Driving an electric car could become more expensive, with a group of MPs calling for the UK to introduce a new road tax that charges motorists based on the number of miles they travel and the type of vehicle they drive.
The House of Commons Transport Select Committee says that the new charge should replace vehicle excise duty (VED) and fuel duty on petrol and diesel, which bring in a combined £35 billion for the Treasury. Because electric car drivers do not pay either charge, the committee has warned of a funding “black hole” due to the UK’s commitment to banning the sale of all non-zero emission new cars and bans by 2035.
The committee believes that the only realistic option is to replace fuel duty and VED with a road tax that uses telematics technology to charge motorists per mile they travel. It could potentially also be used to reduce congestion by charging more to drive in certain areas and at certain times of day.
Any switch to road charging would increase the cost of running an electric car, which could slow efforts to encourage people to switch to zero emission vehicles. The lack of fuel duty and VED charges are intended to help offset the current higher cost of EVs.
Committee calls for ‘honest conversation’
Huw Merriman MP, the chair of the Transport Committee, said it was “time for an honest conversation on motoring taxes.” The report notes that the government needs to be clear to anyone buying an EV that they will eventually be required to pay for road usage.
While the £7bn in VED income is earmarked for investment in roads, the £28 of fuel duty income goes to fund public services and represents around four per cent of tax income. Merriman said: “Schools and hospitals could be impacted if motorists don’t continue to pay.”
Explaining the road pricing scheme, he said: “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. Just like our current motoring taxes but, by using price as a level, we can offer better prices at less congested times and have technology compare these directly to public transport alternatives.”
He insisted that “road pricing should not cost motorists more, overall, or undermine progress on active travel.”
How a road tax could work
The road tax scheme represented by the Transport Committee would entirely replace fuel duty and VED, and the committee has also said it should replace any schemes introduced by individual cities or regions - such as the London congestion charge or its own planned road charging scheme.
The scheme would also have to account for ’societal fairness’, potentially providing an annual allowance of free miles or other measures to support vulnerable groups, those with mobility issues or people who reside in remote areas.
The committee says that there would be security measures put in place to protect drivers’ privacy from the data collected, and also highlighted that research would need to be done on whether having telematic technology logging vehicle use could change drivers’ behaviour.
When will this happen and what could it cost?
That would be up to the Department for Transport and Treasury to decide. The Transport Committee has called on then to establish a new body to consider the issue and formal recommend an alternative mechanism by the end of 2022.
The committee is also clear that any road tax scheme must be ‘revenue neutral’ for the government, which means it would not collect more than the £35 billion currently received from VED and fuel duty.
Of course, with EV drivers currently exempt from both charges their motoring costs will inevitable rise under such a scheme. At this point in time, though, it’s impossible to really gauge by how much. The suggestion by the committee that the rate could vary depending on the type of vehicle used does leave open the possibility of a lower initial rate for zero emission vehicles.
Move Electric's viewpoint - by James Attwood
The prospect of a road tax scheme will increase the cost of motoring for electric vehicle owners, which certainly isn't welcome news. But it's hard be too upset by calls for something that has long felt inevitable.
The government currently nets £28 billion from fuel duty, and it isn't going to do without that once everyone switches to EVs. It will eventually have to find a way to make up that revenue elsewhere.
What's frustrating is that the government has routinely promoted the lower running cost of EVs as a selling point for them - so the suggestion that the cost of electric motoring could rise through taxation could undermine that message. That means it's vital the government clearly lays out a plan so that EV drivers know what they'll be paying in the future as quickly as possible.
The debate really is whether pay-per-mile road charging is the right way forward - or if there is any other realistic option. That's going to be impossible to know until the government lays out a full plan for any road tax, and motorists can work out what it will cost them. As the Transport Committee suggests, the government needs to do that soon.
While the price of electric cars are coming down, they remain more expensive than petrol versions - especially since the government recently reduced the Plug-In Car Grant offered for each vehicle. At present, lower running costs are a key attraction for many switching to EVs, and they will feel hard done by if they are suddenly hit with new charges at short notice.
If the government isn't clear about what is coming, people will be less likely to switch for fear of being hit with future charges.
It's also important to remember that lower running costs aren't the only reason people are increasingly switching to EVs: they are great to drive, have benefits for the environment and can be cheaper to service and run.
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