Analysis
16 Oct 19

UK considers road pricing to replace lost fuel revenue

The ‘looming black hole’ of lost tax revenue raised from petrol and diesel sales, as drivers switch to electric power, has led British MPs to kickstart a national debate about road pricing.

The House of Commons Transport Committee wants to discuss how the Government can replace about £40 billion (€46bn) per year generated from duty and VAT on fuel and road tax.

VAT is only 5% on domestic electricity, compared to 20% for road fuels, and electric cars pay no annual road tax. EVs also avoid the 57.95 pence (67 cents) per litre duty that the Government levies on petrol and diesel.

This huge income will need to be replaced, said the Committee, if the Government is to continue to invest in transport infrastructure and prepare the transport network for a greener future.

New EU road pricing rules

The European Union has already created a framework to encourage its member states to use taxation and infrastructure charging to promote the principles of 'user pays' and ‘polluter pays’. In 2027 new pricing rules will come into force across the 136,706km of roads in the EU’s trans-European transport network, that will require member to change their charging systems for van and minibuses to distance-based charges (tolls), rather than time-based charges (vignette). Countries will still have the option not to levy tolls.

In Brexit-bound Britain, the Transport Committee wants to restart a national debate on the economic, environmental and social impacts of road pricing. This would move taxation from fuel burnt to miles driven, combining road tolls with congestion charges, a workplace parking levy, low emission zones, and a levy on heavy commercial vehicles.

Fiscal black hole

Lilian Greenwood MP, Chair of the Transport Committee, said: “We cannot ignore the looming fiscal black hole. We need to ask how we will pay for roads in the future and in answering that question we have an opportunity for a much wider debate about our use of road space, cutting carbon emissions, tackling congestion, modal shift and how we prioritise active travel.”

This is not the first time that politicians have shown interest in road pricing in the UK, but the last coherent plans to introduce it were abandoned more than a decade ago.

Authored by: Jonathan Manning
Advertorial: