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I am pleased to open this debate. I shall focus on the key issues identified in the report of the Select Committee on Transport, which considers the impact that road charges have on mobility, congestion and sustainability. By focusing on issues that are as yet unresolved, the report draws attention to key areas that deserve more debate.
The report and its topic come under the remit of the Department for Transport, but the report's content also involves the Treasury Department. I thank the Minister for Pensions and the Ageing Society for her important contribution to the Committee's deliberations. I understand that the Under-Secretary of State for Transport, my hon. Friend Paul Clark, will reply today on behalf of the Government as a whole, so I hope that he is able to deal with Treasury-related issues as well as those that are the direct responsibility of the DFT. One of the report's key conclusions was that the two Departments need to work much more closely on matters of this nature.
There is no doubt that road transport is critical to our economy. There are 34 million motor vehicles driving on 250,000 miles of road in Great Britain, and 67 per cent. of freight is carried by road, so it is not possible to consider transport policy properly without considering the great importance of roads. However, there are clear environmental consequences. The transport sector is responsible for 23 per cent. of the UK's carbon dioxide emissions, and roads account for 93 per cent. of those. The Climate Change Act 2008 requires the Government to reduce CO2 emissions by 80 per cent. by 2050. That means that very significant changes are required in the transport sector as a whole, and particularly in road transport. Those changes need to be very wide ranging, and must relate to issues such as new technology, alternative fuels, and investment in a much more integrated public transport system.
A key element of our report is the confirmation that taxation and charges on motorists engender a high level of mistrust between drivers and the Government. It is very unclear what the cost of motoring is, and there are unanswered questions about exactly how much is raised from motor taxation and how it is applied. Our inquiry looked at that specifically, because up to now it is an area about which the Government have not made the information explicit. We found that we could identify £48 billion per annum that is raised by taxes and charges on motorists, £30 billion of which comes from specific motor taxes such as fuel duty and vehicle excise duty. It is a matter of regret that that information has not been made available previously in any simple form. Moreover, the Government have not made clear exactly how the money raised is spent. Indeed, the various claims that have been made at different times have only added to the confusion and misunderstanding about how the money is spent.
For example, it has been claimed that fuel duty is at once a tool to reduce carbon emissions, a source of general revenue, and a means to fund transport investment. The Government's attempts to increase VED bands retrospectively by describing the duty as a green tax brought environmental taxes into disrepute. We call for much greater transparency about exactly what is raised and how the money is applied.
What is the real cost of motoring? Every year, £9 billion is spent on maintaining and improving the road system. That amounts to 41 per cent. of total transport expenditure, yet it is clearly much less than the amount raised by taxation and charges on motorists. The actual cost of motoring must include externalities such as the cost of policing on the roads, as well as health costs and environmental impacts. Some of those items can have financial amounts attached to them so that we can see exactly what the costs are, or at least make an assessment of them. However, financial costs cannot be applied to other items, including some of the environmental impacts.
These externalities add up to a great deal more than what motorists believe them to cost. The Department for Transport considers that congestion costs £20 billion per annum, and the Eddington report suggested that that amount could rise by £22 billion in 2025 unless major changes are made. The Campaign for Better Transport puts the overall costs of driving at between £70 billion and £95 billion a year, so it is clear that there is a very wide variation in the assessments of exactly what the costs of motoring are. Whichever way we choose to assess them, however, it is certain that to reach a reasonable assessment of the cost of motoring we have to consider the externalities-the extra costs-that motoring imposes on communities and taxpayers as a whole.
In its inquiry, the Committee supported the calls from most motoring organisations that a fair way to raise revenue was to base the process on miles driven rather than on car ownership. For example, people pay more fuel duty the more miles that they drive, although we could not agree with some of the representations made to us that road taxation should come exclusively from that source.
We also found in our assessment of the costs and charges imposed on motorists in other European countries that UK drivers are not taxed overall more than their continental counterparts, but we recognised that there will always be limits on what taxation and charges can reasonably be raised at any time.
Congestion is a key road traffic issue. The CBI repeats the concern in its most recent report that congestion harms business because of delays and a lack of reliability. Clearly, congestion also harms the environment. It must be tackled by the Government's smarter choices agenda, which must include better and more integrated public transport and active road management, but it is also true that direct road charges could be an important part of the package if the difficulties associated with such charges could be resolved. The Transport Committee considered that issue previously, and we returned to it briefly in this report.