Here in the U.K., our government has been making noises about “road pricing”, by which they mean a new tax based on the number of miles of road (and the types of road) that you travel using your car.

They claim that this will reduce congestion, however in order to appreciate the real effect of such a scheme you must keep in mind that:

• Most Britons live away from where they work. This a result of industry consolidation, and of government policies such as the promotion of out-of-town shopping and industrial estates.
• Congestion happens primarily during “peak periods”, i.e. the times at which people travel to and from work.
• There is often little or no public transport provision to get people from residential areas to company premises. Even where there is public transport, it often takes a tortuous route, meaning that it takes much longer than travelling by car.

In other words, most of the people affected by road pricing will have little choice other than to pay the tax.

Not only that, but here in the U.K. we already have a pay-by-the-mile road taxing scheme, in the shape of one of the most extreme fuel taxing regimes of any country in the world. Not only does the government take around 50 pence per litre for unleaded petrol, but we actually pay VAT on the fuel tax!. So, of the typical 95 pence per litre we get charged for unleaded petrol today, around 14 pence is VAT, then there’s another 50 pence of fuel duty on top of that, so our government takes 64 pence of the money we pay for every litre of fuel. That’s a whopping 67.5% of the cost of petrol here.

Let’s consider for a moment what that means; say your car does 30 miles per gallon. There are 4.546 litres in an Imperial gallon (not a U.S. gallon, so please don’t try to correct me :-)), so that works out at an effective tax rate of about 10 pence per mile (more for a gas-guzzler). And all this without complicated vehicle tracking systems, extra paperwork, extra loopholes, or indeed any new laws from government.

So, if we effectively already have a by-the-mile charging scheme, why does the government think its new “road pricing” idea is the way to go? Put simply, because the public has already protested at the exorbitant taxes placed on fuel. Our government knows it would never get away with hiking the rate to the kinds of levels that it would like.

And in any case, raising fuel duty or imposing road charging schemes is unlikely to do very much to prevent congestion. Most of the people creating the congestion are simply trying to get to work, and they will continue to try to get to work under almost any conceivable tax regime. Public transport is not fit for purpose; from an employer’s perspective, it cannot deliver employees to the company’s offices reliably and on-time. From an employee’s perspective, it is dirty, unreliable, slow and often late; try to use such a service to get to many jobs in the U.K. and you would be sacked. Indeed, the situation is so bad that in Newbury, Vodafone runs its own bus services!

Increasing fuel duty or creating an expensive-to-operate road pricing scheme in the U.K. can therefore have only one result: inflationary pressure on the pound. The idea that it will have any significant effect on congestion is laughable.