Every year, billions of pounds are collected through Vehicle Excise Duty and fuel duty. Understanding where this money goes — and where it does not go — is one of the most common questions asked by drivers who feel their road tax does not match the condition of the roads they drive on.
VED Revenue and the Treasury
Road tax — Vehicle Excise Duty — is paid directly to HM Treasury. It is not ring-fenced for road spending; instead, it goes into the general consolidated fund alongside all other government revenue. This means VED funds everything from the NHS to education to defence. The idea that road tax is specifically earmarked for road building and maintenance is a common misconception — it has not worked that way for decades.
Roads Funded Through General Taxation
Road maintenance and new road building in England are funded through the Department for Transport's capital budget, which comes from general taxation. National Highways manages motorways and major A-roads with funding from the DfT. Local councils fund local road maintenance from their own budgets, which come from council tax and government grants — not from VED directly. This distributed funding model means road quality depends on local authority budgets, which have been squeezed in recent years.
Fuel Duty Revenue
Fuel duty — the tax on petrol and diesel — raises far more revenue than VED. With over 30 million vehicles on UK roads, fuel duty generates approximately £25-28 billion per year. Like VED, fuel duty goes to the Treasury's general fund rather than being ring-fenced for roads. The fuel duty rate has been frozen at 52.95 pence per litre since 2011 — one of the longest freezes in history — partly due to pressure on household budgets.
The Road Investment Strategy
The government publishes a Road Investment Strategy (RIS) outlining planned spending on major roads. RIS2 covers 2020-2025 with billions committed to motorway upgrades, new roads, and maintenance. However, this spending comes from the DfT budget, not from a dedicated road fund fed by VED. The disconnect between what drivers pay in road tax and what is spent on roads is a recurring political issue.
Calls for Ring-Fencing VED
There is ongoing advocacy for ring-fencing VED revenue specifically for road maintenance and building. Groups representing road users argue that drivers pay road tax and fuel duty and should see that money invested in the road network. The government has resisted ring-fencing, arguing that general taxation allows for flexible allocation of resources across transport modes — including rail, bus, and active travel — rather than prioritising roads alone.