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Drivers' tax bills soar past £1,000 a year

Vehicle tax discThe average driver pays well over £1,000 a year to the government in motoring taxes, according to new research.

The Local Government Authority (LGA) says that the Treasury has a total annual take of £38 billion from duty and VAT on fuel plus Vehicle Excise Duty (VED – commonly known as road tax).

With around 34 million cars in Britain today, this amounts to £1,117 each every year.

This is on top of car insurance costs which, according to the latest Confused.com car insurance price index, currently stands at £652 for an annual comprehensive policy.

'Too little cash for road repairs'

But the LGA is warning that far too little of this money is finding its way to local councils to help them deal with the UK's crumbling road network.

Peter Box, chair of the LGA's Economy and Transport Board, says: "The backlog in repairs is growing longer each year with the town hall bill to clear it at £10.5 billion and rising.

"That is why councils now need increased and consistent highways funding to invest in the widespread resurfacing projects desperately needed for a long-term improvement."

Confused.com reported recently that the state of our roads was people's number one complaint when it came to public spending.

But only a fraction on the money paid by central government to local authorities is ring-fenced for spending on highway repairs.

Peter Williams at the RAC says that the LGA's figure of £38 billion in taxes might even be too conservative.

"We believe the government receives closer to £45 billion in motoring taxation," he explains, which would work out at more than £1,300 each in tax a year.

Drivers being 'taken for a ride'

Williams adds: "Motorists are being taken for a ride when it comes to filling up the Treasury coffers.

"The government has provided local authorities with extra road maintenance money this year and has committed more funding for the future in its 'Action for Roads' scheme, but we have an urgent need now.

"Councils are repairing roads but are also having to make tough decisions about frontline services which means they are not in a position to commit additional funding to maintain their highways."

Williams says that the central government should provide local authorities with a larger ring-fenced sum every year which councils "commit to spending properly".

Fuel bears greatest burden

Filling up on fuelThe lion's share of tax paid by UK motorists is linked to fuel prices.

A recent report by the Office of Fair Trading found that roughly 60p of every £1 spent on petrol or diesel goes to the Treasury in duty and VAT.

That's the equivalent of about 78p on a litre of unleaded costing £1.30.

The VED system was overhauled in 2005 so that annual charges reflect a vehicle's environmental friendliness.

Today, cars which produce less than 100 grams of carbon per kilometre pay no VED, while at the other end of the spectrum, a gas-guzzling SUV could face a bill of almost £500 a year.

More tax rises in store?

However, motoring groups have warned recently that the government may need to increase taxes even further.

This is to cope with the fall in both fuel duty and VED revenues which is likely to result from a widespread move to more energy-efficient vehicles over the next few years.

Last year, the RAC Foundation predicted that this trend would lead to a £13 billion shortfall by 2029.

Thinktank the Institute for Fiscal Studies has said that the current taxation system does not reflect the fact that drivers in towns and cities impose greater costs on other people in terms of pollution and congestion than those in rural areas.

A spokesman says: "A national system of charging related to mileage and congestion, largely replacing the current system of fuel taxation, would help solve this problem."

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Chris Torney

Chris Torney

Chris is the former personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris



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