Updated: Jun 5
A think tank has called for a 6p per mile ‘Road Duty’ charge to be levied on electric cars to help fill the financial black hole caused by declining fuel duty revenue as drivers switch away from petrol and diesel vehicles.
The Resolution Foundation says the new fee would help shore up the public finances whilst still making electric vehicles attractive to buy and run.
The Foundation says: “This new duty could be collected using GPS data that new EVs are already built with, and paid via monthly direct debits to minimise disruption to motorists.”
Responding to the report – Where the rubber hits the road – Steve Gooding, Director of the RAC Foundation, said: “These are still early days for the electric car market – the ban on selling new petrol and diesel cars from 2030 is helping pull-through an ever-growing number of new models of all shapes and sizes, but we also hear motor industry chiefs reporting people switching back to petrol and diesel vehicles because they are easier to use.
“Huge swings in electricity prices have left people unsure about the running cost advantages of switching. No wonder that ministers might fear introduction of a per-mile charge for EV drivers could risk slamming the drive away from fossil fuels into reverse.
“The chancellor is wrestling with two mutually incompatible imperatives: the fiscal desire to maintain his tax take from drivers and the environmental urge to make electric cars attractive to buyers.
“Whilst giving a so-called ‘tax break’ to wealthier households who avoid fuel duty by going electric might look illogical the fact is there’s a green urgency to get those cars onto our roads in increasing numbers, and that means encouraging the people who are in the market for buying new.
“One thing is definite, with so much duty revenue at stake the chancellor must eventually make public his long-term plans for reforming motoring taxation. The more people who have gone electric on the basis of fuel savings, the less popular it will be to create a new motoring tax that catches them by surprise.
“A bold chancellor might, in the short to medium term, decide that losing a few billion pounds in fuel duty is a price worth paying to save the planet.”