The government is pushing drivers to switch to electric vehicles to reach their zero targets. view.
The fuel duty currently brings the Treasury £24.3bn a year, equivalent to nearly 2.3% of total taxes. Including other taxes on car ownership, the total income from drivers rises to £32 billion.
The destruction of the internal combustion engine means a loss of these incomes, since the electricity used to charge electric vehicles is not taxed in the same way as gasoline or diesel fuel.
The looming loss of the fuel tax means the Treasury will face a 'huge black hole' — a £10bn budget deficit — by the early 2030s, according to a new analysis by the Resolution Foundation.
The government must find a way fill the black hole and quickly — otherwise, you will need to raise other taxes or cut spending.
How to fill the gap? The Resolution Foundation pushes for a 6 pence per mile road tax for electric vehicles (EVs).
An influential think tank claims the levy will help cover government shortfalls and also make electric vehicles cheaper to run than petrol or diesel equivalents.
EVs are currently 60% cheaper to run than petrol and diesel vehicles engine, and the 6d tax per mile still leaves them 20% lower than a typical fossil fuel car.
GPS trackers in electric vehicles could be used to measure distance travelled, allowing for monthly road tax collection as proposed.
0106 car taxes
However, moving to a pay-as-you-go car tax model with tracking of your daily movements, would be a radical retreat that would likely alarm both the automotive industry and privacy advocates.
Automakers have already warned that cuts to tax credits for buying electric vehicles will hurt sales, and Steve Gooding, director of the RAC Foundation, says politicians should be careful not to scare people away even more.
“We hear , as auto industry executives report that people are returning to gasoline and diesel vehicles because they are easier to operate,” he says. transition to operating costs. .
«Introducing a mileage fee for electric vehicle drivers could lead to a shift away from fossil fuels into reverse.»
Johnny Marshall, an economist at the Resolution Foundation, argues that the fact that electric vehicles will continue to have lower operating costs, reduces the risk of people turning away from buying greener cars.
However, recent buying patterns suggest that drivers are fickle and sensitive to changes in relative cost.
The think tank is not the first to propose a pay-as-you-go tax, and despite reservations, the idea has found support among the industry on both sides of the political divide.
The Transportation Committee, chaired by Conservative MP Ian Stewart recommended replacing the fuel surcharge and excise duty on vehicles with a new road tax in a recent report.
The committee warned that the Treasury would face a £35bn deficit without action.
Greg Smith, the Conservative MP for Buckingham, says it is «inevitable» that the Treasury will face a «black hole» given the ban on the sale of new gasoline and diesel vehicles comes into effect from 2030.
Road tax makes commuting more expensive
As a result, Smith, who is vice chairman of the All Party Parliamentary Group for Better roads, believes that a fundamental reform is needed.
He argues that the road tax should be introduced for all cars, not just for electric vehicles, as proposed by the Resolution Foundation.
«Personally, I prefer that all motorists be treated equally when it comes to how they driving on UK roads is taxed,” he says.
“At the end of the day, an electric car needs the same amount of space and does the same damage to asphalt as a petrol or diesel car. It is therefore only fair that battery electric vehicle drivers pay their fair share to maintain the road network and capacity of British roads.”
While the Labor Party has yet to clarify its position on the issue, the proposal looks popular among party MPs.
Clive Betts, Labor MP for South East Sheffield, Chairman of the Level Up Select Committee, says: «I think we should seriously think about it.
“No new tax will ever become popular, but I think most people intuitively know that something needs to be done, because if you don't tax driving in one form or another, then you have to tax something else. ”.
The idea is likely to be easier to sell to a Labor government than a Conservative one: opposition party voters tend to be younger, more urban and less likely to drive.
Sadiq Khan of the Labor Party has already demonstrated the party. ready to take a highly interventionist and unpopular stance on the use of Ulez, the emissions pricing scheme he introduced as mayor of London.
The road tax will be a much more difficult task for Conservative voters, who are likely to will live in rural and suburban areas where they are heavily dependent on their cars.
0106 electric vehicles
Many drivers are already frustrated with being forced to switch to electric vehicles, especially given the meager charging infrastructure in many areas.
In the most unserved areas of the UK, the ratio of electric vehicles to the number of public charging stations is as high as 1 to 85, according to a recent analysis.
“What we have in the UK right now is a joke and I think people will get angrier and angrier if they have to pay,” says Betts.
< p>From a practical point of view, the introduction of a road tax based on the use of GPS trackers also raises privacy concerns. Drivers may be concerned that the government is collecting so much information about their whereabouts, not to mention who handles this data and how securely it is stored.
The Treasury has for now rejected the idea of a road tax.
A spokesperson told The Telegraph that changes to the excise tax on vehicles would force electric vehicle owners to pay the tax for the first time since 2025 and ensure that “all drivers have started to pay fair tax deductions.”
“We are making sure that car tax revenues keep pace with the transition to electric vehicles while still being affordable for consumers, and we have no plans to introduce tolls ,» the spokesperson said.
This line may not last long. Whoever has the keys to number 11 after the next general election will have to solve the electric car tax puzzle or face unpleasant decisions elsewhere.
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