Road pricing back on the agenda to replace loss of fuel and vehicle excise duty due to electric vehicles?

[ainsworth74]

I think this has cropped up a few times in various threads over the years but from Sky News this morning:

Rishi Sunak eyes 'pay-by-the-mile' road pricing scheme ahead of £40bn tax threat from electric vehicle drive - report

The idea of "pay-by-the-mile" is back again as the Treasury seeks a way to gradually replace taxes lost through weaker fuel sales.

The idea of a national road pricing scheme has reportedly been revived by the chancellor as the green car revolution applies brakes to £40bn of annual tax revenue.

The Treasury, according to The Times, is exploring ways in which Rishi Sunak can replace lost fuel duty and vehicle excise duty (VED) - known more widely as car tax - as the shift to electric vehicles gathers pace.

Ideas for such a move include a road toll system or "pay-as-you-drive" - a concept last explored by Tony Blair's government in 2007 but abandoned due to opposition from motorists.

The newspaper reported that the chancellor was "very interested" in the idea of a road pricing scheme as ministers accelerate plans to ban the sale of new petrol and diesel vehicles.

The Financial Times has reported that the current 2035 deadline is to be brought forward to 2030 to help reach the government's target of net-zero carbon emissions by 2050.

According to the Institute for Fiscal Studies, fuel duty - frozen since 2011 - brings in around £28bn in a typical year with the balance coming from VAT on fuel sales and VED.

That £40bn tax take is threatened by the environmental goals - hence the drive to find an alternative route for road-related charges.

Because of coronavirus disruption, the year 2020 is not proving a great guide for electric vehicle demand.

But the most recent figures from the Society for Motor Manufacturers and Traders (SMMT) show that almost 76,000 battery electric vehicles have been driven from showrooms in the year to date.

In comparison, more than a million petrol and diesel-powered cars have been sold.

However, the figures do indicate a shift in behaviour as the range of electric models on offer is expanded.

The SMMT stats show a 168% increase in electric sales, while diesel is down more than 50%.

It is a 39% drop in petrol vehicles in the year to date.

The AA has acknowledged that the current roads tax regime poses a threat to the chancellor's income - at a time when Mr Sunak is already under pressure to pay for record peacetime borrowing demanded by the COVID-19 crisis.

The motoring organisation's president, Edmund King, said: "The government can't afford to lose £40bn from fuel duty and car tax when the electric revolution arrives.

"It is always assumed that Road Pricing would be the solution but that has been raised every five years since 1964 and is still perceived by most as a 'poll tax on wheels'."

The AA has supported the idea of an allowance for motorists - with any mile over 3,000 per year being subject to charges and greater freedoms for those in rural areas where there is less public transport.

The Treasury, and Mr Sunak himself, have refused to comment.

Rishi Sunak eyes 'pay-by-the-mile' road pricing scheme ahead of £40bn tax threat from electric vehicle drive - report

The idea of "pay-by-the-mile" is back again as the Treasury seeks a way to gradually replace taxes lost through weaker fuel sales.

news.sky.com

Considering that a move to electric vehicles will, no doubt, over the coming decade or so begin to seriously eat into that £40bn of revenue it is clear something has to be done to plug the hole in public finances left by it (£40bn is roughly what was spend on defence each year for instance). I suppose, personally, it won't really effect me that much as my annual mileage is only around 6,000 miles so it would have to be a very hefty charge to leave me worse of than paying through nose to fill up with petrol every week or so. The ONS reported in 2016 that:

The cost of a litre of fuel – where the money goes​

The price of fuel can be divided into three sections the cost of the fuel itself (which is made up of the wholesale price, the cost of distributing the fuel and fuel companies’ profit margins); fuel duty (which is charged at a fixed rate of 57.95 pence per litre); and VAT. VAT is charged at 20% of the wholesale price plus the duty, which equates to 16.7% of the final price.

Under normal market conditions, only a fraction of the cost of a litre of petrol ends up in the coffers of fuel retailers. For petrol, at its current average price of £1.04 per litre, just over 72% of the price will go to the exchequer in fuel duty and in Value Added Tax (VAT), leaving only around 28% of ‘wriggle room’ for cutting the price to consumers when the price of crude oil falls.

It seems unlikely, to me, that the price per mile will be anywhere near the sort of figures that currently make up the Government's take from a litre of petrol!

I also thought the idea raised by the AA of having an allowance of x,000 miles per year was quite an interesting one as that would probably go a long way to protecting people who are most likely to be significantly disadvantaged by such a compared to paying for it all through petrol and especially those who do live in rural areas (though I can imagine there will be a hell of bunfight over who counts as "rural").

Anyone have any thoughts of their own on this topic?

 

[radamfi]

Britain is far from unique in having this issue, so what are other countries doing to solve this potential loss of revenue?

 

[GRALISTAIR]

I am all for road pricing. It seems the fairest way to me. Long distance use the train and shorter distance electric car and pay by mile.

 

[alex17595]

I think this would be political suicide for the Tories. Too many people on lower wages rely on the car to get to work and in most of the country public transport is useless.

I think this is another one of those 'leak it to the media to gauge the reaction' leak.

 

[trebor79]

Needs thinking about carefully. For example, I'd want to see home deliveries subject to road pricing. Otherwise you just encourage fewer shopping trips and more people ordering online from the likes of Amazon, further reducing the tax take.

I'd also band the tax. So someone driving an £80k Tesla Model S pays more per mile than someone driving a £20k less premium model, for example. This sort of replicates the current situation with fuel duty where someone driving a thirsty Bentley Continental will pay more duty per mile than me in my Peugeot 208.
Should hydrogen or (bio)CNG fuelled vehicles be taxed at a lower rate than pure electric, recognising the lower environmental cost of manufacturing such vehicles?

In general I'm in favour though.

 

[GB]

I am all for road pricing. It seems the fairest way to me. Long distance use the train and shorter distance electric car and pay by mile.

Or...make electric vehicles pay a portion of VED and get rid of the 0% bracket.

 

[ainsworth74]

I think this would be political suicide for the Tories. Too many people on lower wages rely on the car to get to work and in most of the country public transport is useless.

I think this is another one of those 'leak it to the media to gauge the reaction' leak.

Something's going to have to change though. That £40bn black hole won't fill itself and the march of electric vehicles isn't going stop!

Needs thinking about carefully. For example, I'd want to see home deliveries subject to road pricing. Otherwise you just encourage fewer shopping trips and more people ordering online from the likes of Amazon, further reducing the tax take.

I'd also band the tax. So someone driving an £80k Tesla Model S pays more per mile than someone driving a £20k less premium model, for example. This sort of replicates the current situation with fuel duty where someone driving a thirsty Bentley Continental will pay more duty per mile than me in my Peugeot 208.
Should hydrogen or (bio)CNG fuelled vehicles be taxed at a lower rate than pure electric, recognising the lower environmental cost of manufacturing such vehicles?

In general I'm in favour though.

Banding it seems sensible. As you say we already do after a fashion (though it's somewhat crude at the moment!) so it would seem logical to continue such a thing. You're also quite right that home deliveries and others would have to be subject to the same scheme!

Or...make electric vehicles pay a portion of VED and get rid of the 0% bracket.

You'd have to jack up VED to eye watering levels on all vehicles to make up the loss in revenue though! Office of National Statistics figures (see here and here) suggest that VED was worth around £7bn in 2019 so you'll still need to find a further £33bn to make up the expected shortfall.

 

[GB]

True, but it would be a start.

 

[py_megapixel]

Sounds like a reasonable idea to me - as long as it applies to conventional cars as well as electric. Otherwise, you end up incentivising people not to go electric, which is daft.

 

[alex17595]

HGVs are also heavily subsidised, an 18 ton 2 axle rigid truck only has a VED of £300/year. Theres a quite a few cars that cost more than that to tax, and and additional £400/yr for cars over £40k.

What they really need is a way to tax electric car charging - perhaps a 'grid tax' for the use of fast chargers outside of the home. Ideally they could get the funding from other sources i.e company who don't pay tax.

 

[Bletchleyite]

Why tax the use of chargers when a road pricing scheme can be much more effective?

 

[gordonthemoron]

Has this been incorporated into 'SMART' motorways?

 

[py_megapixel]

Why tax the use of chargers when a road pricing scheme can be much more effective?

True. A charger tax simply wouldn't be effective because people would plan their days around charging at home. And I don't think anyone is seriously suggesting that home electrical usage should be charged differently depending on what it's used for...

It seems that the industry is betting on overnight charging at home - with chargers suitable for this even being installed free or at low cost with EV purchases from some manufacturers - rather than replicating the traditional refuelling experience with electricity.

 

[Bletchleyite]

True. A charger tax simply wouldn't be effective because people would plan their days around charging at home. And I don't think anyone is seriously suggesting that home electrical usage should be charged differently depending on what it's used for...

It seems that the industry is betting on overnight charging at home - with chargers suitable for this even being installed free or at low cost with EV purchases from some manufacturers - rather than replicating the traditional refuelling experience with electricity.

And the advantage of road pricing is that you can set different rates for different locations/times, incorporate bridge tolls etc. For instance, why charge the earth to a rural farmer who has no bus service? But if someone is driving into a large city in the rush hour along the route of a railway, why not penalise them heavily? And why not consider a lower rate for e.g. a disabled driver?

 

[alex17595]

The question is how are they going to police it, how much will they charge and would existing taxes be removed?

There's alot of rumours floating about on the internet to do with mandatory black boxes and charges of £1/mile.

The House of commons have a document on Road pricing from August 2020 (Download)

 

[AM9]

... Banding it seems sensible. As you say we already do after a fashion (though it's somewhat crude at the moment!) so it would seem logical to continue such a thing. You're also quite right that home deliveries and others would have to be subject to the same scheme! ...

Road use charges represents by far the fairest method. If a person doesn't use the vehicle on the road, - no charge. The actual charge should be subject to a multiplier based on characteristics of the vehicle, such as:
its impact on road maintenance with factors such as the weight of the vehicle and it's performance *
the level of pollution that the vehicle puts directly into the environment

* greater performance encourages greater acceleration, cornering and braking forces

... You'd have to jack up VED to eye watering levels on all vehicles to make up the loss in revenue though! Office of National Statistics figures (see here and here) suggest that VED was worth around £7bn in 2019 so you'll still need to find a further £33bn to make up the expected shortfall.

VED should be levied as an initial registration charge based on the class of vehicle, with a nominal contribution towards maintaining the registration plus an annual cost of a vehicle test once the vehicle is over three years old. For those that wish to own higher priced vehicles, the car purchase tax can be adjusted to create the necessary revenue. But as has been said above, the majority of what is now about £40bn would come from the cost per km that the car actually traverses which is modified by time of day, day of the week and of course location. Certain classes of vehicles where there was a benefit of them using congested roads, e.g. buses and some taxis could have a reduction for those journeys.

 

[Domh245]

Road use charges represents by far the fairest method. If a person doesn't use the vehicle on the road, - no charge. The actual charge should be subject to a multiplier based on characteristics of the vehicle, such as:
its impact on road maintenance with factors such as the weight of the vehicle and it's performance *
the level of pollution that the vehicle puts directly into the environment

* greater performance encourages greater acceleration, cornering and braking forces

Surely, if we go down the invasive data-gathering/black box route (which I'd much rather we didn't - I'd prefer an ANPR system over compulsory black box, but knowing this countries tendency to snoop) you might as well actually determine acceleration/cornering/braking forces through accelerometers rather than arbitrarily applying a multiplier based on peak engine power. As an example, I went from driving a Vauxhall Meriva to a Mini Cooper S, with double the engine power & torque, and much more sporty handling, yet have driven it far more sensibly than I ever did the Meriva. Under your performance multiplier system, I'd be charged more per mile in the mini than the meriva, despite the fact it's driven more sensibly and has lower emissions simply because the meriva is a bland pensioners grocery getter and the mini is more of a hot hatch.

 

[JonathanH]

To discourage use of the car for short journeys, it would seem appropriate to have a fixed charge to use the car on any given day and then a per mile charge with the charges scaled to be higher for urban driving (or congested areas). A higher charge / higher per mile charges to use the car between 0730 and 0930 and between 1430 and 1900 might also be appropriate. It would also be appropriate to scale the charges for higher levels of emissions.

This clearly favours a 'black box' approach. While it might be an 'end goal', a simpler system might be appropriate in the short term to allow people time to adjust to the ultimate 'sophisticated' pricing. The 'sophisticated' pricing would make public transport, walking and cycling (and indeed not travelling at all) more attractive.

 

[PeterC]

The advantage of ICE vehicles is that the fuel suppliers collect the tax which is effectively milage based. Not only is this collected from every UK driver but also from every foreign vehicle driven into the UK either from a ferry, Eurotunnel train, or across our open land border whenever it is refuelled.

 

[AM9]

Surely, if we go down the invasive data-gathering/black box route (which I'd much rather we didn't - I'd prefer an ANPR system over compulsory black box, but knowing this countries tendency to snoop) you might as well actually determine acceleration/cornering/braking forces through accelerometers rather than arbitrarily applying a multiplier based on peak engine power. As an example, I went from driving a Vauxhall Meriva to a Mini Cooper S, with double the engine power & torque, and much more sporty handling, yet have driven it far more sensibly than I ever did the Meriva. Under your performance multiplier system, I'd be charged more per mile in the mini than the meriva, despite the fact it's driven more sensibly and has lower emissions simply because the meriva is a bland pensioners grocery getter and the mini is more of a hot hatch.

I wasn't presuming the use of in-car equipment, it would only present yet another thing to hack to avoid being charged and a market for cars not yet fitted.
The ANPR systems already in place would form the basis of a much extended network. Contrary to some comments here in a previous thread on the subject, depending on how it was introduced, the establishment of ANPR infrastructure at key traffic pinch points would help discourage some of the worst congestion. The location of those points would be made public and the incentive would be for motorists to be guided by those as much as trouble-free roads as just higher charged, - the system could then be extended as traffic patterns changed.
The other issue might be 'rat-running' which can be particularly troublesome in suburban areas where cutting through residential areas is not only antisocial, but can also create higher pollution levels than those roads were intended to take. There is however a trend with some local authorities blocking off some of the worst rat runs following the realisation by residents during the first COVOD-19 shutdown, how much better their areas were when such unnecessary through traffic stopped. Although some of those schemes in south London heve been both praised by those benefitting, and criticised by those suffering where the rat runners switched to, I suspect that properly funded schemes with additional ANPR installed would happen instead of relying on angry residents trying to police their environment.

 

[JonathanH]

The advantage of ICE vehicles is that the fuel suppliers collect the tax which is effectively milage based. Not only is this collected from every UK driver but also from every foreign vehicle driven into the UK either from a ferry, Eurotunnel train, or across our open land border whenever it is refuelled.

Yes, but they fill up abroad and don't pay road tax. Clearly increased costs are always passed on to the consumer but it would be relatively easy to require a 'black box' to use an overseas vehicle on UK roads.

 

[AM9]

The advantage of ICE vehicles is that the fuel suppliers collect the tax which is effectively milage based. Not only is this collected from every UK driver but also from every foreign vehicle driven into the UK either from a ferry, Eurotunnel train, or across our open land border whenever it is refuelled.

The disadvantage of ICE vehicles is that they are not part of a zero carbon environment, so solutions will be found to discourage unnecessary car use.
Many, (maybe most) HGV drivers arrive in the UK with full tanks and sometimes leave without filling them, thereby contributing nothing towards the UK public purse.
edit: ooops! somebody beat me to that response.

 

[radamfi]

HGVs seem easy to charge, given that there has been road pricing for HGVs in Germany for years.

 

[AM9]

HGVs seem easy to charge, given that there has been road pricing for HGVs in Germany for years.

That will be welcomed by most as it may stop them using roads that are clearly legitimate but highly inappropriate ones.

 

[radamfi]

That will be welcomed by most as it may stop them using roads that are clearly legitimate but highly inappropriate ones.

Just did some internet searching and it seems the German HGV tolling works on all Autobahns and was extended to all federal highways in 2018, so that presumably covers most of the roads they are likely to use. HGVs are less likely to use side roads to avoid charging than private cars.

 

[deltic]

HGVs seem easy to charge, given that there has been road pricing for HGVs in Germany for years.

The UK already has a simple HGV road pricing scheme introduced precisely because foreign registered vehicles were not buying fuel in this country - size of payment depends on Euro emission standards and size of vehicle and is charged by the day, week, month or year. Effectively replaced most of VED for UK registered HGVs and allowed the UK to charge foreign registered vehicles without discriminating against ownership.

 

[trebor79]

The question is how are they going to police it, how much will they charge and would existing taxes be removed?

There's alot of rumours floating about on the internet to do with mandatory black boxes and charges of £1/mile.

You could do it with a black box I suppose, and it would be fairly simple to anonymise the data to placate those worried about someone in Whitehall tracking their visit to the supermarket.
But probably far far simpler to just price it on simple mileage - quite easy to collect the mileage data at MOT time and pay once a year based upon that.

 

[Bletchleyite]

To discourage use of the car for short journeys, it would seem appropriate to have a fixed charge to use the car on any given day and then a per mile charge with the charges scaled to be higher for urban driving (or congested areas). A higher charge / higher per mile charges to use the car between 0730 and 0930 and between 1430 and 1900 might also be appropriate. It would also be appropriate to scale the charges for higher levels of emissions.

This clearly favours a 'black box' approach. While it might be an 'end goal', a simpler system might be appropriate in the short term to allow people time to adjust to the ultimate 'sophisticated' pricing. The 'sophisticated' pricing would make public transport, walking and cycling (and indeed not travelling at all) more attractive.

I think the "black box" approach is the only one that will work, really. The only other option would be booking journeys and routes in advance online, which would be a right faff.

The other thing the "black box" could do, which is why people don't like it, is blanket speed limit enforcement across the whole UK. I don't think they care that much if they're tracked on the way to Tesco as Google is already doing that if they have an Android phone, and I bet almost nobody has turned that feature off.

But probably far far simpler to just price it on simple mileage - quite easy to collect the mileage data at MOT time and pay once a year based upon that.

Yes, that'd be simpler, but nowhere near as effective.

 

[trebor79]

Collecting a simple mileage payment at MOT time would be perfectly effective. What it wouldn't allow you to do, which a black box would, is vary payment based upon time of journey, route taken, types of road used etc. Whether those things are desirable or even would change behaviours much I'm not sure. If you're got to go somewhere you've got to go - people aren't going to rock up a few hours late for work because it saves them a few pence per mile.

 

[Bletchleyite]

Collecting a simple mileage payment at MOT time would be perfectly effective. What it wouldn't allow you to do, which a black box would, is vary payment based upon time of journey, route taken, types of road used etc.

Yes, that's a big benefit, potentially. Doing it at MOT time would let you change the price by vehicle class, though, so if you had a big SUV you could pay more than a small runaround.

Whether those things are desirable or even would change behaviours much I'm not sure. If you're got to go somewhere you've got to go - people aren't going to rock up a few hours late for work because it saves them a few pence per mile.

It might influence them into choosing rail/bus instead, though.