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Roads back in faviour as Osborne reveals first budget in second  term

Budget: Vehicle tax all to be spent on roads by 2020

Infrastructure has not lost its appeal to Chancellor George Osborne but roads are his new enthusiasm, the summer Budget revealed today.

Rail got barely a mention and even the Northern Powerhouse got little in terms of capital investment commitment in what was essentially a Budget focused on saving £17bn in welfare and tax avoidance and shifting the balance in favour of work.

Capital investment decisions and another £20bn of cuts will be set out in the Spending Review in the Autumn.

But from the end of the decade we know that all of what will be a recalibrated system of Vehicle Excise Duty or road tax, embracing low emission vehicles as well as standard motors, will actually be dedicated solely to building and improving the UK’s highways.

"In the last 25 years France has built more than two and a half thousand miles of motorway and we have built just 300,” George Osborne

VED amounts to around £6bn a year and the new system will deliver the same tax take though it will be put into a new Roads Fund that will “ensure that the tax paid on people’s cars will be used to improve the roads they drive on” the Chancellor said. Government will “engage with” the devolved administrations on how much money is allocated to them from the fund.

Osborne sees roads as having a vital part to play in improving the country’s productivity and will feature as a key plank in a new Plan for Productivity due to be released on Friday.

He highlighted that the UK’s roads are ranked behind Puerto Rico and Namibia in quality even though four fifths of all journeys are by road in Britain.

And “in the last 25 years France has built more than two and a half thousand miles of motorway and we have built just 300,” he said.

Highways England has been given a road spending plan of £15bn until 2020 but the Roads Fund was being introduced  as a long term solution “if we are going to fix Britain’s poor roads,” Osborne said.

He gave no detail on whether the fund would be focused on strategic routes or include local roads, something commentators were quick to pick up on.

“Roads are the backbone of the economy and the Chancellor is right to recreate the principle that road tax pays for just what it says it does. However, it would make most sense to allocate protected money to repairing the 97 per cent of the network that is in the worst condition, rather than to the motorways that least need maintaining and will always get the most attention,” said director of policy at manufacturers’ organisation the EEF Paul Raynes.

"The Chancellor is absolutely right; Government must be bold in its commitment to infrastructure if the UK is to achieve a rebalanced economy, increase productivity and maintain our competitive edge." Nick Baveystock, ICE director general

According to head of transport at KPMG James Stamp, more money could be allocated to highways.

"In the last budget, the Government announced a major road investment program worth £15billion. Today, the Chancellor announced that road tax (VED) income will be "ring fenced". This provides some clarity about where funding for the ambitious road projects will be found.

“However, we note that while road tax raises around £6 billion per year, this is dwarfed by income collected from fuel duty which is around £27 billion. We believe that more of this income should be reinvested in roads and transport infrastructure in line with the Chancellor’s statement that money raised from drivers should be spent on the roads they drive on.”

ACE welcomed the news on roads. “We were glad to see that the Chancellor has adopted ACE’s policy as regards dedicating Vehicle Excise Duty to roads schemes and maintenance. With funding ring-fenced like this in a roads fund, industry can have confidence and faith that schemes will be implemented, and investment can now be made in training, staffing, and plant," said ACE chief executive Nelson Ogunshakin.

AECOM managing director for highways and bridges, EMEA and India Paul McCormick bemoaned the time it would take for the dedicated road funding to begin. "The move to ringfence roads excise revenue for spending on the roads network is welcome – but it won’t kick in till the end of this decade, which is somewhat disappointing. The proof will be in the pudding though, with road users repeatedly arguing for this mechanism since mediaeval times.”  

ICE director general Nick Baveystock wanted to see the commitment to roads extended to other “bold decisions”.

“The Chancellor is absolutely right; Government must be bold in its commitment to infrastructure if the UK is to achieve a rebalanced economy, increase productivity and maintain our competitive edge.  We hope this also translates into bold decisions on aviation capacity, resilience and our future energy mix.

“Bold and strategic investment choices are also needed. We are at a critical point - the scale of the UK’s needs is large and growing yet public finances remain tight. As the spend review approaches, we hope to see Government make decisions for the long-term.

If you would like to contact Jackie Whitelaw about this, or any other story, please email jackie.whitelaw@infrastructure-intelligence.com.