Road pricing is likely to replace the current system of fuel duty and VED (Vehicle Excise Duty) in the not too distant future. That’s according to the Transport Select Committee of MPs, which has been looking at alternatives. It addresses of what happens as petrol/diesel cars, HGVs, vans and motorcycles are gradually replaced by electric equivalents – how will they be taxed?

Currently, the road system is paid for by a combination of fuel duty and VED, which together bring in about £35 billion. The RAC Foundation predicts that as the numbers of petrol/diesel vehicles drops off, this tax revenue will halve by around 2028 and fall to £9 billion by 2035.

Electric vehicles (EV) do not pay VED, though this has been a short-term incentive to encourage drivers to buy an EV. The real conundrum has been how to tax the electricity they use, whether charged at home or at a public charge point. According to the Transport Select Committee, it could see “no viable alternative” to road pricing as a means of taxing EV’s.

Road pricing systems charge vehicles per mile driven, and a new generation system would take into account the time of day (charging more during rush hour, for example), congestion and availability of alternative transport. Some of the elements, such as on-vehicle insurance black boxes and automatic number plate recognition, are already with us. But to work, this ‘smart’ road pricing would require GPS tracking of each vehicle – MPs have called for safeguards in the use of this personal data.

The Select Committee added that any system should be revenue neutral, and not charge road users any more overall than fuel duty/VED does now. Fuel duty has been frozen for 10 years so in real terms has decreased over time.

“The BMF has been monitoring the introduction and development of C-ITS (Co-operative Intelligent Transport Systems) for years, how typical that one of the major implementations will be to tax private vehicle users, perhaps all that talk of automated vehicles was just a red herring? We managed, via FEMA, to sow seeds of doubt at an EU level, I’m glad that MPs appear to have doubts, as well.” said BMF Chair Jim Freeman.

Link to full Select Committee report here

Written by Peter Henshaw 

Top image courtesy of Colin Watts – Unsplash