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MPs call for road pricing to replace motoring taxes

The ban on the sale of new diesel and petrol vehicles by 2030 will create huge pressure on the government to come up with an alternative to raise billions in tax revenue

The government needs to act urgently to reform motoring taxation, say MPs on the Transport Committee, calling on the Treasury and Department for Transport to come up with policy options by the end of 2022.

A road pricing system, based on miles travelled and vehicle type using telematics, would enable the government to maintain the existing link between motoring taxation and road usage.

In the report, Road Pricing, the Committee favoured a road charging system based on technology which measures road use. Any scheme would include the drivers of electric vehicles, who would be required to pay for road usage, as is currently the case for petrol and diesel vehicles. It would also cover vans and HGV vehicles, as well as overseas vehicle drivers.

Speaking at a Centre for Policy Studies webinar, chair of the Transport Committee Huw Merriman MP, said: ‘The UK is the first major economy that needs to come up with an alternative to road tax as we are ruling out [new] petrol and diesel vehicles from 2030.

‘£35bn is raised from motoring taxes – £28bn from fuel duty and £7bn from road tax – this is 4% of the Exchequer’s total tax take.’

Merriman stressed that any changes to policy such as road pricing need ‘to show real positives of this policy. We need to show people that it is not a stealth tax’.

‘There are huge challenges as you can’t put cameras on every country lane. There are some suggestions that it could be phased in through the strategic road network – motorways and A roads, but people could just avoid these roads,’ Merriman said.

‘We are more attracted to a big bang approach. We don’t see any alternative to telematics in your car which would measure how many miles you drive. You’d have to put incentives in too, for example you could get a refund if your journey was delayed as you get on rail journeys.

‘This has to be a replacement tax, not an additional tax. It will not cost you any more as a collective of motorists, you will have to pay for the road that you use, which you already do.’

Without reform, policies to deliver net zero emissions by 2050 will result in zero revenue for the government from motoring taxation. The Committee urges the government to act now to replace a potential loss of £35bn to the Exchequer.

The ban on the sale of new petrol and diesel vehicles from 2030 will result in a corresponding decline in two significant sources of Treasury revenue. As sales of electric vehicles increase, currently accounting for 11% of sales in 2021, Treasury revenue from motoring taxation will decrease, because neither fuel duty nor vehicle excise duty are currently levied on electric vehicles.

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.’

When replacing the existing motoring taxes, the committee calls for the government to ensure that the new charging mechanism:

  • entirely replaces fuel duty and vehicle excise duty rather than being added.
  • is revenue neutral with most motorists paying the same or less than they do currently.
  • considers the impact on vulnerable groups and those in the most rural areas.
  • does not undermine progress towards targets on increased active travel and public transport modal shift; and
  • ensures that any data capture is subject to rigorous governance and oversight and protects privacy.

In signalling a shift to an alternative road charging mechanism, the report calls for drivers of electric vehicles to pay to maintain and use the roads which they drive on, as is currently the case for petrol and diesel drivers. There must, however, remain incentives for motorists to purchase vehicles with cleaner emissions.

They also want to see the government set up an independent body to oversee the plans with representatives from both the Treasury and Department for Transport.

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