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Is pay-by-the-mile road pricing back on the agenda?

2-minute read

Is pay-by-the-mile road pricing back on the agenda?
Catriona Smith

Catriona Smith

20 May 2021

Driving on Britain’s roads could get more expensive as the government considers ways to recover funds lost in tax as people switch to electric vehicles.

With the UK government’s commitment to ban the sale of new petrol and diesel vehicles by the end of 2030, there will be a huge financial hole in the public finances with a loss of funds from Vehicle Excise Duty (VED) – known as car tax – and fuel duty.

UK government considers road pricing scheme

The Chancellor is said to be considering a national road pricing scheme to help recover money currently raised through motoring tax.

A report from Greener Transport Solutions, a not-for-profit group, was published in April as part of the government’s inquiry into zero emissions vehicles and road pricing.

The report says that “road pricing is one of the best fiscal changes any government could have made over the last generation.”

Adding: “it’s the most effective way to tackle road congestion and pollution, and now there is a fiscal imperative with the prospect of a £40 billion hole in the public finances as receipts from road taxation disappear.”

Higher rates proposed for vans and lorries

The report proposes that drivers should pay for the roads through a scheme calculated on a vehicle’s weight as well as mileage.

Car drivers would be charged a flat rate of 2p a kilometre, while heavier vehicles would be subject to higher rates. It proposes a rate of 3p for vans and 6p for lorries.

It’s also suggested that these rates should increase to take into account axle weight and wear and tear to the road surface.

Incentivising a switch to electric vehicles

Not paying VED and fuel duty is one of the main incentives for consumers to make the switch to an electric vehicle (EV), although MPs have warned this isn’t enough to meet the ambitious targets for phasing out petrol and diesel cars.

Women charging her electric car at plug-in pump

The Telegraph reports that there’s a ‘mountain to climb’ when it comes to the prices of plug-in cars.

Ultimately, the green transport group says more needs to be done to encourage people to buy an EV to avoid a ‘Big Bang’ in 2030. Their report suggests:

  • discounts on the cost of EVs if people opt-in to a road pricing scheme before 2030
  • similar discounts on second-hand EVs
  • money towards an EV if you scrap your current vehicle and it’s more than 10 years old

It’s important to note that this is only a proposal, and the government hasn’t yet indicated how they plan to balance motoring taxation and this commitment to the green agenda.

The president of the AA, Edmund King said: "The government can't afford to lose £40bn from fuel duty and car tax when the electric revolution arrives.

"It is always assumed that Road Pricing would be the solution but that has been raised every five years since 1964 and is still perceived by most as a 'poll tax on wheels'."

What do you think of the proposals? Let us know in the comments below.

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