Transport Committee says it’s time for “honest conversation” on motoring taxes
The cross-party Commons Transport Select Committee has concluded that a road pricing system, based on miles travelled and vehicle type, is needed to enable the Government to maintain the existing link between motoring taxation and road usage.
In its new report, Road Pricing, the Committee warns that it has not seen a viable alternative to a road charging system based on road use.
The problem is well known, but until now has been considered too politically sensitive to tackle.
The ban on the sale of new petrol and diesel vehicles from 2030 will result in a collapse in two principal motoring taxes, fuel duty and vehicle excise duty, which raise £35 billion a year – significant sources of Treasury revenue.
But neither fuel duty nor vehicle excise duty are levied on electric vehicles. Without reform, the Committee concludes, policies to deliver net zero emissions by 2050 will result in zero revenue for the Government from motoring taxation.
The Committee argues that Government must move fast. It says motoring taxes are increasingly duplicated by local schemes that charge motorists for entering congestion zones and clean air zones. This “growing patchwork of devolved schemes” may make it impossible to deliver a national road pricing scheme, because the “simultaneous operation of local and national road pricing schemes would create confusion and unfair double taxation.”
Chair of the Transport Committee, Huw Merriman MP, said, “It’s time for an honest conversation on motoring taxes. The Government’s plans to reach net zero by 2050 are ambitious. Zero emission vehicles are part of that plan. However, the resulting loss of two major sources of motor taxation will leave a £35 billion black hole in finances unless the Government acts now - that’s four per cent of the entire tax-take. Only £7 billion of this goes back to the roads; schools and hospitals could be impacted if motorists don’t continue to pay.
“We need to talk about road pricing. Innovative technology could deliver a national road-pricing scheme which prices up a journey based on the amount of road, and type of vehicle, used. Just like our current motoring taxes but, by using price as a lever, we can offer better prices at less congested times and have technology compare these directly to public transport alternatives. By offering choice, we can deliver for the driver and for the environment. Road pricing should not cost motorists more, overall, or undermine progress on active travel.
“Work should begin without delay. The situation is urgent. New taxes, which rely on new technology, take years to introduce. A national scheme would avoid a confusing and potentially unfair and contradictory patchwork of local schemes but would be impossible to deliver if this patchwork becomes too vast. The countdown to net zero has begun. Net zero emissions should not mean zero tax revenue.”
And when replacing the existing motoring taxes, the committee calls for the Government to ensure that the new charging mechanism:
entirely replaces fuel duty and vehicle excise duty rather than being added;
is revenue neutral with most motorists paying the same or less than they do currently;
considers the impact on vulnerable groups and those in the most rural areas;
does not undermine progress towards targets on increased active travel and public transport modal shift; and
ensures that any data capture is subject to rigorous governance and oversight and protects privacy.
The Committee describes the situation as urgent. It recommends that to fulfil their respective and connected responsibilities for managing congestion and maintaining the public finances, the DfT and the Treasury must jointly establish an arm’s-length body with an appointed individual to evaluate options to replace motoring taxes.
The body, says the Committee, “should consult experts on road planning, taxation and telematic technology, and it should consider international experience. It should be tasked with recommending by the end of 2022 an alternative road charging mechanism to replace fuel duty and vehicle excise duty.”