raised in VED in England will go into the new Roads Fund, which the Chancellor said would pay for the “sustained investment our roads so badly need”.

He also said the government would engage with the devolved administrations on how the money was allocated.

“Tax paid on people’s cars will be used to improve the roads they drive on,” he said.

“It is a major reform to improve the infrastructure and productivity of our economy – and deliver a fairer tax system for the motorist.”

The government will also be consulting on extending the deadline for new cars and motorbikes to have their first MOT test from three to four years, which could save motorists over £100m a year.

Mr Osborne also confirmed that there would be no changes to fuel duty and rates would be frozen this year.