Road pricing back on agenda to plug EV budget shortfall
Motorists could face a per-mile charge on Britain’s road to help avert a £40bn tax shortfall from the switch to electric vehicles.
Plans are being mulled by the chancellor, who has been presented with a Treasury paper on a national road pricing scheme, according to a report today in the The Times.
It would be a timely move for such a move; a much-reported announcement on switching the current 2040 deadline for ending sales of new petrol and diesel-engine cars and vans to 2030 is expected to be made this week. The resultant loss on fuel duty and VED is expected to be about £40bn.
It’s not the first time that road pricing has been mooted – it’s over 55 years since it was first set out as an idea in the so-called Smeed Report, which recommended the Conservative government at the time introduce nationwide road pricing to cut congestion.
But while such schemes tend to be supported by both economists and environmentalists for when the ‘Electric Revolution’ arrives, they still remain unpopular with drivers.
Edmund King, AA president, said: “It is always assumed that road pricing would be the solution but that has been raised every five years since 1964 and is still perceived by most as a ‘poll tax on wheels’.
“We need a more imaginative solution and have proposed ‘Road Miles’ whereby every driver gets 3000 free miles, with one third more for those in rural areas, and then a small charge thereafter.
“Combined with commercialising the roads with an adopt a highway scheme with naming rights such as the Minecraft M1, Manchester Utd M6 or Adidas A1, this should be prove a more popular solution.”
The BVRLA has said it continues to work with both the Treasury and wider transport stakeholders to look at how and when the tax system should adapt to the zero-emission transition, but warned that getting the balance right on any new solution is tricky.
Chief executive Gerry Keaney commented: “Any radical change will need a great deal of consideration and forward planning. Policymakers must start conversations now and the fleet industry must have a seat at the table in these discussions. To support a speedy and sustainable shift to zero emission road transport, it is essential to have alignment between fiscal and environmental policy. Getting it wrong will punish drivers and compromise the UK’s ability to achieve its environmental and economic goals. To get it right, it must be fair, proportionate, practical and planned.”
The RAC also warns that any system does need to levy tax on both conventionally fuelled and battery electric vehicles fairly.
Head of roads policy Nicholas Lyes said: “If this isn’t addressed, we risk finding ourselves in a situation where petrol and diesel drivers continue to pay all the tax for using the roads which is unsustainable.
“But drivers are firm in their views that any new system must not be used as a way to increase the tax burden on them. Despite this, RAC research shows around four-in-10 drivers believe that some form of ‘pay-per mile’ system would be fairer than the current system of fuel duty, while half (49%) agree that the more someone drives the more they should pay in tax. Drivers are also clear that tax revenues from any replacement for fuel duty should be solely reinvested back into the road network.”
Comparethemarket.com has also highlighted the potential impact on drivers, warning that the cost of running a car is already a significant burden for some; its research indicates that 71% of young people – who pay the most of any age group to keep a car – don’t believe their pay cheque is high enough to cover the cost of driving.
Dan Hutson, head of motor insurance at the comparison site, said: “It is essential that the Government think carefully about how this rumoured road pricing scheme is implemented to protect these under-pressure groups as they struggle to cover the existing costs, let alone a further tax.”
And Brian Madderson, chairman of the Petrol Retailers Association, said any such measures “would only succeed in discriminating against the poorest in society”.
“Public transport infrastructure in rural communities is near non-existent, with millions solely relying on their private vehicles to travel. If the regressive road pricing ‘poll-tax like’ regime came into force, those living in rural areas on low incomes would be hit the hardest as it could become unaffordable to run a car. This method of taxation has already been rejected by the British public in 2007 when proposed by the Labour government, so it is startling to see that these proposals are even being considered.
“There has been a clear lack of consideration to the inflationary hit to goods and services. 100% of fresh food is moved by road, along with over 80% of all other goods. It will be the consumer that has to bear the brunt of any increased transport costs.”