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New funding for Britain’s Roads

An interesting aspect of George Osborne's first conservative budget last week was a plan to invest more money in road building.

The plans involve the introduction of a new flat rate car road tax from 2017. The new vehicle exercise duty (VED) will be set at £140 for nearly all cars, although electric cars will be completely free from tax and owners of expensive cars will have to pay higher rates.

Talking about the new VED Mr Osborne said all the funds raised from the tax would be ring-fenced and only allowed to be used on building new roads and upgrading the country's motorways.

The new duty will not apply to existing cars so drivers will continue to pay the same amount until they buy a new car. For all new cars bought from 2017 onwards the first year's VED will be related to the vehicle's emissions rating. Every year after that you will be affected by the 3 new VED bands, which will be set as zero emissions, standard and premium.

Some industry experts such as the RAC believe the move is good news but are disappointed that we will have to wait for 5 years to see the money spent on the vital infrastructure upgrades of our road systems.

Speaking about the plans the chancellor compared the number of miles of new motorway built in England when compared with France. France has built over two and a half thousand miles while the UK have constructed just over 300 miles of new motorway roads in the same period.

Mr Osborne said:

“Four fifths of all journeys in this country are by road, yet we rank behind Puerto Rico and Namibia in the quality of our network.“

 

“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. But we need a long-term solution if we’re going to fix Britain’s poor roads. Vehicle excise duty was used to fund our roads, but not anymore. 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. And I will return this tax to the use for which it was originally intended.”

“I am creating a new Roads Fund. From the end of this decade, every single penny raised in vehicle excise duty in England will go into that Fund to pay for the sustained investment our roads so badly need. Tax paid on people’s cars will be used to improve the roads they drive on. It is a major reform to improve the infrastructure and productivity of our economy – and deliver a fairer tax system for the motorist. “

The VED tax will rake in around £6bn per year but some critics have noted that fuel duty nets around £27bn per year and some of this income could be used to help improve the roads sooner.

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