Life after fuel tax: How road pricing could work in the UK

The government will need to plug the hole left in its finances by the switch to EVs. We look at one possible reality

Car makers may be excited by the uptake in electric cars but in Whitehall, the men and women from the Ministry are wringing their hands.

You see, EVs may be helping to save the planet but they're doing little to balance the books of UK PLC since, as is well known, they attract neither road tax nor fuel duty. As 2030 approaches, this perk will become a luxury the country can no longer afford.

This was the message from the House of Commons Transport Select Committee that met recently to discuss the issue and the possible ways forward. One solution, the MPs suggested, is road pricing. Sound familiar? In fact, UK policymakers first raised it in the Smeed Report of 1964 when they recommended congestion pricing on UK roads. It was a political hot potato that governments have kept under lock and key – until now.

With improvements in technology and experience of schemes such as the London Congestion Charge, road pricing's time may have come. We explain what it is and the challenges it could face.

*How much tax is raised from vehicles and how is it spent?*

Road tax and fuel duty generate £35 billion a year in tax revenue, equivalent to 4% of overall tax receipts. The revenue from road tax (£7bn) is allocated to the National Roads Fund for local and strategic road upgrades. Fuel duty (£28bn) is disbursed across the whole of state spending to help fund everything from schools and hospitals to public sector pensions and infrastructure projects.

*What's the problem?*

The government expects that by 2040, when electric vehicles dominate the UK car parc, very little tax will be raised from motoring. However, the government doesn't want to discourage the take-up of EVs so, rather than simply imposing a tax on them to restore the public finances, the Transport Select Committee (TSC) has suggested introducing road pricing as a means of generating revenue.

*What is road pricing?*

It uses telematics technology to charge motorists by distance driven, factoring in vehicle size and type. It also serves another purpose of managing the costs of motoring such as pollution, emissions and congestion. The TSC says that to be seen as fair and acceptable by the public, road pricing 'must be revenue neutral, with most motorists paying the same or less than they do currently.' It adds that it hasn't seen a viable alternative to a road pricing system based on telematics.

*So road pricing is inevitable?*

The TSC says that much of the technology required is already available and that 'introducing road pricing is an opportunity for the UK to be a world leader.' It recommends the Department for Transport and the Treasury appoint a body of experts to identify an alternative road charging mechanism by the end of the year.

However, it also accepts that road pricing 'has acquired the reputation as a policy that is toounpopular [with voters] to implement'. It says the government 'must start an honest conversation with the public' but soon because, it warns, as electric vehicle drivers become accustomed to no-tax motoring, it may become socially and politically difficult for theExchequer to extract motoring taxes from them in the future.

*What other country has a road pricing scheme?*

In 2009, Singapore was the first to launch electronic road pricing (ERP) aimed at reducing congestion. Sensors mounted on overhead gantries communicate with an In-vehicle unit (IU) affixed to each car's windscreen into which the vehicle keeper inserts a pre-pay card. Cameras record the vehicle's registration number. Charges fluctuate according to the time of day, with peak times being the most expensive. London's congestion charge zone was inspired by the system. A road pricing system on the scale of the UK's would need to be GPS-based.

*What alternatives to road pricing has the TSC considered?*

Recovering lost revenue in general taxation is one idea but the TSC says this would be unfair to non-drivers. Pricing electricity used for charging an EV differently from that used for the home is another but doing so would require costly infrastructure. The TSC says that whatever solution is adopted must not discourage active travel (walking and cycling), which the government is committed to increasing or encourage vehicle use and consequently congestion, which it has pledged to reduce.

*What other challenges does road pricing face?*

Persuading voters that under such a system they won't pay any more tax than they do at present will be as great a challenge as establishing one that works nationally, taking into account existing local charging schemes. Equally challenging will be delivering it on budget and on time and ensuring it pays for itself without requiring subsidy. In this last respect, the current tax-based system is extremely efficient.

There's a question, too, around retro-fitting older vehicles with the means to be tracked and charged, unless these continue to be taxed under the old system. There's also the issue of influencing driver behaviour with demand pricing, which many will resent, as well as data capture and driver privacy. On this point, the TSC says government must ensure that data management is subject to rigorous oversight. However, it also heard from witnesses who argued that 'data protection is not a top-level for concern for the public who are prepared to provide data access in exchange for efficient services and systems.'

*What do motorists think?*

Readers writing in response to a recent Autocar Opinion piece on the topic had mixed views.

One correspondent accepted that road pricing is fairer than raising general taxes and that, if you have nothing to hide, data privacy is not an issue. Another voiced concerns that road pricing will be impossible to make revenue neutral. Someone else suggested that increasing the tax on domestic energy consumption would be sufficient to plug the revenue gap but was challenged by another reader who pointed out that this would be an intolerable burden on poorer people. Another correspondent suggested taxing cars on the mileage declared at each MOT but this raises the spectre of people clocking their cars ahead of the test as well as requiring legislation to establish payment liability.

-The technology is ready now-

As a concept, national road pricing sounds reasonable but someone is going to have make it work. That person could very well be someone such as David Savage, vice president of Geotab, the world's largest fleet telematics provider.

Operating in 130 countries, it has 2.6 million connected cars on its books and processes over 40 billion data points daily. So Geotab is used to working with big numbers but even Savage admits connecting the 40 million cars on UK roads would be a challenge. "One of our solutions uses black box technology and we've got installation down to no more than 20 minutes," he says. "Even so, connecting millions of cars in a short period might require an operation like the covidvaccination programme."

He's joking. In fact, he thinks it possible the government could phase in road pricing as it phases out the current tax-based system. In any case, he says, many modern cars are sufficiently connected for Geotab and others to establish a data link without any modifications.

"Road pricing is not unworkable; the technology exists. What is necessary is that government engages with providers such as ourselves as soon as possible."