Will electronic road pricing replace car tax in the UK?

As the revenue from Vehicle Excise duty dwindles and electric cars become more numerous, the government has been eyeing up new ways to impose taxes on motorists.

Members of the parliamentary Transport Select Committee say that under the current UK car tax system (fuel duty and car road tax), zero emission vehicles mean near zero tax take to pay for roads, schools and hospitals, so the committee has come out in favour of a nationwide road pricing scheme. This would see the sort of toll road technology used to run London’s congestion charge rolled out nationally on a massive scale.

The committee also gave the government a kicking for appearing not to have a definite plan to replace the current UK road tax arrangements.

Toll road technology used to run London’s congestion charge would be rolled out nationally

‘A road pricing system, based on miles travelled and vehicle type, would enable the Government to maintain the existing link between motoring taxation and road usage,‘ reckoned the committee, which has put out a report titled, with spectacular originality, ‘Road Pricing,’ and warned that ‘it has not seen a viable alternative to a road charging system based on technology which measures road use.

’With new diesel and petrol car sales ending in eight years the clock is ticking on the current road tax system.“Ultimately the Treasury could lose about £35bn,” said AA president Edmund King.

“So, the Government needs to do something, but the options are quite difficult.”Rod McKenzie, executive director of policy and public affairs at the RHA Road Haulage Association, thinks Transport Minister and Tesla owner Grant Shapps should do something else other than road pricing.

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“Our basic position is that we don’t want an extra tax burden. We appreciate that the world and road use are changing, but we would propose a simple, national system for road tax with no exemption for electric (cars) and a ‘fuel duty’ for the electricity used,” he said. McKenzie thinks road pricing based on distance, time and location would penalise truck, coach and van drivers. His reckons what would be a fair road pricing charge for a holidaying car owner on a one off trip from London to Wales, would be a financial drag on a truck covering the same ground to earn a living. However, some people see ways round this.“Potentially, HGV drivers and key workers could be taxed at lower rates than average drivers,” said Nicholas Lyes, the RAC’s head of roads policy, who pointed out that some business drivers get VAT fuel rebates. He added that the government “needs to get the discussion started on this soon.

”It appears that minsters are still in the foothills of making a decision about road pricing. When the Government announced plans to help fund 300,000 charging posts, Shapps acknowledged on Radio 4’s Today programme that the existing UK road tax regime was unsustainable, but suggested that the Treasury would make the final decision about its replacement.

Commercial drivers and key works could be charged less

The AA’s Edmund King agrees that civil service minds are finally turning to the problem of road pricing and car tax, and thinks in a world of pay-as-you-go phones and streaming services, road pricing will be an easier sell than it once was, but there’s a perception problem.

“When we survey drivers and ask if they accept the principle of pay-as-you-go the majority thing it’s fairer. Ask if they trust the Government to administer this and 86 per cent say no,” said King, citing things like broken promises on London and Dartford crossing road tolls and congestion charges. He thinks these have caused mistrust.

Caterina Brandmayr, head of climate policy for the Green Alliance think tank, suggests that the Government is making a mistake in not having ‘an honest conversation’ about car tax “to avoid a knee jerk reaction to a sudden change.

”Edmund King said that this ‘would require a degree of bravery,’ and wondered whether with a general election about two years away announcing potentially controversial road pricing plans would be at the wrong end of the parliamentary cycle for the government. “When he was London mayor, Ken Livingstone introduced the congestion charge at the start of his term,” said King.

Road pricing does have its fans. Environmental pressure group Friends of the Earth thinks it could reduce car usage to cut carbon and other airborne emissions. It reckons only about a third of carbon vehicle emissions are generated in urban areas, so it’s in favour of a nationwide distance-based road pricing scheme, and would like to see this introduced quickly on Highways England controlled motorways and A roads, claiming that if the charge was as little as 6p/km, motorway usage could decrease by a quarter. Are there alternatives to road pricing, such as a tax rake off taken directly from electric vehicle chargers, once these cars become really commonplace? “That would be complicated, said Edmund King. ‘For instance, home chargers just link into the existing electric systems.”

Taxing electricity used through home chargers is possible, but complicated

He suggested an insurance-based mileage levy as another possibility, with rebates if drivers cover less miles than they’d paid for. “In theory everyone should have motor insurance so the Government could build it into that,” said King.

He pointed out that successive governments have looked at road pricing as a car tax alternative and then done nothing about it as far back as 1962, when transport planner Rueben Smeed produced a report on its feasibility.

A couple of years back King and his economist wife Diedre co-authored a report called ‘Road Miles,’ which proposed road pricing with sweeteners. “Almost to soften the blow, everyone gets 3,000 miles free, 4,000 miles for rural areas and small payments thereafter. It would be easier to introduce, and this could be done progressively as people switch from petrol and diesel cars. Those doing low mileages wouldn’t pay, and it could be run by an independent body,” said King.Caterina Brandmayr of the Green Alliance said road pricing ought not to be seen as ‘a silver bullet,’ and should be considered alongside and integrated with things like planning and public transport improvements.

The RAC’s Nicholas Lyes thinks the adoption of road pricing is inevitable, in part because it shares with fuel duty the implied fairness that the more miles driven the more tax is paid. He suggests that getting the IT side right would also be important in PR terms (and given other public IT scheme failures a tall order).

“Road pricing has to be a replacement for existing systems. Anything else would be seen as a stealthy way to raises taxes on drivers, and lose support,” he said. Lyes added that a road pricing system with multiple different tariff rates, perhaps with higher peak time charges on motorways, might not go down well either. He said that drivers would need to feel the incoming charges weren’t costlier.

Whether we’ll get a progressive road pricing system or last minute legal hash remains to be seen. Either way, how we pay for our motoring will change forever.