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Road pricing is ‘fairer than fuel duty,’ says Social Market Foundation

Think-tank says fuel duty is regressive because it falls more heavily on lower-income drivers

Mark Moran
16 May 2022
Mean fuel duty costs versus mean road pricing costs for a range of scenarios, vehicle-owning households. Per-mile road charge set at a rate that raises the same amount of revenue as fuel duty does at present. Free mileage is on a per vehicle basis. Modelling the distributional impact of road pricing: Social Market Foundation modelling shown in Chart 1 shows that a road pricing regime with a uniform per mile charge and a free mileage allowance per vehicle would be slightly financially beneficial to lower income motorists, compared with the current fuel duty regime. For example, a revenue-neutral regime with a free allowance of 2,500 miles would leave motorist households in the bottom two income quintiles about £20 per year better off than the current fuel duty regime. This amounting to about £92m in aggregate. This rises to about £40 per year with a free allowance of 5,000 miles - £188m in aggregate.
Mean fuel duty costs versus mean road pricing costs for a range of scenarios, vehicle-owning households. Per-mile road charge set at a rate that raises the same amount of revenue as fuel duty does at present. Free mileage is on a per vehicle basis. Modelling the distributional impact of road pricing: Social Market Foundation modelling shown in Chart 1 shows that a road pricing regime with a uniform per mile charge and a free mileage allowance per vehicle would be slightly financially beneficial to lower income motorists, compared with the current fuel duty regime. For example, a revenue-neutral regime with a free allowance of 2,500 miles would leave motorist households in the bottom two income quintiles about £20 per year better off than the current fuel duty regime. This amounting to about £92m in aggregate. This rises to about £40 per year with a free allowance of 5,000 miles - £188m in aggregate.
 

Charging motorists a levy based on the miles they drive would be fairer and more popular than the current fuel duty regime and could even help address the cost of living crisis, suggests an influential UK think-tank. 

In a report endorsed by Lord George Young, a former transport secretary, the right wing Social Market Foundation (SMF) said that a new road pricing system is urgently needed to make transport policy more fair and fiscally sustainable. 

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