Call for a ‘Road Duty’ for electric vehicles

Vehicle taxation report proposes local congestion charges, reports Deniz Huseyin

There is a strong case for introducing both a per-mile ‘Road Duty’ for electric vehicles and local congestion charges, states a report on reforming vehicle taxes. Fuel Duty is the UK’s main motoring tax, raising £25bn in 2022-23, reports The Economy 2030 Inquiry. “This contribution, however, is already in decline,” it notes. “Receipts likely peaked in 2019, and the increasing prevalence of EVs means an annual shortfall of £10 billion is expected by the early 2030s.”

The Economy 2030 Inquiry is a collaboration between the Resolution Foundation and the Centre for Economic Performance at the London School of Economics, funded by the Nuffield Foundation.

There is an urgent need to replace Fuel Duty, the inquiry found. There are many ways that an electric driving tax could be implemented, but “sufficient public support and political deliverability are fundamental”, says the report, which is called Where the Rubber Hits the Road. “For that reason, while some argue for mile-by-mile variation in road pricing in response to congestion, we don’t support this.”

Instead, the inquiry calls for a system as straightforward as

Fuel Duty. “We therefore recommend a national per-mile ‘Road Duty’ which – based on typical Fuel Duty costs – would be around 6 pence per mile (plus VAT) for a typical electric car. Such a scheme would be easy to understand and receive relatively high acceptance as a fair, like-for-like replacement while ensuring that EVs remain cheaper to drive than non-EVs.”

There are four key choices to consider beyond this basic vision, states the report:

1) Using an in-vehicle system that makes use of the cell network, milometers and global positioning system (GPS) to periodically report taxable miles driven each month – allowing accurate direct debits (ideally using existing Vehicle Excise Duty payment arrangements).

2) Fuel Duty should continue to be used, rather than switching non-EVs to a per-mile charge

(which would not target carbon emissions as accurately as Fuel Duty does and would not be as simple to collect).

3) Coupling a simple Road Duty approach based on GPS with locally-determined congestion charges which have the benefit of not needing expensive infrastructure. This could be extended to fossil-fuelled vehicles that are technologically ready for permile charges, as they still cause congestion and it would not be desirable to exempt them from local Congestion Charge.

4) The government should be aiming to begin charging Road Duty on compatible EVs by 2027 – by which point one in every six miles driven are expected to be electric, and the missing tax revenue will top £3bn.

The inquiry proposes reforms to Vehicle Excise Duty (VED) by taxing new cars according to