Since EVs are successful(ish) in the U.K., road user taxes have gone done. No good deed goes unpunished, eh?
Electric vehicles’ success is a headache for the Treasury
When Rishi Sunak announced a temporary cut of 5p a litre in fuel duty in last week’s Spring Statement, electric vehicles were probably not at the front of the chancellor’s mind. He was focusing on the vast majority of road users who experience “pain at the pump” from spiralling petrol costs. Yet the accompanying fiscal outlook from the Office for Budget Responsibility, the independent watchdog, noted that more than one in 10 cars sold in the UK last year were electric; by 2027, it forecast the proportion would rise to 59 per cent — double its forecast only six months ago. Consumer appetite for electric vehicles has consistently run ahead of the OBR’s estimates.
This poses a headache for the exchequer because of the importance of revenues from fuel duty and vehicle excise duty, neither of which electric car owners have to pay. Together, they raise about £35bn a year. The OBR forecasts the higher share of electric car sales alone will reduce motoring tax revenues by £2.1bn by 2026-27. It also assumes Sunak will be able to keep his promise to reverse the 5p cut in fuel duty — which may well prove over-optimistic.
One way to help balance the books might be to remove the subsidy regime, which has already been scaled back over the past decade and is now capped at a £1,500 grant on electric cars costing less than £32,000 — helpful support for EV sales. This would be foolhardy. The EV market is still in the nascent stages of growth, and government support to improve uptake will be warranted for some time yet.
The Commons transport select committee last month recommended considering road user charging as a like-for like replacement for fuel duty. This would involve monitoring all cars in the UK and charging according to the distance they drive, factoring in the type of vehicle used, and congestion. Some economists like this idea as a way of charging motorists proportionately for the public cost of building and maintaining roads. As the committee cautioned, however, any road charging mechanism should entirely replace fuel duty and vehicle excise duty rather than being added to them, and should not result in motorists paying more.
The government creates the problem by requiring these types of vehicles, then whines about the loss of revenue, so, finds new ways to get the money, which can be problematic for those who are over-reaching their budget when buying an EV.
And all being done for a scam.
Read: Oops: British Government Looking For Ways To Tax EV Users »