It was originally intended to be a "Road Fund", the tax disc even used to be called the "Road Fund Licence" didn't it? The problem was they soon realized that this was a nice big pot of easy money and decided they should be allowed to spend it on other far more important things than what it was originally intended for. Wikipedia has:
"...a new excise duty specifically for motor vehicles was introduced in 1920 which was paid into the Road Fund and was hypothecated for road construction. Since 1937 the money has gone into central government revenues and has not been used directly to fund road building or maintenance."