Autumn Budget 2021: Government accused of "kicking the can down the road" on EV road tax

Witnesses at the Transport Select Committee meeting agreed that a simple national system needs to be introduced but with the flexibility for it to be changed in the future. 

Poston said: “Any new road pricing scheme must be easy to pay and have the simple objective of providing a revenue-neutral replacement for fuel duty and VED. 

“It should be based on a simple ‘distance driven’ model that considers vehicle weight, emissions and use case, with discounts given to shared mobility solutions – such as car clubs, rental cars, buses and taxis – to incentivise more sustainable travel choices.”

As to how much people would pay, John Siraut, director of economics at multidisciplinary consultancy 
Jacobs, which has worked on the introduction of road charging in other countries, suggested that to roughly raise the same amount of revenues as the Treasury does now for VED and fuel duty “about 10p a mile would be the base charge”.

However, he said: “You would want a flexible system that had very differential charges between rural and urban areas, time of day, and so on." 

Alistair Hunter, highways business leader at design and technical engineering consultancy Arup, said: “I think it has to be dynamic. You have to have flexibility. If you look at the outcomes that you are trying to achieve, that is where you start from.

"In an urban environment at peak hours, you are trying to disincentivise people from using the car. In a rural environment on a Sunday afternoon, it is a totally different price point. I see variability in that.”

Traditionally, road pricing has been a ‘political hot potato’ - the 1997-2010 Labour Government looked at national road pricing but went off the idea due to the negative reaction from voters. 

Recent surveys have had mixed results, with some suggesting people are more open to the idea, particularly as they have got used to paying the London congestion charge and more cities introducing clean air zones, but there are also concerns about privacy and security. 

Understanding where the revenue raised goes will help get buy-in from the public, according to witnesses at the Transport Select Committee. 

They suggested a need for transparency about the overall amount of money that is raised, not just through fuel duty and vehicle excise duty, but from air passenger duty and other transport and travel sector related funds. 

The cost to implement the system, the technology solutions and regulation are all factors the Government will need to consider. 

Instead of road pricing, the Government could consider a tax on charging electric cars but Mike Williams, director for business and international tax at HM Treasury, highlighted the challenges to the Transport Select Committee. 

“With electricity, you already start with the fact that there are far more suppliers of electricity and you then have the issue that electricity is used for other purposes,” he said. 

“If you are thinking of people charging in the home, and certainly if I were to do that, at the moment there is no mechanism for my supplier to know if I am using the washing machine or charging a car. 

“You would have to put in that infrastructure if you were to go down that road, which is new infrastructure that is not there, which would have to be paid for.”

As to whether taxing insurance is a means of raising revenue, Williams said: “We charge insurance premium tax on insurance premiums for motoring insurance. To that extent, we are already taxing it.”