MPs suggest re-opening the road tax debate to fill tax black hole

MPs suggest re-opening the road tax debate to fill tax black hole
Kevin Blackmore

Posted by

Kevin Blackmore

October 2019

One certain consequence of the growing swing to electric vehicles will be reduced tax flows in terms of Benefit-in-Kind (BIK) tax, Vehicle Excise Duty (VED) and fuel duty into the government coffers.

Now MPs on the Transport Select Committee are leading a call for a national debate on road pricing, as they highlight the need for a replacement for motoring taxes as drivers increasingly switch to EVs.

Although the committee will investigate whether national road pricing should be a part of the future transport network as part of a formal inquiry due in 2020, it wants the motoring public to begin the discussion now as it says that it has been almost a decade since the last real discussion of national road pricing.

The call follows hard on the heels of comments from the Institute for Fiscal Studies (IFS) regarding the need for road pricing to counter an estimated £28bn tax black hole created by the switch to EVs.

The IFS has said that revenue from fuel duties has already fallen by £19bn, or nearly 1% of national income, since 2000, and believes that the window of opportunity to address this is closing fast.

Currently, revenue from fuel duties stands at around £28bn a year, which is 1.3% of national income. A rumoured move by Prime Minister, Boris Johnson, to cut fuel duty by 2p per litre in the upcoming Budget would have cost a further £1bn a year in lost revenue – although this has now been postponed.

Addressing declining revenue

The government’s current Road to Zero Strategy aims to halt conventional new diesel and diesel car sales from 2040,  ahead of a commitment to reach net-zero by 2050. The IFS says the decline in VED and fuel duty revenue which would inevitably result could be solved by turning to per-mile road user charging, which should also reflect when and where journeys take place.

Lilian Greenwood MP, chair of the Transport Committee, said the fall in motoring revenues required a serious response, including rethinking how we manage the road network.

“We cannot ignore the looming fiscal black hole. We need to ask how we will pay for roads in the future and, in answering that question, we have an opportunity for a much wider debate about our use of road space, cutting carbon emissions, tackling congestion, modal shift and how we prioritise active travel.

“Tackling the climate emergency is essential but this is about more than what we must do to meet that challenge. It’s also about our health and the sort of towns and cities we want to live in.

“This isn’t about pricing drivers off the road; it’s about making sure that as many people as possible have a say in future plans so that we can manage the changes to come. The Transport Committee wants to kick-start this conversation,” she said.

Concerns over higher taxation

Her comments were supported by motoring organisation, the RAC, which has carried out extensive research into the topic.

Head of roads policy, Nicholas Lyes, said: “We know through our research that drivers are open to a new form of motoring taxation, but three-quarters of those we question are worried they may end up paying more tax than they do now. For this reason, we believe any new tax should be in place of the current one and not in addition to it.

“Our research also suggests that a sizeable number of drivers would see a ‘per mile’ road pricing option as fairer than the current system of paying fuel duty, and there is a large level of support for the principle of the ‘more you drive, the more you pay’.

“However, it is clear there is more engagement with drivers needed before such a system can be brought forward.”

Fleet Alliance managing director, Martin Brown, commented: “As we head towards an increasingly electric future, it is increasingly evident that some of the old tax-collection mechanisms will no longer work, and that we need some form of alternative to fill the Exchequer’s fiscal black hole.

“It seems sensible to us to start that discussion around road pricing as it more accurately charges those who use our roads most and who should arguably, therefore, pay more,” he said.

You also might like…

If you liked this artcle then check out our posts about similar topics

Fleet Alliance named as one of UK’s Best Places to Work 2020

Glasgow-headquartered Fleet Alliance has been named one of the UK’s Best Places to Work It is the eighth successive y...

Drivers granted six-month MOT extension (COVID-19)

As part of the Government's strategy to battle the growing coronavirus pandemic, the Department for Transport (DfT) has ...

Chancellor freezes fuel duty, confirms BIK rates and pledges to repair roads

In a Budget dominated by anti-Coronavirus measures and capital expenditure aimed at ‘levelling up‘ the country, the ...

Fleets should review policies in absence of WLTP data

Fleet Alliance is backing calls by the British Vehicle Rental and Leasing Association (BVRLA) for companies to consider ...

Leasing sector reveals its wish list ahead of 2020 Budget

The 2020 Budget Statement, now confirmed for 11 March, is one of the most eagerly awaited for some time as many hope it ...

Drivers’ intentions turn increasingly to EVs

Drivers' intentions are shifting increasingly towards electric vehicles (EV), with more than one-in-ten consumers now se...

Motor industry caught on the hop as Government moves goalposts

The motor industry seems to have been caught out by Government plans to end the sale of petrol, diesel and hybrid cars b...

Fleet Alliance sees huge growth in ULEVs as drivers and companies look to go green

Fleet Alliance Group has witnessed huge growth in 2019 in ULEVs (Ultra Low Emission Vehicles) on its funded fleet as dri...

Ready to make the management of your fleet more efficient?

Request a call back

Or Call Us On: 0345 601 8407
Schedule a call back
  • This field is for validation purposes and should be left unchanged.