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

[higthomas]

I personally fully support the idea of road pricing. It seems to me to be the only way to truly reflect priorities in how we tax vehicles.

It means that those driving in SUVs London can be heavily discouraged, whilst those driving electric cars in rural Scotland (where public/active transport is sadly never likely to be an alternative) can drive with minimum penalty.

How to enforce it is going to be a harder method. I'd support an intermediate period where drivers of new vehicles pay road pricing (set at a price whereby it doesn't discourage uptake of new cars), but older vehicles pay VED as their tax. Then set a date (e.g. 2030) by which all road users have to have their vehicles retrofitted with a black box to support this.

I really hope it happens, but the politics is going to be interesting. Strange that it seems to be the treasury pushing for this rather than being climate change/congestion busting related.

 

[miami]

Also go back to the old system of basing VED on Co2 output

A 5L mustang doing 1000 miles a year generates less CO2 than a Corsa doing 40,000 miles a year.

 

[GB]

Who says the Mustang is only dong 1000 miles and the Corsa 40000 miles? The Mustang could quite easily do 40000 miles and the Corsa 1000...they could quite easily both be doing 10000 miles or any other number. The only real difference is fuel usage and VAT on fuel.

 

[py_megapixel]

A 5L mustang doing 1000 miles a year generates less CO2 than a Corsa doing 40,000 miles a year.

But there's such a variance in mileage there that the Corsa would pay more anyway...

 

[Bletchleyite]

Well ICE vehicles are not going anywhere are they.

Yes, they will disappear, other than classics, between 2030 and 2045 or thereabouts. Very few ICE cars on the road more than 15 years old, and as electrics become more popular and ICE fuels are taxed higher and higher to get people to stop using them they will in my view go away quite quickly.

This is all about how the tax revenue is replaced once that has happened.

How to enforce it is going to be a harder method. I'd support an intermediate period where drivers of new vehicles pay road pricing (set at a price whereby it doesn't discourage uptake of new cars), but older vehicles pay VED as their tax. Then set a date (e.g. 2030) by which all road users have to have their vehicles retrofitted with a black box to support this.

A "VED escalator" could drive adoption here once the boxes are widely available (all they'd need in the car would be a 12V connection so everybody could fit one). Say add 50% to it each year after that point. They would, furthermore, be fitted to all new cars as standard. After 3-5 years they could be made a condition of passing an MoT.

 

[87 027]

I suspect anything which is widely feared to leave people significantly worse off than they are now is going to be a non-starter politically, however technically ‘pure’ the scheme may be. Remember we’re talking £40bn here

 

[Bletchleyite]

I suspect anything which is widely feared to leave people significantly worse off than they are now is going to be a non-starter politically, however technically ‘pure’ the scheme may be. Remember we’re talking £40bn here

Like water meters vs. water rates, it will leave some better off and some worse off. Those who are worse off will need to consider how they use their car. No bad thing at all there.

VED concentrates too much on trying to dissuade people from buying cars, which is fairly pointless as people will buy them anyway. What you want to do is get them to buy them if they want (keeping the industry moving) but leave them parked up off-road as much as possible, which road pricing does.

As to electric car drivers, I think most of them are probably intelligent enough to understand that they're just being cut slack to get more of them on the roads, and their near-tax-free status won't continue forever. And if they aren't they're in for a shock.

 

[miami]

Who says the Mustang is only dong 1000 miles and the Corsa 40000 miles? The Mustang could quite easily do 40000 miles and the Corsa 1000...they could quite easily both be doing 10000 miles or any other number. The only real difference is fuel usage and VAT on fuel.

In which case why not get rid of VED and put it all on carbon pricing? At £150 a year for an average 10k miles, it works out at 1.5p per mile. At 40mpg that means extra tax of 60p/gallon, or 13p a litre. Those that only travel 20 miles a week when they go to town to do the weekly shopping aren't subsidising those driving 300 miles a week into a city.

VED concentrates too much on trying to dissuade people from buying cars,

Given that the capital cost of even a cheap car averages out at over 1k a year, add insurance on top of that, VED makes very little difference.

 

[ABB125]

One thing I'm concerned about is how the government would set the "standard" price per mile: currently, I pay between 10 and 12 pence per mile in fuel costs. I'm not going to be very happy if it suddenly becomes 20p per mile.

 

[py_megapixel]

One thing I'm concerned about is how the government would set the "standard" price per mile: currently, I pay between 10 and 12 pence per mile in fuel costs. I'm not going to be very happy if it suddenly becomes 20p per mile.

I don't think the aim of this is to make people happy in the short term. It's either to raise funds that the government needs to provide public services, or to discourage vehicle use.

 

[ABB125]

I don't think the aim of this is to make people happy in the short term. It's either to raise funds that the government needs to provide public services, or to discourage vehicle use.

Yes, I appreciate that "happiness" isn't the aim, but if someone has a car which will do 70mpg (roughly 8p per mile) and gets charged the same price as a car which does 20mpg (27p), the incentive to buy a greener non-electric car disappears entirely: you might as well buy an inefficient car because it won't cost you any more, but is probably more fun to drive.
There's also very little incentive to move to an electric car as well, unless they have a lower rate.

 

[miami]

One thing I'm concerned about is how the government would set the "standard" price per mile: currently, I pay between 10 and 12 pence per mile in fuel costs. I'm not going to be very happy if it suddenly becomes 20p per mile.

Average car does 7,400 miles a year, and there are 31.6 million cars. That's 234 billion miles a year.

Petrol tax raises 28 billion, plus another 20% in VAT on that petrol tax, so you're looknig at 34 billion pounds that needs to be raised (more if VED is rolled into road pricing)

To raise 34b from that 234b miles would mean a tax of 7p per mile.

 

[ABB125]

Average car does 7,400 miles a year, and there are 31.6 million cars. That's 234 billion miles a year.

Petrol tax raises 28 billion, plus another 20% in VAT on that petrol tax, so you're looknig at 34 billion pounds that needs to be raised (more if VED is rolled into road pricing)

To raise 34b from that 234b miles would mean a tax of 7p per mile.

But would the government (or, more pertinently, the treasury) see it that way?

 

[miami]

But would the government (or, more pertinently, the treasury) see it that way?

If they were to instead charge 15p per mile, assuming no change in mileage, they will be raising £70b a year, which they could use to increase subsidies for trains, or to build a new aircraft carrier, or to lower income tax, or whatever else.

I suspect there will be a desire to factor in behaviour changes as well - so charging more for driving on busy roads, in which case it would depend on the details of your mileage.

 

[Bald Rick]

Also go back to the old system of basing VED on Co2 output. It makes no logical sense that a 5.0L Mustang pays the same rate as a 1.2L Vauxhall Corsa.

The Mustang owner will have paid for that CO2 output via the year 1 VED

Average car does 7,400 miles a year, and there are 31.6 million cars. That's 234 billion miles a year.

Petrol tax raises 28 billion, plus another 20% in VAT on that petrol tax, so you're looknig at 34 billion pounds that needs to be raised (more if VED is rolled into road pricing)

To raise 34b from that 234b miles would mean a tax of 7p per mile.

You’ve missed the VAT on the non duty part of the fuel price, which is roughly another £6bn, hence the tax on fuel raises £40bn. That’s before VED.

 

[87 027]

Is there a significant difference in battery and energy efficiency between different electric vehicles? If so some sort of tax on the electricity used to recharge them might be a proxy for current taxes on fuel

 

[edwin_m]

In which case why not get rid of VED and put it all on carbon pricing? At £150 a year for an average 10k miles, it works out at 1.5p per mile. At 40mpg that means extra tax of 60p/gallon, or 13p a litre. Those that only travel 20 miles a week when they go to town to do the weekly shopping aren't subsidising those driving 300 miles a week into a city.

Seems reasonable to do something like this for IC vehicles to pay the cost of pollution and discourage the continued use of IC vehicles. But IC vehicles might have to pay road user charge as well, otherwise someone who mostly drives on "expensive" roads (which are probably urban ones where pollution causes most damage) might be better off staying with an IC vehicle than going electric.

 

[ainsworth74]

There's also very little incentive to move to an electric car as well, unless they have a lower rate.

Gonna be a bit of a struggle once you can't buy new internal combustion engine cars from 2030. Sure the second hand market will extend that by a fair old bit but still unless we sudden a massive shift from the way people now 'buy' cars by leasing them and then upgrading every few years to a newer model people won't have much choice!

 

[Bletchleyite]

Seems reasonable to do something like this for IC vehicles to pay the cost of pollution and discourage the continued use of IC vehicles. But IC vehicles might have to pay road user charge as well, otherwise someone who mostly drives on "expensive" roads (which are probably urban ones where pollution causes most damage) might be better off staying with an IC vehicle than going electric.

I would expect to see it introduced with a lowish price and apply to all vehicles, i.e. IC vehicles pay it as well as fuel tax (but maybe getting rid of VED except the first year "registration tax"), but it being ramped up as the ICE dies out.

Gonna be a bit of a struggle once you can't buy new internal combustion engine cars from 2030. Sure the second hand market will extend that by a fair old bit but still unless we sudden a massive shift from the way people now 'buy' cars by leasing them and then upgrading every few years to a newer model people won't have much choice!

Leasing or "car subscriptions" may well provide a better model for electric cars (and needn't be of a new one, cheaper leases could be made available of an older one) especially given the limited life of the batteries. But at present car companies seem to be introducing these at very high rates so they aren't presently applying this to the lower end of the market.

 

[py_megapixel]

Is there a significant difference in battery and energy efficiency between different electric vehicles? If so some sort of tax on the electricity used to recharge them might be a proxy for current taxes on fuel

Judging by the roads around where I live, persuading people to go electric is proving a task in its own right, so I'm not sure now is the time for them to start being picky about exactly which EVs people choose!

The exception, of course, is Tesla, who seem to be quickly be replacing the likes of Mercedes-Benz and Jaguar/Landrover as the top-of-the-range status symbol car. As much as I hate Musk, we do have his company to thank for providing a viable ultra-high-end option in the EV market, thereby significantly reducing the number of people who are driving fuel-guzzling Range Rovers (other large, inefficient IC engine cars are available) around suburbia and city centres.

*******
My concern would be that the more variables you introduce in the formula used to determine the price, the greater the chance of it becoming so confusing that the general public are unable to understand it, and the more scope you introduce for charges to be challenged on some little detail. There's also a greater chance of the system used to calculate it just breaking.

I say, keep it simple, understandable, and robust, and apply it to all vehicles other than perhaps those used for mobility purposes by the disabled or elderly.

 

[87 027]

the greater the chance of it becoming so confusing that the general public are unable to understand it

Sums up the existing tax system perfectly! Agree that if you have a complete cliff edge on prices for enough people though, that will be a very difficult sell at the ballot box

 

[miami]

You’ve missed the VAT on the non duty part of the fuel price, which is roughly another £6bn, hence the tax on fuel raises £40bn. That’s before VED.

There's VAT on the electricity to charge your car. 234 billion miles, at 60 miles per 15kwh charge, or 4 miles per unit, would be 60 billion units of electricity, or about £9b. OK with VAT only being 5% that's not going to fill the coffers.

Either way a 10p/mile charge should cope with the lost revenue, and still work out about equal cost for drivers.

Of course you then have a ridiculous situation where people driving clean electric cars are paying excess tax to subsidise empty diesel trains. Currently there's a thin veneer that fuel tax is there to cover the externalities from the polution. Once that vanishes you're then onto arguments about rationing road usage, which is tricky as you really should charge the railway in the same way. (If a given road lane generates £2k an hour in road charges, surely a given railway track should do as well)

 

[bluenoxid]

There are still negative externalities of busy roads after electric cars are introduced

Rubber from tyres releases small particulates into the air and water supply
Slowing down others journeys (including people crossing the road)
~1750 road fatalities and 20k+ serious injuries
Storing vehicles at their destination or further journeys to remove the vehicle from that area (if it is a taxi/autonomous)

 

[The Ham]

People don't tend to like paying one-off retrospective lump sums. It would be completely unworkable to pay these sort of costs once a year on a retrospective basis (rather than on a prospective basis).

Indeed, but it may well highlight to them actually how much car ownership costs, even if they are sent details of the last 12 months of charges.

By making it a monthly update if people make changes they can see how this impacts on their costs.

Well ICE vehicles are not going anywhere are they. Even when the new petrol/diesel sale ban comes into affect in 2030 there will still be 10's of millions of ICE vehicles and VED requirements for years and years. Increase the VED and make electric vehicles pay a %.

Also go back to the old system of basing VED on Co2 output. It makes no logical sense that a 5.0L Mustang pays the same rate as a 1.2L Vauxhall Corsa.

There's about 33 million cars in the UK, and whilst only a tiny number of those are EV's (164,000) in the last 9 months about 2/5th of these (66,000) were added to the overall total, and about 3 times as many as the whole of 2019 (22,000).

Even if we see no acceleration in sales then 10 years worth would add 0.7 million electric cars to the mix. However, it's likely that there would be an increasing rate of uptake, of that's at a rate of 50% more than the year before then by the time you get to 2031 you'd see 3.8 million new EV's sold that year.

That's likely to be a bit high, however it should be noted that even at +25% per year that's going to be 0.6 million new EV's that year.

The problem is that once there's a critical mass you're going to see petrol stations closing or at least removing petrol pumps.

The problem is that WFH would likely speed this up as people potentially drive thousands of miles a year less than they did before (2 days a week at home when the office is 15 miles away would do 2,700 miles a year less) and so would be using less fuel than they did. By doing so it would reduce the viability of petrol stations.

If that makes it that people have to travel further to fill up then they will then be more willing to get an EV, which then makes it harder for the remaining petrol station to be viable and so on...

 

[87 027]

There's VAT on the electricity to charge your car. 234 billion miles ... OK with VAT only being 5% that's not going to fill the coffers.

Smart meters and smart chargers could be used to identify when EVs are being charged and hence attract a higher tariff accordingly. The road footprint of EVs is the same as ICE vehicles in respect of congestion, and by most accounts total lifetime environmental impact of EVs is not much different once manufacture and scrappage are also included in the equation. And if the aim is to reduce personal vehicle travel generally, the tax revenue gap will still need to be plugged - higher taxes on other forms of travel perhaps? Such as diesels running under the wires...

 

[Bald Rick]

Smart meters and smart chargers could be used to identify when EVs are being charged and hence attract a higher tariff accordingly.

Bit difficult if you are charging using your own solar panels, or have a variable price tariff where your supplier sometimes pays you to use electricity. How would a smart meter know if you’re charging your car or just put the heating on?

 

[87 027]

Bit difficult if you are charging using your own solar panels, or have a variable price tariff where your supplier sometimes pays you to use electricity. How would a smart meter know if you’re charging your car or just put the heating on?

Not necessarily. I believe they are enabled for HCALCS* functionality so know the load on each specific circuit in the house. EV chargers would be wired up into their own circuit. Assuming you have a second generation SMETS2 meter.

*Home Area Network Controlled Auxiliary Load Control Switch

 

[PeterC]

Smart meters and smart chargers could be used to identify when EVs are being charged and hence attract a higher tariff accordingly. The road footprint of EVs is the same as ICE vehicles in respect of congestion, and by most accounts total lifetime environmental impact of EVs is not much different once manufacture and scrappage are also included in the equation. And if the aim is to reduce personal vehicle travel generally, the tax revenue gap will still need to be plugged - higher taxes on other forms of travel perhaps? Such as diesels running under the wires...

Smart charging is the fairest solution with a levvy on both home and public charging. This would catch both people who have home charging available and those who have to use public chargers as well as foreign tourists.

 

[edwin_m]

Smart charging is the fairest solution with a levvy on both home and public charging. This would catch both people who have home charging available and those who have to use public chargers as well as foreign tourists.

Easy enough to get round I would think, just wire up the relevant cable to charge very slowly from a 13A plug.

On a slightly related point, presumably if a learner learns on an EV it counts as an automatic so they aren't able to drive a manual IC car in future. If so, families with teenagers might be less willing to go electric for that reason.

 

[Bald Rick]

Assuming you have a second generation SMETS2 meter.

I don’t.

Easy enough to get round I would think, just wire up the relevant cable to charge very slowly from a 13A plug.

Exactly!