Budget 2025 - Review

A Little Tax That Could

Of everything in the Budget (and, let’s face it, there wasn’t much), the measure that interested me most was one that raised comparatively little money and barely featured in the headlines: the introduction of a per-mile charge for electric vehicles.

Three pence per mile for EVs (half that for plug-in hybrids) is pretty small but is it the first foot in a potentially transformational door?

The very first post on this blog was arguing for road pricing as the golden ticket that unlocks change in transport.

For the first time, we have taken a step (albeit a small and comparatively low-risk step) towards taxing road use by distance. The exciting thing is whether this could be a trojan horse towards something much more interesting.

A flat charge per mile is obviously a blunt instrument. A farmer driving between their own fields is treated the same as a West End commuter in an 8.45am queue on the Holloway Road. But once the principle is established, refinement becomes possible.

Maybe - in response to the perceived unfairness - a future Government could start differentiating between congested urban areas and quiet rural ones, or between peak and off-peak, or high-pollution zones and residential streets, or by weight. Once you stop taxing the fuel and start taxing the behaviour, you open the door to real potential for modal shift.

The politics isn’t ideal (it never is). The Government has wrapped this new tax in a narrative of road maintenance, using the revenue to help fund a £2 billion-a-year programme for local roads by the end of the Parliament (hooray! No more potholes! Again!).

That linkage will make the policy harder to unwind: politically, it is easier to say “this pays for resurfacing your road” than to justify a variable charge on an ever-cleaner vehicle fleet.

But a tax is, to a very significant extent, binary: the big difference is between not existing and existing, and pay-per-mile road charging now exists.

Not All Infrastructure Is Equal

The Government has committed to maintaining £120 billion of infrastructure spending. That is welcome; most politicians cut capital investment at the first sign of budgetary trouble. George Osborne’s first budget statement was a cri de coeur on the importance of not cutting capital spending - even as he cut capital spending.

But capital investment is only good if you’re actually investing in something helpful.

Nowhere is this clearer than the Lower Thames Crossing.

£891 million has been allocated to complete the publicly funded elements of the scheme.

It will be the fourth major road crossing of the Thames east of London.

The history of Dartford is like a fairy-tale parable of induced demand:

Once upon a time, there was a two-lane tunnel that filled with cars. So we built another two lane tunnel that filled with cars. So we built a four-lane bridge that filled with cars. So now we are preparing a six-lane tunnel…

… that will fill with cars.

The reason why there’s so much demand to travel by road between Essex and Kent is that there is no public transport (at all!) between Essex and Kent, other than a bus that gets caught in the same traffic jam.

The Crossing is, in essence, a very expensive way of not solving the problem. It consumes money, land, and woodland, and it guarantees yet another round of congestion that future governments will feel obliged to “fix”. Far better to have built a tram between Dartford and Thurrock to give all those local drivers a congestion-beating, reliable alternative, but that wasn’t even on the table.

In the meantime, it will consume carbon to build and generate emissions in the induced demand.

Rail: A Smörgåsbord Without a Menu

This was briefed in advance as the “Smörgåsbord Budget” - lots of small elements.

That was certainly true in rail projects.

There is support for Northern Powerhouse Rail, the Transpennine Route Upgrade, East West Rail, and the Midlands Rail Hub.

It’s all great stuff but it’s also never totally clear what any of it means. Some of it (Transpennine, East West, etc) is being reannounced for the gazillionth time, but the scope is unchanged.

Other bits (specifically Northern Powerhouse Rail) are still hugely ambiguous.

This process of funding ‘named’ projects in isolation does not feel like the best way of delivering transport investment.

My most popular blog post this year so far was about how the Swiss would have done HS2.

In Switzerland, every scheme is part of a coherent long-term timetable. When I visited a few years ago, the team was working on the 2050 timetable. Every investment has a place, and there is clarity about why it matters.

Here, by contrast, we continue to assemble rail schemes like furniture from different shops: all potentially fine, but not obviously designed for the same room.

Don’t Mention the DLR

Did you know that Rachel Reeves announced a new rail line?

No?

Well, you wouldn’t know from her speech, as despite being the only genuinely new transport investment in the Budget, she didn’t mention it.

The scheme is the DLR to Thamesmead, designed to unlock new flats on both sides of the RiverThames. OK, it’s not being funded directly by the Government, but enabled through a TfL borrowing facility (presumably because the DLR has a strong business case, reliable revenue and low operating costs, making it well suited to municipal finance) but it’s still a rare piece of good news.

It’s therefore frustrating that something so squarely aligned with the Government’s own core agenda - housebuilding - wasn’t even mentioned.

Thamesmead is one of the few places in London where truly large-scale housing growth is feasible. It is the textbook case for public transport unlocking development. If anything in the portfolio embodies the delivery of Labour’s core election pitch, it is this.

And yet: silence.

It’s hard to avoid the impression that the Government remains embarrassed about anything good happening in London, even when it advances its own climate, growth and housing priorities. We see this in other areas of policy as well. If ministers never quite feel able to own their own achievements, why would they expect to be popular?

Balance Between Modes

The Budget maintains the £3 single bus fare cap until 2027 and reaffirms the wider package of bus support introduced last year. It also freezes regulated rail fares for. Given the divergence between rail fares and motoring costs over the past decade, this is sensible. I wrote about that earlier in the week.

Fuel duty, meanwhile, remains frozen until September 2026, with a planned return to the previous rate after that. In practice, governments often promise fuel duty rises that do not materialise, so the test will come not today but in ten months’ time.

Nevertheless, it’s marginally better than previously, as the Government has at least pencilled in a date (before the next Budget) for fuel duty to rise.

It’s baby steps towards rebalancing public and private transport costs.

Not that this is why it was done: I’d love to think it was part of a strategic rebalancing of costs but I think they were both the outcomes of a desire to cut inflation without increasing borrowing. Transport was the means not the ends.

Nevertheless it’s something to build on and to try to ensure it becomes a pattern and not a one-off moment.

A Bit More Devolution

There was a small nod towards fiscal devolution, with tourist taxes and some business rates retention stability through to 2029. Individually, these are minor compared to the levels of control most cities globally have over their finances. But fiscal devolution in Britain always happens in millimetres, not miles, and these are baby steps in the right direction.

Fiscal devolution matters not just for the money (though money, of course, does matter).

It also matters because we need our transport authorities to lead confidently (to articulate long-term plans, to take responsibility, to assemble partnerships) and to do this they need more than ring-fenced grants from the Exchequer.

Whether this Budget marks the beginning of that shift remains to be seen but at least it implicitly acknowledges the question.

But Not Much

One of the weirdest things about the Budget, should any foreigners have been masochistic enough to watch it, were some of the hyper-local announcements.

For example, the announcement of funding for the “Peterborough Sports Corner”

Or “£20 million to upgrade Kirkaldy seafront… with work starting next year!”

Or “£18m to improve playgrounds across the UK”.

In every other G7 economy, local authorities decide whether to fund a seafront renovation, a sports centre or a playground.

Only in Britain would the national Finance Secretary feel it’s her job to take the decision out of local hands and make it in Westminster.

This stuff really matters because it disempowers local leaders.

Every time Whitehall takes responsibility for small, low-risk, local decisions, it weakens the confidence of local leaders and reinforces the idea that nothing can be done without Treasury permission.

And this creates a chicken-and-egg problem: transport authorities need to grow into long-term, strategic roles with real agency, but they are expected to do so while still being treated as subordinate delivery units for the centre.

I see this in my work with transport organisations. In the last week alone, I met two French mayors and the Exec team of a Middle Eastern transport authority: places where independence, responsibility and long-termism are normal. It throws the British model into sharp relief.

Forgive the sales pitch but this is why, with Nordic colleagues, I’ve helped create an Integrated Transport Authority executive programme: a short, focused set of workshops that draw on global best practice from regions that have managed to combine independence with clarity and delivery. Please contact me if you’d like to know more.

A Final Thought

Taken together, the Budget contains some genuinely positive moves; particularly the EV per-mile charge, which could become the foundation for something genuinely exciting. It contains sensible rail investments and a nod to fiscal devolution. It even contains, deep in the small print, a commitment to unlock housing at Thamesmead through the DLR.

What it does not yet contain is the thing we continue to miss: a coherent national strategy that sets out the transport system we are trying to build and the steps we will take to get there.

Until we have that, we will keep making progress in patches, with good decisions overshadowed by bad ones (Lower Thames Crossing, I’m looking at you).

Still, there are the beginnings of something here.

It’s nearly a year since I wrote my review of the Government’s first six months in power. I headlined that “Labour’s Challenging Start”. Since then, it’s got worse.

There’s just enough in this budget for some grounds for optimism but there could have been so much more.