Electric cars: call for tax on road usage to cover lost fuel revenue

Posted: October 4, 2019 by oldbrew in Emissions, government, Subsidies, Travel

Electric car charging station [credit: Wikipedia]

The advice is to act soon, before too many EV owners get used to the idea that their road journeys should always be much cheaper than those made in fuel-burners.

Britain should move to a system of road pricing to combat congestion and compensate for the £28bn loss of revenue from fuel duty as the country makes the transition to electric vehicles, the Institute for Fiscal Studies has said.

The thinktank said the government’s pledge that the UK would reach zero net emissions by 2050 meant the tax take from petrol and diesel would shrink to nothing over the coming decades and a new way to raise money from drivers was needed, reports edie.net.

The IFS said decisions by both Labour and Conservative governments not to raise fuel duty in line with inflation meant that duties had fallen from 2.2% to 1.3% of national income since peaking in 1999-2000, costing £19bn a year in lost revenue.

It added that the government would lose a further £1bn a year if rumours of a 2p a litre cut in fuel duty in the budget proved to be true.

In a report, the IFS said taxes on driving would still be necessary even after the replacement of fossil-fuel-powered cars by electric models because the costs of congested roads would remain a factor.

The ideal approach, it added, would be a system of road pricing under which the charges for driving would vary according to the time of day and the location. Those driving in busy places would pay more, but the majority of journeys would be taxed less heavily than at present, the IFS said.

Road pricing has proved to be a hard sell with the public and the IFS said a second-best solution would be the introduction of a flat-rate tax per mile driven that would be used to supplement reduced revenue from fuel duties and help correct for the social costs of driving.

There was an advantage in acting quickly, the IFS warned, because it would be much harder politically to introduce such taxes only once the revenue from fuel duties had dropped much further and many people had bought hybrid or electric cars in the expectation of paying little tax on them.

Full article here.

  1. Graeme No.3 says:

    How about a tax on all those bicycle riders creating havoc on London roads?

  2. Tointon says:

    If you live in Durness (mainland Scotland, not a remote island) it is a 200 mile round trip
    to your nearest M & S, and 400 mile round trip to John Lewis. A flat rate mileage charge
    is going to make shopping expensive.
    Tamen Dubito.

    [reply] 400 miles in an EV?

  3. ivan says:

    Charge a premium for the electricity used to charge the electric cars. That would solve two problems 1) loss of tax revenue and 2) the cost of updating the electric infrastructure necessary to charge all the electric cars.

    If they removed all the green stupidity, including checking for insider trading by members of the climate change committee, non of these measures would be necessary since all the green wash is nothing more than grand scale virtue signalling on the part of the politicians.

  4. pochas94 says:

    Regulation by people who have absolutely no idea what they are talking about will drive your economy into the ditch.

  5. chaswarnertoo says:

    The assumption that HMG needs the cash should be challenged. How about DROPPING tax take?

  6. stpaulchuck says:

    I like taxing the electric charging stations. It removes the headache of getting the odometer readings and keeping records on them for one thing. In addition it penalizes heavy ev’s because they will use more electricity.

  7. pochas94 says:

    I like hydrogen, with ammonia for transportation and storage, if we can afford all of the infrastructure. Time will tell.

  8. cognog2 says:

    As predicted by many this is inevitable. I reckon the best way to deal with this is have all EVs fitted with a smart meter which automatically takes the tax independently of the price of the electricity charged. To be acceptable the tax needs to be perceived as fair both to EV and ICE owners.
    The problem for the government here is that the imposition of this tax would seriously reduce the take up of EVs by the public, as would even the threat of it.

  9. oldbrew says:

    If they put a big drag on the economy with their so-called green policies, interest in expensive (compared to the competition) EVs could well fade even from its present very low level.

    Big fuel tax hikes would just create more dependency by the gov’t on that revenue stream, and probably drive up economic inflation as well.
    – – –
    The EV Free Lunch is coming to an end
    By Ronald Stein | September 20th, 2019

    For years electric vehicle owners benefited from federal subsidies (financed by the working class). They also enjoy exemptions from the fuel taxes that pay for road and bridge maintenance as they use no “fuel” as it relates to powering a combustion engine.

    Things are changing and rather quickly. With subsidies beginning to end, states are also hitting electric vehicle owners with high fees in an effort to put all vehicles equally accountable for financing repairs and maintenance of our highway infrastructure.


    Subsidising the better-off can’t go on indefinitely, and won’t change the weather.

  10. Gamecock says:

    ‘costing £19bn a year in lost revenue’

    If we let you keep some of your money, it is a ‘cost.’ Cos all your money are belong to us.

    ‘The ideal approach, it added, would be a system of road pricing under which the charges for driving would vary according to the time of day and the location.’

    Government spying on your every move would be ‘ideal.’

  11. oldbrew says:

    Higher fixed annual road tax and lower fuel duties might be one way to go.

  12. oldbrew says:

    Electric Vehicles ‘being outstripped by the popularity of SUVs’ – Electric cars ‘represent less than a tenth of 1% of the 1.1 billion cars’

    ‘The even more telling fact is that the growth of EVs is being exceeded by the much more rapid growth in the number of SUVs. After growth of over 20 per cent a year earlier in the decade, the global demand for SUVs is now stabilising but at a high level of market share. In the US, SUVs account for 45 per cent of new car sales. But the trend is not limited to the US. In Europe SUVs take 34 per cent of new sales, in China 42 per cent and in India 23 per cent.’


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