Current State of Motoring Tax
The UK hasn’t updated how it tracks motoring tax. This is an issue because cars are changing, and the way we tax them needs to change too. Right now, there is a tax on petrol and diesel called fuel duty. But this tax hasn’t gone up with inflation for 13 years. This is because the government doesn’t want to upset drivers. However, this tax will soon be gone.
Why Fuel Duty is Decreasing
Fuel duty brings the UK government about £25bn every year. But more people are buying electric vehicles (EVs) now. EVs don’t pay this tax. Last year, 1 out of every 6 cars sold was electric. And, by 2030, the UK won’t allow new petrol and diesel cars to be sold. This means the money from fuel duty will be gone.
The Impact on the Government’s Money
The money from fuel duty is over 2% of what the government makes. This is a big deal. There is a thought to start taxing EVs slowly over time. This is because, even if they don’t use petrol or diesel, EVs still have costs for things like road repairs, accidents, and traffic jams.
Traffic and EVs
UK drivers spend about 115 hours in traffic each year. This costs about £7bn. Traffic might go up by 20% by 2060. And because EVs are cheaper to use, people might drive more. The current tax doesn’t help with traffic problems. So, a new way to charge EVs will be needed to make road use better and make up for the lost tax money.
A New Approach: Road Pricing
The UK should start charging cars based on how many miles they drive. At first, only EVs would pay this. One idea is to charge six pence for every mile driven. Cars could use built-in tools like GPS to track miles. This system could then be used in cities to charge more in busy areas. The money made could help improve buses and trains.
Protecting Motoring Tax with the Move to EVs
Switching to electric cars is good for the environment and will contribute toards companies going green by 2050. But they are still expensive. So, this new charge should start small and go up slowly. There could also be some free miles at the start. The government should tell people about this plan now, so drivers know that eventually, they will have to pay.
The Risk of Waiting on Motoring Tax
Not making changes now could be a problem later. The money from fuel duty is going down and needs to be replaced. Charging for road use can help the government and reduce traffic and attempt to recover for the loss from fuel duty.
In summary, as cars change, the way we tax them needs to change too. The UK should think about a new approach to motoring tax soon or risk having to tax road users heavily in an attempt to catch up the position.