Chancellor Jeremy Hunt is expected to detail in tomorrow’s autumn budget plans to change the way UK motorists are taxed, with a new road pricing system rumoured to be among the proposals.
Meera Vadher, who was special adviser to former transport secretary Grant Shapps, confirmed on Twitter that proposals for road pricing were anticipated to overhaul the existing system of fuel duty and vehicle excise duty.
Any plans will come as a response to the increasing electrification of the UK’s car parc. EVs are charged no road tax and don’t contribute anything in terms of fuel duty. As such, revenues have slipped and are forecast to continue to do so exponentially as their uptake spikes in the coming years.
Some 36% of motorists surveyed by the RAC said a ‘pay per mile’ system would be fairer but 75% were also concerned that it could result in higher taxation.
The company’s head of roads policy, Nicholas Lyes, said: “Whatever any new taxation system looks like, the most important thing is that it’s simple, transparent and fair to drivers of both conventional and electric vehicles. It’s also essential that a new system replaces rather than runs alongside the existing taxation regime.
“Ministers should additionally consider ring-fencing a sizeable proportion of revenues raised from a new scheme for reinvestment into our road and transport network.”
For a full guide to road pricing, including how it will affect you and where the money will go, read on.
How much tax is raised from vehicles and how is it spent?
Road tax and fuel duty generate £35 billion a year in tax revenue, equivalent to 4% of overall tax receipts. The revenue from road tax (£7bn) is allocated to the National Roads Fund for local and strategic road upgrades. Fuel duty (£28bn) is disbursed across the whole of state spending to help fund everything from schools and hospitals to public sector pensions and infrastructure projects.
What’s the problem?
The government expects that by 2040, when electric vehicles dominate the UK car parc, very little tax will be raised from motoring. However, the government doesn’t want to discourage the take-up of EVs so, rather than simply imposing a tax on them to restore the public finances, the Transport Select Committee (TSC) has suggested introducing road pricing as a means of generating revenue.