Pay-per-mile road tax proposed by government to reflect shift to electric

Date Posted 4th February 2022
Read Time 3 min read

Zero emission vehicles shouldn’t mean zero tax revenue, says Transport Committee.

The Transport Select Committee has proposed a road pricing system based on miles travelled and vehicle type to replace the current vehicle excise duty (commonly referred to as road tax).

The proposal would enable the government to maintain the existing link between motoring taxation and road usage, with the report recommending the use of telematics (or black box) technology to track when, where and how far you drive similar to that offered by insurance providers.

The report further recommends variable costing, with drivers charged more to travel in rush hour and in typically busy areas.

£35billion blackhole in road tax revenue without action

The committee states that the ban on the sale of new petrol and diesel vehicles from 2030 will result in a corresponding decline in two significant sources of Treasury revenue.

As sales of electric vehicles increase, Treasury revenue from motoring taxation will decrease by nearly £35billion because neither fuel duty nor vehicle excise duty are currently levied on electric vehicles. Without reform, policies to deliver net zero emissions by 2050 will result in zero revenue for the government from motoring taxation.

Pay-per-mile road tax recommendations in full

When replacing the existing motoring taxes, the committee has called on the government to ensure that the new charging mechanism:

  • entirely replaces fuel duty and vehicle excise duty rather than being added;
  • is revenue neutral with most motorists paying the same or less than they do currently;
  • 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.

In signalling a shift to an alternative road charging mechanism, the report calls for drivers of electric vehicles to pay to maintain and use the roads which they drive on, as is currently the case for petrol and diesel drivers. They have, however, called for incentives for motorists to purchase vehicles with cleaner emissions to remain.

Industry response to recommendations

The BVRLA has welcomed the Transport Select Committee’s call, with BVRLA Director of Corporate Affairs, Toby Poston, saying: “Road pricing involves a total rethink about the way we tax motorists and incentivise transport behaviour. It is a controversial topic, and one that successive Governments have chosen to avoid.

“BVRLA members have set out their road pricing principles, and we are delighted that the Transport Select Committee agrees with so many of them, particularly the need to make any system revenue neutral and think about the needs of essential road users.”

The full report can be read here. The government has two months to respond to the proposals.