UK road pricing could be here by 2024

The Transport Select Committee has presented its report to MPs backing the introduction of a new road pricing structure to replace fuel duty and VED (Vehicle Excise Duty) as a means of generating tax revenue to plug the financial hole created by the switch to electric vehicles. 

Any new road pricing structure would replace the current VED and fuel duty by means of ‘dynamic tax charges’ that charge driver’s a variable price per-mile depending on the time, location and type of vehicle being driven. As well as a means of raising tax revenue, the report states that it could also be designed to modify driver’s behaviour with a key objective of reducing urban traffic by as much as 50 per cent by 2030.

Electric cars are currently exempt from paying VED charges and there is no duty payable on the electricity used to charge their batteries, therefore should the current system remain as it is there is a potential for a £35 billion shortfall in the Government’s annual tax revenue should its goal of switching the UK’s fleet of internal combustion engined cars to electric come to fruition. 

Road pricing is one of the levers MPs say will be required to make up the revenue shortfall. The government is likely to back the road pricing plans, with the Chancellor of the Exchequer Rishi Sunak in favour of the introduction of such a scheme.

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The reality of a road-pricing system would require a GPS device fitted to every car and registered to its user, this would be directly connected to a telematics system logging the times and location of where you have been and which route you took and the charge calculated on the time of day you travelled. This could be something as simple as activating your location on a smartphone device, or a specific piece of hardware installed in your car.

However, there have already been questions raised as to privacy laws regarding this level of surveillance, which the report refutes using the example of black boxes that are already voluntarily installed by young drivers as a means of reducing their insurance premiums. However, how well this goes down with experienced road users is another matter, and one that will likely remain very contentious. 

The Committee report does have some good news for drivers, in that it recommends the switch to road pricing “should be revenue neutral and not cause drivers, as a whole, to pay more than they do currently”. However, given the soaring rates of taxation piled onto drivers over recent decades, they may have reason to be cynical about future intentions, especially with a system designed to offer economic levers that change driver behaviour. 

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In response to the report, John O'Connell, chief executive of the TaxPayers' Alliance said "Road taxes should be designed to manage traffic jams and pay for repairs, not simply shake down motorists for more money. 

"Politicians are right that drivers as a whole should not pay any more, moving Britain on from VED and punitive levels of fuel duty. But road pricing cannot just be a tool for the taxman to replace lost revenues, given that drivers are already often overtaxed. 

"Any road pricing system should be set up to only consider cutting congestion on the roads, not raising any more money it needs to do that."