Resolution Foundation calls for use of new technology to enable road charging, congestion charging, VED reform
Thu 01 June 2023
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A new report by the Resolution Foundation, the independent UK 'think tank' says that a national, per-mile road duty system should be introduced that leads to EV drivers paying 6p per mile driven from 2027, when one–in–six of all car miles are expected to be electric. The report also calls for local areas to be empowered to introduce congestion charging with both reforms enabled by GPS technology.
The Resolution Foundation says that the transition to net zero means that the way we drive is changing, bringing with it the prospect of sharp falls in motoring-related tax revenues. This risks an annual £10 billion black hole in the early 2030s and reaching more than £30 billion per year within the next three decades. The report says that the rapid and welcome uptake of electric vehicles must come with reform of motoring-related taxes that protects tax revenues, helps limit congestion, and considers the potentially disproportionate impacts on low-to-middle income households.
The Foundation says that Government has already acted to reform Vehicle Excise Duty (VED), the UK’s other main transport tax, by extending annual charges to EVs from 2025. While this approach will protect revenues, it will see the tax burden shift from those who can afford new cars than if reforms protected VED levied at the point of purchase.
In addition to a national, per-mile system of road duty (with drivers of fossil-fuelled vehicles continuing to pay Fuel Duty), the report calls for reforms to Vehicle Excise Duty so that at-purchase VED is based on vehicle weight, with a per-kg charge for all vehicles above a certain weight limit.
It also calls for VAT on public charging to be reduced from 20 per cent to 5 per cent, matching that enjoyed by motorists able to charge at home. Costs, it says, should be recouped from other motoring taxes, with a higher rate on upfront VED likely to be the most progressive option.
In a response to the Resolution Foundation's paper, the Local Government Association (LGA) acknowledges that a workable alternative to fuel duty for EVs is needed. The LGA, however, calls on the Government to take steps to "avoid a huge increase in traffic levels" and ensure that public transport and active travel remain attractive and affordable options.
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