Another think tank has called for a per mile ‘Road Duty’ for electric vehicles to compensate for lower revenues from motoring taxes.
A new report from the Resolution Foundation argues that the UK ‘must and can’ urgently reform what it said are £32bn of road taxes so that the ‘welcome transition’ to EVs does not put pressure on the public finances and road congestion.
The analysis won support from the Local Government Association, which said a 'workable alternative to fuel duty' was urgently required.
The report, Where the rubber hits the road, funded by the Nuffield Foundation says the UK’s transition away from fossil-fuel-powered cars is proceeding faster than many experts predicted, with EVs accounting for one in seven new cars bought last year, and ‘creating a growing fiscal hole’.
It calculates that the transition is set to drive a £10bn a year revenue shortfall by the early 2030s, adding that government policy needs to play a greater role in tackling congetstion.
The authors said that arguments for continuing with far lower rates of vehicle taxation for EVs to encourage take-up are misplaced, with regulations banning the sale of non-EVs by 2030, and lower running costs generally already playing that role.
They add that higher-income families are more likely to buy new electric cars and that maintaining big tax breaks for EVs risks disadvantaging people on lower incomes.
The report calls for a new ‘Road Duty’ for EVs at around 6p per mile (plus VAT), collected using GPS data that new EVs are already built with and paid via monthly direct debits.
This would be enough to offset the fall in Fuel Duty revenues over the coming decade, while maintaining incentives to switch as EVs remain 20% cheaper to run, it says.
In addition, the ability to implement congestion charging via this system could make it far easier to tackle congestion in large towns and cities.
The think tank also joined calls for the 20% VAT rate on electricity from public charging points to be reduced to the 5% level that applies to electricity used for home charging.
Senior economist Jonny Marshall said: ‘The switch from fossil-fuel-powered cars to EVs is a key part of Britain’s net zero transition, and it’s happening quicker than most people expected. This is good news for the planet and motorists as EVs are cleaner and cheaper to run.
‘Our tax system needs to keep pace with the Electric Vehicle transition, in a way that protects low- and middle-income households.’
Last week. free market think tank the Centre for Policy Studies mooted a ‘pay as you drive’ scheme as the only form of motoring taxation for zero emission vehicles.
Cllr Linda Taylor, transport spokesperson for the Local Government Association said: 'This report rightly highlights the urgency that is required to develop a workable alternative to fuel duty for electric vehicles.
'It is vital that we avoid a huge increase in traffic levels on our local roads, which according to official statistics, could be 54% higher by 2060.
'It is important that the Government takes steps to mitigate against this and help ensure that public transport and active travel remain attractive and affordable options.'
