Government looks to road pricing to replace fuel duty as electric vehicle sales rise
25 October 2018

The government is forecast to collect £28.3 billion in fuel duty this financial year, and yet those who drive pure-electric vehicles will contribute precisely zero to that figure. So what will happen when we’re all humming about in electric vehicles?

Such a future now looks inevitable, with impending bans on the sale of petrol and diesel vehicles, cities plotting access restrictions for non-electrified vehicles and the EU rapidly imposing reductions on the fleet-average CO2 figures of manufacturers for new cars sold.

All this means that by 2025 more than one in 10 car sales across Europe will be purely electric, analyst firm LMC believes, even if those sales in the UK are currently skewed more towards plug-in hybrids than pure EVs.

Top 10 best electric hatchbacks 2018

The think tank Policy Exchange estimated last year that the government could lose up to £170bn by 2030 by allowing electric cars to slip through the duty net. It stands by the figure today.

“If anything, the case for reform has accelerated because of the increased uptake of plug-ins,” said Josh Burke, a senior fellow at Policy Exchange’s environmental unit.

So what is the plan? And will those of us planning to hold on to petrol or diesel cars for as long as possible be affected? The government is laying very low on the subject. “It’s almost as if no one is addressing this issue,” said Edmund King, president of the AA. “We know that duty is going to disappear, but no one is facing up to it.”

A couple of pieces of evidence show the government is moving silently in the background. One was buried at the bottom of a web page run by government financial forecasters the Office for Budget Responsibility, which mentioned this year that it had agreed with the tax office to “investigate the potential impact of compositional changes in the vehicle stock and its implications for trends in fuel efficiency”. And the second from Burke, who told us that a Treasury official mentioned to him at a recent gathering that the government was looking at alternatives, including the dreaded words: road pricing.

Our Verdict

Tesla Model 3 2018 road test review hero front

Lowest-price, largest-volume Tesla yet has wooed the buying public in the US. Should UK buyers join the queue for a Model 3?

Find an Autocar car review

Driven this week

Everyone we spoke to agrees that fuel duty is on its way out. “It will disappear, it’s inevitable,” said Phil Summerton, managing director of think tank Cambridge Econometrics.

Pretty much everyone we spoke to also agrees that taxing electricity as a fuel is a non-starter. “It would be incredibly difficult to replicate in electric cars,” Summerton said. “If people felt they were taxed on electric for their car but not their house, they would take out smart meters pretty quickly.”

Which leaves road pricing. “Given that mileage is already recorded for MOT purposes, it seems entirely logical,” said Tom Callow, director of strategy at electric charging firm Chargemaster. It also works on the same principle as fuel duty: drive fewer miles, pay less duty. The problem with road pricing is that it has traditionally proven to be incredibly unpopular. Fuel duty is unpopular enough, which is partly why the government has frozen it at 57.95 pence per litre (plus the VAT on the pre-tax price, plus the VAT on the fuel duty itself) every year since 2011. The Conservatives flirted with road tolls under David Cameron but dropped the idea after driver opposition. Now the government has no choice but to revisit, but the approach needs to be smarter, King argues. “Road pricing gets described as a poll tax on wheels. It’s political suicide,” he said.

King and his wife, economist Deirdre King, were shortlisted for the prestigious Wolfson Economics Prize last year for their proposal entitled Road Miles. Essentially under the King scheme, drivers are awarded a ‘free’ 3000 miles per year and they pay above that amount. Drivers in rural areas get more miles, as do drivers of lower-emission cars such as EVs. It’s more friendly in that it appears to give you something, rather than restricting freedoms. It’s introduced gradually, rather than straight away, with fuel tax phased out at the same time.

Whether King’s idea or another scheme is adopted, it seems certain mileage would either be tracked via a device attached to your car’s diagnostics port, similar to an insurance black box, or recorded at MOT time for older cars (necessitating a much tougher approach to clocking).

Many won’t overcome their dislike of road pricing but it will look a whole lot fairer when EV-driving neighbours to your left and right are among 20 households on your street niftily avoiding what is, for the rest of us, the largest motoring tax we’re subjected to.

Nick Gibbs

Read more

Lexus boss on EVs, autonomy and radical design

Free recovery for Renault EVs

Top 10 best electric hatchbacks 2018

Join the debate

Comments
24

25 October 2018

In the end it'll be just as expensive to run. The words why and bother spring to mind.

25 October 2018
Cobnapint wrote:

In the end it'll be just as expensive to run. The words why and bother spring to mind.

Those little things called climate change and pollution, you may have heard of them.

XXXX just went POP.

25 October 2018

Why does every article and anti-EV person assume that EVERYONE will have an EV in the not to distant future.  Oh forgot to mention the savings the NHS will make by not treating so many cancer suffers etc. thus lowering taxes.

To the people who say otherwise the only argument will be, best get in their quick to maximise the saving.

typos1 - Just can’t respect opinion

25 October 2018
xxxx wrote:

Why does every article and anti-EV person assume that EVERYONE will have an EV in the not to distant future.  Oh forgot to mention the savings the NHS will make by not treating so many cancer suffers etc. thus lowering taxes.

To the people who say otherwise the only argument will be, best get in their quick to maximise the saving.

This post makes no sense and has no relevance to the article.

XXXX just went POP.

FMS

28 October 2018
typos1 wrote:

xxxx wrote:

Why does every article and anti-EV person assume that EVERYONE will have an EV in the not to distant future.  Oh forgot to mention the savings the NHS will make by not treating so many cancer suffers etc. thus lowering taxes.

To the people who say otherwise the only argument will be, best get in their quick to maximise the saving.

This post makes no sense and has no relevance to the article.

 

Indeed, but who could resist calling it out on yet another idiotic post. It is a TwIT, and nothing can be done.

25 October 2018

The problem with all the penalisation of non electric cars through congestion and ulev zones is that it punishes those who cant afford the latest eco tax friendly offerings, it took us as a family about 8-10 years before we could afford a low tax family car, ie below £30 rfl, since its introduction, everything else we had was at least the band above which went up £5/yr, there are many who buy older cars as a matter of necessity who will find themselves even more restricted. The gift of a tax free 3000 miles still wont allow you into a town centre to work if you cant afford to drive the correct car.

25 October 2018
You can buy a Nissan leaf for sub £7000. This exempts you from the London congestion charge and the upcoming T charge for more polluting vehicles. So if you currently have a really old polluting car you can buy one and pay for it with around 220 trips into central London. So it would pay for itself in under a year.

Sure it is not the best EV but if you actually do the maths then it is the cheapest driving in central London possible.

It is also not that expensive. If you cannot afford the £7000 in cash or loan then you almost certainly cannot afford to pay the current congestion charge or park your car anywhere in central London.

18 November 2018
Sweet blog! I found it while searching on Yahoo News. Do you have any tips on how to get listed in Yahoo News? I’ve been trying for a while but I never seem to get there! Thanks Jewelry Financing

25 October 2018

As a side issue I hope Autocar will report on Tesla's biggest every reported Quarter PROFIT. Back to story.

typos1 - Just can’t respect opinion

25 October 2018

Why is there an automatic presumption that the motorist is responsible for such a large slice of the Tax Take?

Twice I have asked an MP the question “Why do I pay a higher rate of tax on going by car to visit my wife in hospital than Bankers pay on their Bonuses?” Still haven’t had a reply though. 

Surely this is the time when the unfair tax rating against motoring (as against other forms of activity) should stop?

Pages

Add your comment

Log in or register to post comments

Find an Autocar car review

Driven this week