The Road Fund: Action needed now

Wednesday 8 July 2015 was a red letter day for the roads sector. For the first time in modern history, a Chancellor of the Exchequer, George Osborne, agreed to ring-fence the income from a major, national tax revenue stream for the specific purpose of funding the national road network. 

As the Budget document put it: “From 2020-21 the government will spend all of the revenue raised from VED in England on the English Strategic Road Network.”

The new Road Fund promises stable and adequate funding for our most important routes for the medium to longer term, adding vital substance to planned increases in investment and improvements in service quality. At last road users will become entitled consumers of a service which they pay for, rather than just weary and defenceless taxpayers. Our highways supply industry will be able to plan and invest with confidence, to deliver the better road network that our economy urgently needs.

The Road Fund will be hugely beneficial to all of us. Our economy and population are growing. Traffic pressures are rising. Roads carry 90% of inland passenger and freight movements: an efficient strategic road network is a key component of our national productivity, competitiveness and future growth.

Only stable, consistent funding, not just for years but for decades to come, will deliver the Government’s promise of a road investment renaissance. Only the new Road Fund can turn promise into reality. 

So there we are: job done. Now we can all relax.

Or rather, not yet. A declaration of intent is welcome, but delivery is what counts.

We have heard the Chancellor’s intentions, but we have yet to see any substance detailing how they will be put into practice. Although the Fund isn’t due to start until 2020, action is needed now.

The challenge to the supply chain to invest, recruit and gear up to deliver the current Road Investment Strategy (RIS1) and its successor – already in the pipeline – is with us today. Meeting that challenge is absolutely mission critical. The roads renaissance simply won’t happen unless the private sector is ready and able to give it substance, and above all that means the confidence to invest and recruit. Yet the Road Fund remains no more than a good intention of the present Chancellor. 

The longer term risks need addressing too. It’s a cast-iron certainty that sooner or later, the Exchequer income stream from VED will tempt a Government or a Chancellor facing familiar spending pressures and struggling to balance the national books. Confidence and predictability matter just as much over the longer term, in a sector where plans take years to mature and deliver, as they do in the here and now.

The Road Fund needs to be given substance as soon as possible. Good news it is then, that the government has a perfect vehicle at hand for providing that essential certainty. The Modern Transport Bill, promised in the Queen’s speech, could cheer us all by putting some statutory flesh on the Road Fund’s bones. What better, more convenient and more appropriate legislative home for the necessary provisions than a genuinely Modern Transport Bill?

Timing isn’t the only issue of course. What about the substance? The Road Fund must be fit for purpose and, crucially, enduring. A mere policy change, accounting convention or brass plate on a Treasury office door will present a soft target to future governments and chancellors who may have different priorities for tax revenues and public spending. So the statutory provisions establishing the Road Fund must create the defences it will need to counter such temptations.

What would we like the Modern Transport Bill to provide? Here are two key requirements that the legislative framework must meet:

Ensuring all income from Vehicle Excise Duty (VED) makes its way into the Road Fund

There are several ways this could happen. It could be distributed by a Roads Fund Board, a small new body created at arms’ length from government. Such a body could be tasked with broader functions, such as advising on the adequacy of roads funding from an independent, expert perspective. The Office of Budgetary Responsibility offers a possible model.

Alternatively, VED income could be collected as now by the Driver and Vehicle Licensing Agency but then disbursed to the relevant highway authorities in England – and potentially Scotland and Wales - by a clear formula that could in turn relate to the registered vehicle keeper address.

But the key point is that clear statutory provision must ensure a straight pass-through, rather than resting on an administrative fix which leaves the income meandering through the lengthy corridors of the Treasury, at ever-present risk of being siphoned off along the way. 

Ensuring Road Fund money is spent wisely and efficiently

If the Road Fund is to be administered by a new body, that body could be required to report on the value achieved against a set of statutory objectives.

Fundamentally, though, it is the recipients of the Road Fund cash who must be held accountable for delivering on the Fund’s statutory objectives. For Highways England this should come within the purview of the Office of Rail and Road, the Government’s appointed efficiency monitor for Highways England, and should be detailed in the annual Report and Accounts, which would be subject to independent audit and also scrutiny by the Transport Select Committee.

Parallel arrangements will be needed for the devolved administrations.

The new Road Fund is potentially one of the most important transport policy reforms of our lifetimes. Its benefits will accrue not just to those who journey by road, but to every citizen and taxpayer in the land. VED will no longer be just another tax bill. Instead it will seal the government’s promise to treat us no longer as anonymous ‘road users’, but as valued customers for a vital public service. That moment cannot come too soon.

The Road Fund’s effectiveness and the odds on its survival will be determined by what the Government chooses to do now. Keeping up momentum is mission critical.

Brian Wadsworth is director for the Road Ahead Group and formerly director of strategic roads, planning and national networks at the Department for Transport.

The Road Ahead Group is an alliance of industry and City interests campaigning for reforms to motoring taxes and stable, long-term funding for the road network.