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The chancellor has reportedly revived the idea of a national pricing scheme for roads as the green car revolution curbs £ 40 billion in annual tax revenue.
The Treasury, according to The Times, is exploring ways in which Rishi Sunak it can replace the lost fuel tax and the special vehicle tax (VED), better known as the car tax, as the shift to electric vehicles accelerates.
Ideas for such a move include a highway toll system or “drive fee,” a concept that the Tony Blair government last explored in 2007 but was abandoned due to opposition from motorists.
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The newspaper reported that the foreign minister was “very interested” in the idea of a road pricing scheme as ministers accelerate plans to ban the sale of new gasoline and diesel vehicles.
The Financial Times has reported that the current 2035 deadline will be pushed forward to 2030 to help meet the government’s goal of net zero carbon emissions by 2050.
According to the Institute for Fiscal Studies, the fuel tax, frozen since 2011, generates around £ 28bn in a typical year and the balance comes from VAT on fuel sales and VEDs.
That £ 40bn tax collection is threatened by environmental targets, hence the push to find an alternative route for road-related charges.
Why coronavirus disruption, the year 2020 is not turning out to be a great guide for the demand for electric vehicles.
But the most recent figures from the Society of Motor Manufacturers and Traders (SMMT) show that nearly 76,000 battery electric vehicles have rolled off showrooms so far this year.
In comparison, more than a million gasoline and diesel cars have been sold.
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However, the figures indicate a change in behavior as the range of electric models on offer expands.
Statistics from SMMT show a 168% increase in electricity sales, while diesel is down more than 50%.
It’s a 39% drop in gasoline vehicles so far this year.
The AA has acknowledged that the current highway tax regime poses a threat to the Chancellor’s income, at a time when Sunak is already under pressure to repay a record peacetime loan demanded by the COVID-19 crisis.
The president of the car organization, Edmund King, said: “The government cannot afford to lose £ 40 billion in fuel taxes and car taxes when the electric revolution comes.
“It was always assumed that the price of roads would be the solution, but that has risen every five years since 1964 and is still perceived by most as a ‘tax on wheels.’
The AA has supported the idea of a subsidy for motorists, with any miles over 3,000 per year subject to charges and greater freedoms for those in rural areas where there is less public transportation.
The Treasury, and Mr. Sunak himself, have declined to comment.
