Government considers road pricing to cover EV tax shortfall

The Times has reported that the UK government is planning a road tax to cover EV shortfall. With many EVs being exempt from vehicle excise duty (VED) — what many call ‘road tax’ — the government is rumoured to be looking for a way to make up that shortfall. Bringing the ban on petrol and diesel cars forward to 2030 is going to accelerate the use of vehicles that don’t pay any VED, which could lead to a £40billion shortfall for the government.

The long-rumoured road pricing scheme is likely to be officially announced alongside the 2030 ban. Though, it’s unlikely any new tax will be imminent.

This isn’t the first we’ve heard of road pricing. In October 2019, the idea was presented by the cross-party House of Commons Transport Select Committee in order to start a national debate over the idea of pay-per-mile road pricing schemes. Even before last year, the Labour government considered this 13 years ago but ultimately dropped the idea over fears of public backlash.

At the moment, not having to pay tax on an electric car is a big incentive and while we’ve no doubt got many tax-free years ahead of us, once wider-scale adoption of EVs happens, the government will need to respond.

There’s no real concrete information on how this road pricing scheme could work but it could be similar to how we already use toll roads such as the M6 in the West Midlands. Currently, all vehicles have to pay a fee to use the road. As cities become increasingly more pedestrian-friendly, it could be that congestion charges are applied to all vehicles to discourage city use. Many also suggest there could be a pay-per-mile scheme for vehicles to ensure those who use the road more pay more.

Commenting on the report on the Autocar website, RAC head of roads policy Nicholas Lyes said: "While not paying car tax is clearly an incentive to go fully electric at the moment, we will very soon need a system that can levy tax on both conventionally fuelled and battery electric vehicles fairly. 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."

RAC research shows around four-in-10 drivers believe that a pay-per mile system would be fairer than the current system of tax, while half (49%) agree that the more miles a driver covers, the more they should pay in tax.

Jess Shanahan

Author:Jess Shanahan
Date Updated:17th Nov 2020

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