Chancellor Philip Hammond revealed the ‘biggest ever’ cash injection for the road network in the 2018 Budget announcement. A new £28.8 billion fund has been set up to improve our motorways and major roads from 2020 to 2025, all funded by Vehicle Excise Duty (commonly referred to as road tax.)
This £28.8 billion fund marks a 40% improvement on the £17.6 billion invested by the Treasury in the previous five-year investment cycle and it is the first time that the Vehicle Excise Duty pot will be dedicated solely to improving the state of our road network.
How will this be funded, you ask?
Well, VED will be going up as of April 1st 2019 in line with the Retail Price Index. Hammond has also stated that there will be a review into the effects that the new Worldwide harmonized Light vehicles Test Procedure (which will dictate how vehicles are ranked and subsequently charged based on their emissions) has on company car taxes and vehicle excise duty. This report should be due in Spring 2019. That’s excellent, finally our so-called ‘road tax’ is actually going towards fixing the roads.
‘But what about the potholes?’
Happily, Mr Hammond has also set aside a £420 million pot to repair potholes, minor road-blemishes and bridge repairs over the next financial year. According to Hammond, every Member of Parliament "will testify potholes are high on the public's list of concerns." - which is reassuring.
There is also £150 million set aside for fixing or amending roundabouts and major road junctions. This is all in addition to a previously announced £300 million pothole repair fund and the £1.3 billion highway maintenance budget.
Well, everything seems hunky-dory, doesn’t it? Not quite.
Historically, changes in Vehicle Excise Duty only affected cars registered after the date of the change. For example in April 2017, when prices last went up, it only affected vehicles bought brand-new after that date. It’s fair because people consider affordable VED when they’re in the decision-making process when buying a car, how are they supposed to know if the VED will be affordable in a few years time if the prices were to go up?
These changes to VED coming in April next year, however, affect cars that were purchased between March 1st 2001 up to the present day - so that’s pretty much everyone then.
Now, VED isn’t going to soar for everyone. In fact, for most people, the price of taxing their current vehicle will only increase by £5 a year, and for older and more polluting cars it will rise by £15 a year.
The worst suffering vehicles, however, will be those purchased after 1st of April 2019, exactly 2 years on from the previous VED hike. For example, if you were to buy a new car after April 1st 2019 and it is a more polluting car emitting more than 255 g/km of CO2, then your first-year tax rate will increase by £65, from £2,070 to £2,135.
Did you miss all of this talk about increasing the Vehicle Excise Duty on existing cars in Hammonds speech?
You’re not alone. It wasn’t mentioned. Hammond was quick to tell us all about the increases in spending on our road network and happy to lap-up the praise for addressing potholes. Fuel duty will be frozen for the ninth year, but he completely neglected to mention it will be funded by raising our Vehicle Excise Duty rates. Instead, these details were found buried deep into the Budget document - 16,500 words deep inside a 35,000-word document, and that is what’s annoyed a lot of motorists and politicians.