VED hypothecation ‘fizzles out’ after £2bn Treasury raid

05/11/2021 |

The Government’s pledge to spend ‘every penny’ of English Vehicle Excise Duty (VED) on improving the road network is in tatters after it cut the money in what was its flagship National Roads Fund (NRF) by more than £2bn.

The Budget and Spending Review saw funding for the 2020-25 Road Investment Strategy (RIS 2) cut from £27.4bn to exactly £24bn.

The Government has now confirmed that the £2.6bn over five years for local roads upgrades is for the major road network (MRN) and Large Local Majors (LLMs).

RIS 2 and local road upgrades were to be the sole beneficiaries of a £28.8bn pot of hypothecated VED revenue. This means that the Treasury has held onto approximately £2.2bn VED funding.

The NRF was first announced by the then chancellor, George Osborne in 2015, when he told MPs: ‘From the end of this decade, every single penny raised in Vehicle Excise Duty in England will go into that Fund to pay for the sustained investment our roads so badly need.’

However, the Treasury has not responded to a request from Highways to clarify whether the NRF still exists.

National Highways has said that cuts to the RIS largely reflected delay on major schemes such as the Lower Thames Crossing and the A303 Stonehenge Tunnel.

RAC Foundation Director Steve Gooding told Highways that if delays to these ‘mega projects’ are the reason for the chancellor ‘slipping funding to the right, rather than taking a random whack out of RIS 2, then it is to be hoped that the benefits of funding certainty remain for the rest of National Highway’s activity’.

He added: ‘Hypothecating vehicle excise duty to re-create a virtual “road fund” was an idea that burned brightly but briefly before fizzling out.’

It was originally planned that MRN and LLM schemes combined would receive £3.5bn from the NRF, although this was quietly cut when the RIS 2 budget rose to £27.4bn. The cut to RIS 2 funding means that cuts to local road upgrades are less severe.

However, as Highways has reported, the Spending Review also appears to have cut the level of funding local road maintenance available over the next three years.

In 2019 Simon Clarke, then the exchequer secretary to Treasury, made clear that the NRF did not cover local road maintenance.

He said: ‘The government is delivering its commitment to hypothecate English Vehicle Excise Duty to roads spending, and has announced that the National Roads Fund will be £28.8 billion between 2020-25. From this, we expect £25.3 billion to be spent on the Road Investment Strategy 2, […]. The remaining £3.5 billion will be spent on local roads, with major structural renewals eligible for funding.’

The RIS 2 document, published in early 2020, stated: ‘Funding for this plan is directly linked to the money road users pay. For the first time since 1926, a new National Roads Fund (NRF) will dedicate a sum equal to all receipts from Vehicle Excise Duty for use on our most strategically important roads.’

Mr Gooding told Highways that the end of the promise of hypothecation ‘might not be such a bad thing if, as seems likely, there will need to be a root and branch review of motoring taxation as the chancellor’s income from fuel duty inexorably ebbs away consequent on our switch to electric cars’.

Highways InProfile

latest magazine issue
Highways jobs

Senior Civil Engineer - Major Projects x 4

£45,894.00 - £54,952.00
We are looking for experienced engineers to help us progress a number of key projects and programmes Glasgow, Glasgow City
Recruiter: Transport Scotland

Technician - Maintenance

£31001.0000 - £36471.0000 per annum
Essex Highways is responsible for managing and maintaining one of the largest highway networks in the country
Recruiter: Essex County Council

Highways Contract Engineer

£46,731 - £49,764
The team helps provide a safe road network that operates efficiently and effectively.  Northamptonshire
Recruiter: North Northamptonshire Council

Principal Transport Planner

£46,731 - £49,764 (pro-rata)
We are looking for an experienced professional to join us on a six-month temporary contact as a Principal Transport Planner. Kettering, Northamptonshire
Recruiter: North Northamptonshire Council

Highways Maintenance Operative

£Competitive
We have a fantastic opportunity for a Permanent Highways Maintenance Operative Broughton, Brigg
Recruiter: Amey

Head of Highways Contracts & Network

£81,803 progressing to £90,664 per annum
The team includes approximately 60 directly employed HCC people Hertfordshire
Recruiter: Hertfordshire County Council

Principal Construction Manager

£Competitive
We are excited to offer a fantastic opportunity for a Permanent Principal Construction Manager Yorkshire and the Humber
Recruiter: Amey

Quality Technician

£Competitive
We are excited to offer a fantastic opportunity for a Permanent Quality Technician Yorkshire and the Humber
Recruiter: Amey

Senior Highway Engineer (Development Management)

£42679.0000 - £50211.0000 per annum
Senior Highway Engineer (Development Management)Permanent, Full Time£43,960 to £51,718 per annum*Location
Recruiter: Essex County Council

Project Manager (Major Projects)

£44,711 - £47,754
Are you an experienced project professional or engineer with looking to take the next step in your career? Halifax, West Yorkshire
Recruiter: Calderdale Metropolitan Borough Council

Senior Civil Engineer - Roads

£45,894 - £54,952
Are you an experienced engineer looking to support the Scottish Government’s national objectives. Scotland
Recruiter: Transport Scotland

Senior Civil Engineering Technician

Grade 7 £29,093 to £32,654 per annum
We are looking for a flexible individual who has the ability to meet targets and analyse and resolve complex technical problems and formulate a design Durham
Recruiter: Durham County Council

Project Team Manager

£55,147 to £60,676 per annum
We are pleased to be able to offer an opportunity for a role as Design Team Manager Norwich, Norfolk
Recruiter: Norfolk County Council

Clerk of Works

GRADE 08 (£37,938 - £41,511)
Warrington is one of the most successful towns in the country Warrington, Cheshire
Recruiter: Warrington Borough Council

Assistant Projects Engineer

GRADE 06 (£29,093 - £32,654),GRADE 07 (£33,366 - £37,035), GRADE 08 (£37,938 - £41,511)
Warrington is one of the most successful towns in the country Warrington, Cheshire
Recruiter: Warrington Borough Council

Principal Engineer - Traffic Management

£45,718 - £48,710 per annum
At Bath & North East Somerset Council we have one overriding purpose – to improve people’s lives. Bath, Somerset
Recruiter: Bath & North East Somerset Council

Vehicle Technician - Improver

£28,624 - £30,060
Transport Services is responsible for all aspects of transport and related services Huddersfield, West Yorkshire
Recruiter: Kirklees Metropolitan Council

Programme Delivery Office Administrator

Grade 9 £31,344 - £33,253 per annum
At Derbyshire, we have been on a journey to transform the way we deliver highway services to make them fit for the future Derbyshire
Recruiter: Derbyshire County Council

Support Officer - Highways Asset Management Systems

£31,586 - £34,314
We are a forward-thinking organisation dedicated to maintaining and improving our highway infrastructure. Lincolnshire
Recruiter: Lincolnshire County Council

Principal Transport Planner (Strategy)

£46,731-£49,764
We are looking for an experienced professional to join North Northamptonshire Council as a Principal Transport Planner (Strategy). Sheerness House, 41 Meadow Road, Kettering moving to Haylock House, Kettering Parkway, Kettering NN15 6EY, United Kingdom
Recruiter: North Northamptonshire Council
SUBSCRIBE NOW

Latest Video

Subscribe to Highways today to ensure you keep your finger on the pulse of everything happening in the UK road network throughout the year.

SUBSCRIBE NOW