MPs call for road pricing to plug £35 billion fiscal black hole
The Government should introduce road pricing to replace fuel duty and vehicle excise duty (VED) and plug the £35 billion ‘fiscal black hole’ created by the switch to electric vehicles (EVs), according to a new report by the Transport Select Committee.
The report recommends a pay-as-you-drive road pricing scheme, using telematics, and argues that drivers of EVs should pay to maintain and use the roads which they drive on, as is currently the case for petrol and diesel drivers.
Currently, fuel duty and VED raise £35 billion a year and the Committee warns that the ban on the sale of new petrol and diesel vehicles from 2030 will leave the Exchequer facing a potential "fiscal black hole" by 2040 as motorists switch to electric cars unless a new road tax system is introduced.
The new charging mechanism should be "revenue neutral with most motorists paying the same or less than they do currently", the Committee said.
The Committee also calls for the Government to ensure that the new charging scheme: considers the impact on vulnerable groups and those in the most rural areas; does not undermine progress towards targets on increased active travel and public transport modal shift; and ensures that any data capture is subject to rigorous governance and oversight and protects privacy.
Huw Merriman MP, chair of the Transport Committee, said that it was "time for an honest conversation on motoring taxes".
"Innovative technology could deliver a national road-pricing scheme which prices up a journey based on the amount of road, and type of vehicle, used," he said.
"Just like our current motoring taxes but, by using price as a lever, we can offer better prices at less congested times and have technology compare these directly to public transport alternatives.
"By offering choice, we can deliver for the driver and for the environment. Road pricing should not cost motorists more, overall, or undermine progress on active travel."
Motorists support overhaul of tax system
Motorists overwhelmingly favour a wholesale overhaul of the system to make it fairer and easier to understand for all, according to a survey of 10,000 drivers by HonestJohn.co.uk's sister brand heycar.
One in five (19%) favour the introduction of a pay-per-mile system of road charging.
At the same time, over a quarter (28%) of drivers say they would like a flat-rate of vehicle tax introduced - resulting in petrol, diesel, EV and hybrid owners paying exactly the same.
An increase in fuel duty was supported by 16%, while road tolls emerged as the least popular option - favoured by just eight per cent.
"The Treasury needs to get moving on this sooner rather than later.” RAC head of roads policy Nicholas Lyes
Research by the RAC also found drivers broadly support the principle of ‘the more you drive, the more tax you should pay’, with nearly half (45 per cent) saying a ‘pay per mile’ system would be fairer than the current regime.
RAC head of roads policy Nicholas Lyes said: “Whatever any new taxation system looks like, the most important thing is that it’s simple and fair to drivers of both conventional and electric vehicles.
"Ministers should also consider ring fencing a sizable proportion of revenue for reinvestment into our road and transport network.
“The Treasury needs to get moving on this sooner rather than later.”
Next steps
The Transport Select Committee recommends that as the Treasury is responsible for taxation policy, including motoring taxation and the Department for Transport (DfT) is responsible for road connectivity, the two Government departments should work together to set out their preferred options for replacing fuel duty and vehicle excise duty and establish an arm’s-length body with an appointed individual to evaluate the potential merits of those options.
Merriman added: "Work should begin without delay. The situation is urgent. New taxes, which rely on new technology, take years to introduce.
"A national scheme would avoid a confusing and potentially unfair and contradictory patchwork of local schemes but would be impossible to deliver if this patchwork becomes too vast.
"The countdown to net zero has begun. Net zero emissions should not mean zero tax revenue.”
A Government spokesperson said: “The Government has committed to ensuring that motoring tax revenues keep pace with the changes brought about by the switch to electric vehicles, whilst keeping the transition affordable for consumers.
“We will respond to the Committee’s recommendations in full in due course.”
Why is road pricing in the UK taking so long?
Traditionally, road pricing has been a ‘political hot potato’ - the 1997-2010 Labour Government looked at national road pricing but went off the idea due to the negative reaction from voters.
Although more recent surveys have had a more positive reaction from motorists, there are also concerns about privacy and security.
What are the alternatives to road pricing?
The Government could consider a tax on charging electric cars but there are challenges around the supply of electricity and identifying when a car is being charged.
This would require new infrastructure, which would have to be paid for, Mike Williams, director for business and international tax at HM Treasury, told the Transport Select Committee.
How will pay per mile road pricing work?
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Lloydyboy on 7 February 2022
EVs will never be a viable option for the following reasons ;
When the car gets to around 8-10 years old it will be worthless as who in their right mind would buy a car that is likely to need a new battery that costs more than the car is worth. So how is this good for the environment? Just think of everything you own that uses a rechargeable battery, its useless, your mobile phone battery after a few years degrades to the point where it needs to be connected 24/7 to work!
If everyone did end up in EVs (doubtful), the Kwh rate will skyrocket and it will cost more to run than a internal combustion vehicle, the only bonus is its easier to steal electricity than fuel by bypassing your meter at home.
Unless there is a charger at every car parking space at the motorway services, people will be stranded or in mile long queues trying to charge their car.
Not everyone can have a charger at home, those that park in streets or live in high-rise buildings.
Those who end up with more than 1 car at home will need multiple chargers, who wants numerous unsightly chargers on their house!
There will be a growing number of people who think it's funny to unplug your vehicle when it's charging.
We don't produce nowhere near enough electricity in this country to charge all these vehicles, imagine when everyone gets home and plugs their EV in = blackouts
Just use a flat rate for vehicles based on weight, those small and light do less road damage, the heavier suvs and lorrys cause more so pay more..... Simple
WilliamRead on 7 February 2022
If itain't broke, don't fix it. Dft changed a cheap system of tax discs, replacing it with ANPR cameras. Evasion hugely increased , and the "benefits" never materialised.Stormy. on 7 February 2022
Lloydeboy has hit the nail on the head. This pathetic government, in it’s headlong rush to be seen “green” gallop on encouraging people to buy electric before the necessary infrustructure is in place, or even thought about. One of the top uk car mags has reports of staff cars nearly coming to a standstill because of broken charging points, charging stations being blocked by ‘all nighters’ etc. Teslar seem to be the only outfit that have it sussed. Now we are told of a black hole in revenue that electric cars do not pay. Chaos all round from a government who rush into things before any thought processes take place.4caster on 8 February 2022
Battery manufacturers charge around $130 or £100 per KwH of storage. So the 90 KwH battery even in a Tesla model S or E, or a Jaguar iPace, only costs about £9,000 to make. Lower capacity batteries in cheaper cars will be less. That will reduce over the next few years due to competition between manufacturers and lower-cost mass-production techniques. Presently Tesla and Mitsubishi are the biggest makers of vehicle batteries.
peter1947 on 7 February 2022
We have visited Norway in our campervan several times and they have "Road Pricing".You have to register, giving your vehicle number plate and if it is under or over 3500kg.There are cameras which obviously can read your number plate and presumably what vehicle you drive. Nor all roads have cameras and those that do on major roads indicate how much it will cost to travel to say the next major town. The costs seem to be reasonable and if I remember rightly run by a British company.
But knowing how the Government work in this country its bound to be expensive and any tax on fuel will be removed eh! in your dreams!!
Steve Last on 7 February 2022
Possibly the answer to pay per mile is to use the MOT test mileage for three year old vehicles and instead of paying for your vehicle tax you provide a photo of your mileometer for newer vehicles. Stage payments for high mileage users could be arranged if they couldn't pay in total. Pay per mile is the only fair way...more use, more wear, pay more.Lada on 8 February 2022
Inclined to agree with the MoT being the method if road pricing is to come in. Absolutely not in favour of constant surveillance, of every mile being tracked and every journey logged.
Steve Last on 7 February 2022
Possibly the answer to pay per mile is to use the MOT test mileage for three year old vehicles and instead of paying for your vehicle tax you provide a photo of your mileometer for newer vehicles. Stage payments for high mileage users could be arranged if they couldn't pay in total. Pay per mile is the only fair way...more use, more wear, pay more.I'm a keen motorcyclist, have three bikes which I use regularly, pay three lots of road tax plus my car... A fairer system is desperately needed.
conman on 7 February 2022
Why not every vehicle pays £180 a year with the more polluting paying £250 and pay it yearly and even have a little disc in the windscreen to show you've paid..No toooooooo simple instead install thousands of cameras install a massive computer that uses mega watts of power, spend thousands of pounds chasing up innocent motorists that have either forgot to pay or didn't even notice they had passed a camera.
Politicians are idoiots bit like the politicians that think SMART motorways are safe. it's beyond belief.
Contax139 on 7 February 2022
I prefer the VED and pay per mile price depending on class of road, my small MPV is only £30 VED and paying your way I would lose as I only do 700 miles a year due to mobility problems, your highly polluting Chelsea tractor would save you a fortune at my cost, pay per mile could replace fuel duty.
Dennis Leeds on 7 February 2022
If EV batteries cannot be recycled then there is no point buying them.Contax139 on 7 February 2022
If with pay per mile any vehicle is found to have no working device or been tampered with to try and avoid paying then the car should be seized by police, investigated, if tampered with in any way car should be crushed and driver banned from driving for life with no exceptions.4caster on 8 February 2022
Scrap VED and put the cost onto petrol and diesel. Make the gas-guzzling high mileage Chelsea tractors and lorries pay in proportion to their pollution and the road wear they cause.
Graham Saunders on 8 February 2022
Vehicles should be taxed by weight and superficial area. This would mean those causing most damage and/or taking up road space would contribute the most.stevemor on 8 February 2022
In addition there will not be a major town or city not introducing a ULEZ type charge of their own - words fail me !!!Lada on 8 February 2022
The aim of EVs is clear - to limit motoring to a small, privileged minority.
on 8 February 2022
I believe all road users should have to pay tax for the up keep of our road, this should include bikes which should also have insurance and a reg number if on the road.Bike do cause accidents as well as cars and should be able to claim if it is the bikes faultDe Sisti on 10 February 2022
Motor bikes have all of that.
william hutchison on 8 February 2022
The charge per mile is not realistic. Apart from it being technically bypassed. It cannot be applied to current used vehicles Just think how much it is going to cost to set up and maintain ah highly paid department to operate it. . Simple answer a flat rate annual charge for all cars. They all use the roads. It would reduce the number of overstaffed employees at the DVLA..Just william
jchinuk on 8 February 2022
Of course, it's realistic, new cars (EVs) get the "pay as you go" system,Old relics using petrol & diesel get gradually increasing VED rates, forcing them off the roads.
A flat rate is unfair and regressive, someone who commutes on the train and only uses their car at weekends should not pay the same as someone who commutes 100 miles each day in their car.
David Cleverley on 8 February 2022
Why not tax an EV on its brake horse power, ie, a flat 500-e Action 24KWh is 92 bhp in a lower tax band compared to a Tesla Modal 3 Long Range AWD 340 bhp, this will be in an hire road tax band, and including how many electric motors a car will have from 1 up to 4 motors.jchinuk on 8 February 2022
The survey results show the problems with surveys,One in five (19%) favour the introduction of a pay-per-mile system of road charging.
Research by the RAC also found drivers broadly support the principle of ‘the more you drive, the more tax you should pay’, with nearly half (45 per cent) saying a ‘pay per mile’ system would be fairer than the current regime.
It depends on how the question is asked.
A "pay-as-you-go" system seems fairer, especially if the costs were bumped up in rush hours and lowered at off-peak times.
hissingsid on 8 February 2022
I am no fan of EV's but they are the future, because government policy will force that future upon us whether we like it or not.When production of petrol and diesel cars ceases, their numbers will gradually dwindle and petrol stations will dwindle with them, making it increasingly difficult to refuel. All part of the strategy to force them off the road. Forecourts will become the new charging stations.
Of course EV drivers should pay their share of the tax burden. Any new motoring tax regime should be about maintaining the roads which we all use, but governments have a long history of diverting the proceeds to whatever else is politically expedient.
Rob Pollock on 8 February 2022
I think everyone's missing the point here, imho. Just about every single person in the country benefits from the road network in one way or another, be it deliveries to the home, goods to the shops, a lift off a mate or kids too young to drive.For decades the governments have collected money from motorists, and used us as a cash-cow that never complains or rebels against more and more restrictions and taxes heaped upon us. They collect far more than they spend on the roads from us in fuel, road and car taxation, and eke out measly amounts to the councils to repair pot holes so we're forever dealing with poor road surfaces. And yet when they mutter something about changing taxation we all start cutting each other's throats and saying he or she should pay more etc. etc.
If they need a particular amount to run the country, they should tax everyone based on that figure, not use the 30-odd million of us who drive or have to drive, as a convenient source of money to swell the chancellors budget.
Graham Tucker on 8 February 2022
We are an easy target.
4caster on 8 February 2022
Battery manufacturers charge around $130 or £100 per KwH of storage. So the 90 KwH battery even in a Tesla model S or E, or a Jaguar iPace, only costs about £9,000 to make. Lower capacity batteries in cheaper cars will be less. That will reduce over the next few years due to competition between manufacturers and lower-cost mass-production techniques. Presently Tesla and Mitsubishi are the biggest makers of vehicle batteries.
4caster on 8 February 2022
Battery manufacturers charge around $130 or £100 per KwH of storage. So the 90 KwH battery even in a Tesla model S or E, or a Jaguar iPace, only costs about £9,000 to make. Lower capacity batteries in cheaper cars will be less. That will reduce over the next few years due to competition between manufacturers and lower-cost mass-production techniques. Presently Tesla and Mitsubishi are the biggest makers of vehicle batteries.
4caster on 8 February 2022
It isn't cars and light vans that cause road surfaces to wear out and potholes to form; it is the heavy goods vehicles.VED should be scrapped and the revenue recovered by an increase in fuel excise duty. That would charge drivers
a) in proportion to the miles they travel
b) in proportion to the pollution they cause,
c) in proportion to the fuel economy of vehicles, and
d) in proportion to wasteful driving techniques such as high speeds, acceleration and heavy braking.
Importing lorries should be charged excise duty on the fuel in their tanks above a small minimum, like Singapore charges drivers when they arrive from Malaysia, where fuel duties are lower.
Leave EVs untaxed until they form the majority of vehicles on the road.
Sorry about the triplicate entries above. They appeared in the wrong place, and apparently I can't delete the incorrect ones.
Graham Tucker on 8 February 2022
This isn’t about funding roads. It’s about diverting cash raised from drivers to other government expenditure programs. Road users already pay for road construction and maintenance costs many times over.
hissingsid on 8 February 2022
If all you do is fiddle around with fuel duty whilst leaving EV's untaxed until they form the majority of vehicles on the road, the predicted fiscal black hole which was the original subject of this article will soon become a reality.Graham Tucker on 8 February 2022
I suspect motorists will come to regret their support for road pricing. It will be used to severely curtail their mobility.Oldboy on 8 February 2022
“Fair and Reasonable” don’t actually figure at allRoad fuel duty collects vastly more than HMG spend on our roads, & VED is a much smaller tax raiser
Motorists have been a Cash-Cow for decades, so merely charging Motorists for their costs of road use won’t anywhere near replace the likely losses from Fuel duty.
Charging motorists for their actual road use is hardly a logical basis for the general fund raising levied from motorists.
AQ on 8 February 2022
If there is a simple approach or a complicated one, take a guess as to which the UK government will choose. A huge chunk of the revenue will be spent on administering the system. Before EVs, we had the option of a fair system by abolishing VED and using fuel duty as the sole revenue source - the more you drive, the more you pay and the bigger the car or engine, the more you pay. However they did not seize that opportunity for a simple system and nor will they adopt any straightforward system in future. They will employ expensive consultants, who will be financially linked to the politicians who engage them and they will adopt a hair brained system that we will be cursing for ever.on 12 February 2022
A new technology solution will not work for 2 reasons:1. Civil Servants and their Industry Partners have a history of being unable to deliver computer solutions on time and within cost. A technology solution will take forever to be developed, delivered and probably cost more than the tax it will raise.
2. Relying on technology is a very bad thing. Anything than causes a loss of electricity will invalidate it use and we are already on the brink of power outages as the current energy sources for the UK are at their limit with more requirements for increased usage - Air Source Heat Pumps for homes use a very large amount of electricity to work; we have already seen France use electricity transmission to the UK as a political means of disadvantaging the UK as the existing and planned Wind Turbine / Solar Power output is not sufficient to supply UK needs in the near future - and as the importing of electricity will become more expensive as oil and gas powered electricity power plants are turned off - the UK Green Energy Plan.
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