A new report from Parliament’s Transport Committee calls for the existing UK system of fuel duty and road tax (aka Vehicle Excise Duty, or VED) to be replaced entirely by a national road pricing system. It recommends that owners of electric cars, who currently escape paying annual road tax, should also be charged under the new system.
Under the proposal, drivers would be tracked while on the road using the same GPS technology that underpins satellite navigation and would pay for every kilometer driven, taking into account both the type of vehicle used and the levels congestion. The committee said its investigations had found no viable alternative to a road pricing system using telematics technology such as this.
Taken together, fuel tax and road tax bring £35billion into the public purse, but the current exemption for electric cars from both should wipe out this entire source of revenue in time. The new report also highlights how the reduction in revenue from car taxation under the current system will accelerate as the number of electric vehicles on UK roads increases and the prices of new and used electric cars fall. .
The Transport Committee estimates that without changes to the current system, revenue from car taxation would be reduced to zero by 2040, particularly in light of the ban on the sale of new petrol and diesel cars from 2030, the UK aiming to achieve net zero emissions by 2050. .
As a result, the report makes it clear that drivers of electric cars will have to be charged for their use of UK roads in the same way as owners of petrol and diesel cars. However, he also stresses that incentives for motorists to use low- or zero-emission cars should not be removed entirely.
The committee advises that any new system should ensure that motorists pay the same or less than they currently do in fuel taxes and excise duties on combination vehicles, and that the impacts on vulnerable groups and those living in rural areas are taken into account.
Its final recommendation is that the Treasury and the Department for Transport create an “independent” body, which should “review solutions and recommend a new road pricing mechanism by the end of 2022”.
The idea of introducing road pricing in the UK was first raised in the 1960s. In 2005, then Labor Transport Secretary Alistair Darling suggested a similar national scheme. However, her introduction was dropped after public response and a petition against her which received nearly two million signatures.