London’s Ulez expansion: the thin end of the wedge for UK road pricing?

The cost of motoring is firmly in the spotlight again. The price of petrol is approaching a record high at UK pumps, only weeks after filling stations ran dry. Drivers of older diesel and petrol vehicles will be forced to pay a £12.50 daily charge to travel in a wide area of London from Monday, when the ultra-low emission zone (Ulez) expands, and all eyes will be on the chancellor on Wednesday to see whether he decides to freeze fuel duty again in his autumn budget.

All things considered, it might seem an unfortunate moment to talk bout a new charge for drivers, but the bigger, long-term shift is the transition to electric vehicles – the centrepiece of the government’s decarbonisation plan, under which the sale of new petrol and diesel cars will be banned from 2030. Fuel duty nets the Treasury about £28bn a year and vehicle excise duty another £9bn, and electric cars owners do not currently pay either.

Treasury documents released on Tuesday made clear where that ends up under plans for net zero emissions by 2050: zero revenue. When it comes to filling the fiscal gap, most policy thinking has pointed to road pricing of one form or another, even if politicians are loath to amplify that view.

The last time ministers were loudly enthusiastic about road pricing was in 2007, when an early e-petition condemning the plans quickly gathered 1.8m signatures. The director of the RAC Foundation, Steve Gooding, remembers the plans well. As a senior Department for Transport civil servant, he helped to write them.

A crucial point, he says, is that road pricing can mean many different things. Many economists hanker after a tailored scheme that might deliver a sophisticated way of balancing out when and where traffic flows.

“Having worked extensively on different models of pricing in days when the government was last enthusiastic about it, what became clear to me is that the more ambitious the scheme, the more complicated it gets and the more expensive to administer, and the less ability motorists have to respond.”

Black-box technology and mobile phones make those kinds of scheme technically feasible now but they still raise privacy concerns, not to mention motorists’ hackles. Recent research by the Social Market Foundation suggests public attitudes had softened overall to the concept of road pricing until tracking was mentioned.

Nonetheless, local monitoring – from pay parking spots to the London congestion charge zone – is now widely accepted. As Gooding and other experts testified at a Commons select committee hearing last week, charging is “probably inevitable” and now is probably a good moment to act when most motorists are still used to significant taxation. The opposite holds true for owners of zero emission vehicles. Toby Poston of the British Vehicle Rental and Leasing Association said: “The longer we leave it, the more people will get used to the idea of having very low-cost transport … and it is going to be a shock. We need to start working on it very soon.”

If the rationale is not purely to raise tax revenue, however, but also to push drivers in the direction of electric vehicle ownership, Gooding suggests we might prefer to forgo a simple distance charge. As the chief executive of the Renewable Energy Association, Nina Skorupska, put it: “How will that deemed to be fair if people have taken that step to have an electric vehicle and all of a sudden have to pay the kind of taxes that a polluting vehicle will be paying?”

EVs, as well as most petrol cars and the newest diesels, will not be charged under Monday’s expansion of London’s Ulez to the north and south circular roads, which enlarges the current zone – the congestion charge area – by a factor of 18 to include residential areas where people routinely drive. But about one in five cars that currently use the expanded zone will still have to pay or stay away.

It will be one of the biggest road charging schemes anywhere and could be a “pathfinder” for wider policy, Gooding suggests. “It’s going to be telling whether, despite all the publicity, all drivers realise it is coming their way, and it doesn’t matter when or where you drive in that zone in a 24-hour period.”

City Hall believes the expanded Ulez will cut carbon by the equivalent of taking 60,000 cars off the road and reduce NOx emissions by 30%.

But London has good public transport. According to Gooding, elsewhere “lots of people go to their jobs in cars at the time they do because they don’t believe there is a practical alternative. If you’re working shift work on antisocial hours in a factory or a care home, good luck finding a bus.”

Motorists already have ample reason to rein in their mileage. Many new cars are bought on financing schemes that push up the price the more they drive in the leasing period, and the price of petrol is now the most acute.

Perversely, while high petrol prices increase the pain, in some ways they relieve the pressure on the Treasury. Duty of 57.95 a litre becomes a smaller fraction of the total cost, rather than more than the bulk of the take.

And fuel duty remains the purest form of pay-per-mile taxation. While the cliff edge is coming for the Treasury, it would be no surprise if the chancellor chooses to keep heading straight on the current path for now.