Government urged to rethink road taxation policy to spur EV uptake

Motoring tax needs a rethink if it is going to be fit for the twenty first century and the increase in electric vehicles (EVs), according to the British Vehicle Rental and Leasing Association (BVRLA).

Government urged to rethink road taxation policy to spur EV uptake

The RAC though said that its own findings suggested the UK was “still some distance” from the “tipping point” where consumers would buy electric vehicles as their first choice

The BVRLA made the call in its report Road to Zero: time to shift gear on tax, which included a series of viewpoints on taxation change from industry groups such as the RAC, Centre for London and Energy UK.

Chief executive of the BVRLA Gerry Keaney said a “simple, fair and well signposted tax regime” was required to meet the challenges set out by the government on mobility and clean growth through zero-emission transport.

“To put it bluntly, motoring tax needs a rethink. Introducing a new tax is risky, so it is not surprising that policymakers have preferred to tweak – in some cases freeze – existing motoring measures,” he said.

“The advent of increasingly connected, electric and shared road transport is challenging this fiscal status quo. Today’s CO2 emissions-based tax regime has a limited shelf-life and is not effective enough in tackling increasingly devolved policy priorities, such as urban air quality and congestion.”

Broadly, the various industry groups questioned agreed that the current system of Vehicle Excise Duty (VED) and Fuel Duty, mixed with the desire to decarbonise vehicles, meant taxation needed to be overhauled to include options such as road charging. Currently, HM Revenue and Customs brings in £40bn in revenue from VED and fuel duty, which is 5% of all taxation raised.

The RAC though said that its own findings suggested the UK was “still some distance” from the “tipping point” where consumers would buy electric vehicles as their first choice. But it did report motorists’ attitudes to taxation were changing, especially with regard to road pricing. In 2014, only 28% would pay per mile on roads compared to 35% in 2018. Opposition to road user charging also fell from 45% to 38% over the same period.

The Centre for London said that with revenues declining at all levels, road charging is a way for cities to ensure that roads are self-financing, and that funding is fairly allocated between the different authorities responsible for their management.

The director of the Institute of Fiscal Studies, Paul Johnson, said the UK “can’t continue to ignore this issue and pretend that the status quo is sustainable”.

“We need a tax system which aids the move towards zero carbon transport. And we need one which continues to levy a charge on road users, not so much because that will be important to the public finances – though it will – as because we need some way of taxing the external costs created by road users,” he said.

 “Since by far the greatest of those external costs is the congestion created by driving, the move away from burning petrol won’t, in fact, change that consideration all that much.”

A joint statement from chair of the Environmental Audit Committee Mary Creagh and chair of the Environment, Food and Rural Affairs select committee Neil Parish said the Government had a “good opportunity to work with the sector” to increase EV uptake, and create a “long-term, sustainable and environmentally focused tax base that continues to support government revenues and clean air policy objectives”.

Investment uncertainty

The report comes at a time where the investment community is casting more scrutiny onto EV charging infrastructure. A new S&P Global Ratings report, released this week, notes that the infrastructure market for EVs globally could reach $350bn in annual investments in the next decade, up from $20bn today.

However, the report warns that the business model for charging stations is “currently unprofitable”, due to unpredictable supply and demand patterns and uncertainty as to how network operators will react to increased grid demand.

The report notes that the falling prices of EVs will make the market more attractive to investors, but that European utility firms are best placed to make substantial investments into infrastructure.

Shell, for example, has invested heavily in solar firms and electric car infrastructure companies in recent times as more green technologies come to the market, and has also moved to install rapid EV charging points and hydrogen cell refuelling facilities at some of its petrol station forecourts.

James Evison

Comments (2)

  1. Keiron Shatwell says:

    What would convince this motorist to purchase an EV as a first choice (when I come to replace my current petrol vehicle) is not the tax regime, as let’s be honest the government will find some way to screw every penny out of us they can, but things like the price of the EV, the actual real world range, the comfort, style, features of the vehicles themselves.

    I didn’t buy my current car for its tax status. I bought it because I liked it, it is comfortable, cruises happily on the motorway at 70 (ish), gets 450 miles to a tank and I can throw 2 mountain bikes or 2 inflatable kayaks in the back. Show me a mid sized, family hatchback EV that can do that and I’d consider it.

    Talking to a local taxi driver who runs an EV fleet (Nissan Leafs and a Tesla) he was saying that even his newest Leaf can only just get to Crianlarich and back from Fort William on a full charge, if he turns the heated seats off and it isn’t raining. The Tesla can get to Glasgow Airport and back but even he admits it’s an expensive vehicle to run as a taxi, nice but expensive.

    Whilst no one "needs" 450 mile range you do realistically need to have 3hrs at motorway cruising speeds so 240 miles, ideally on 70% of charge which equates to 343 miles on a full charge. I say 70% as that is the 80% fast charge less a 10% reserve. If you can find a charger and it can top you back to 80% in 15 mins at a services then it isn’t much different from stopping, having a comfort break then filling the car up with liquid fuel (apart from the fact I only need to do that every other stop).

    Forget worrying about road taxes, vehicle taxes and other stuff and concentrate on building the charge infrastructure for all and making EVs that people want and can afford. Not everyone can pay 30,000 plus for a basic EV (which of course has 20% VAT on it so taxed again.)

  2. Ian Byrne says:

    Road charging, with differential rates for vehicle type, is probably the only long-term solution. The Government is going to need to find a way of replacing vehicle fuel duty, but without taxing domestic electricity supplies at a greatly increased rate. Initially rates should favour EVs or other low emission vehicles (eg. H2 fuel cells), but as petrol and diesel use declines, road charges for all vehicles will have to rise.
    Of course, this will be fought tooth and nail by the civil libertarians, as whether transponder or GPS technology is used, Governments will "know" where a vehicle was at any time (although not who was in it, of course). There will also be issues about common standards when crossing international borders, and the need to make systems tamper and hack-proof. But it’s the only realistic solution that I can see in the long term.
    In the very long term, it may be possible to link vehicle use to personal carbon allowances, but I do find that rather more "Big Brother"-ish than relatively simple schemes for road charging.

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