Yahoo Finance Electric vehicles should be taxed to plug £35bn fiscal hole, say MPs
The Commons transport committee is urging the government to tax zero emission vehicles to offset the £35bn ($47.6bn) in fuel duty losses once the 2030 ban on sales of new petrol and diesel cars come into force.
In its report, the committee of MPs said that “zero emission vehicles should not mean zero tax revenue” and suggest a new road pricing system, based on miles travelled and vehicle type.
Currently, owners of electric vehicles do not pay any fuel or car tax as their vehicle does not emit any CO2. As the government pushes for its goal of net zero emissions by 2050, the use of electric cars will only continue to increase.
The report warned that without reform, policies to deliver net zero emissions by 2050 will result in zero revenue for the government from motoring taxation and urges ministers to act now to replace a potential loss of £35bn.
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“It’s time for an honest conversation on motoring taxes. The government’s plans to reach net zero by 2050 are ambitious. Zero emission vehicles are part of that plan. However, the resulting loss of two major sources of motor taxation will leave a £35bn black hole in finances unless the government acts now – that’s 4% of the entire tax-take. Only £7bn of this goes back to the roads; schools and hospitals could be impacted if motorists don’t continue to pay,” transport committee chair Huw Merriman said.
“We need to talk about road pricing. 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 lever, we can offer better prices at less congested times and have technology compare these directly to public transport alternatives.
"By offering choice, we can deliver for the driver and for the environment. Road pricing should not cost motorists more, overall, or undermine progress on active travel.
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Although the report calls for drivers of electric vehicles to pay to maintain and use the roads which they drive on MPS want incentives to remain for motorists to purchase vehicles with cleaner emissions.
The committee also wants the Treasury and Department for Transport to join forces to set up an arm’s length body to examine solutions and recommend a new road charging mechanism by the end of 2022.
"Work should begin without delay. The situation is urgent. New taxes, which rely on new technology, take years to introduce. A national scheme would avoid a confusing and potentially unfair and contradictory patchwork of local schemes but would be impossible to deliver if this patchwork becomes too vast. The countdown to net zero has begun. Net zero emissions should not mean zero tax revenue," Merriman said.
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Ben Foulser, head of future mobility at KPMG UK, said: "With rapid adoption of zero emission vehicles underway and a 2030 ban on the sales of conventional petrol and diesel vehicles looming, it’s vital that progress is accelerated on developing our future road pricing system.
"That is why the findings of this report are welcome, and would progress this journey, including via the establishment of a dedicated body. It’s important that government now put some clear milestones in place, including implementation.
"As acknowledged in this report, there are a number of local clean air and congestion charging schemes in existence in the UK already and any national system developed needs to incorporate those, rather than add to them.
"I hope that this report prompts the start of an open conversation with the public about future road charging and the role of such a demand management tool in reducing congestion."
