20th January, 2021

Driven by Passion...
Pay-as-you-drive-tax

As sales of electronic vehicles continue to rise, there is an estimated shortfall of £40 billion in revenue. This is from fuel duty, VAT and vehicle excise duty. This is because the road fund licence is free for electric vehicles. And of course they use no petrol or diesel. According to The Times, chancellor Rishi Sunak is very interested in the idea of introducing a national pricing scheme. So people pay for howe much they use when it comes to driving on the country’s roads.

As well as the shortfall in road fund license, there is also a decline in revenue from fuel duty. This is because electric cars do not use petrol or diesel. The new suggested plans coincide with Boris Johnson’s intention to ban the sale of new petrol and diesel cars in the UK by 2030.

Since March 2011, fuel duty on petrol and diesel has been 57.95p per litre. It is thought that this extra tax brings in an additional £28 billion per year. This is almost 1.5% of the UK’s national income. In addition to this, the government makes money on the VAT portion of fuel. And of course money is made from vehicle excise duty (road tax) as well.

Alternative Solutions

Other measures to try and claw back much needed revenue from motorists have also been considered. These are:

  • Pay-as-you-drive tax
  • Clean air zones
  • Toll roads
  • Workplace parking charges

Currently there is only one toll road in the UK, and that is on the M6 in the West Midlands. Currently, cars are charged £6.70 HGVs are charged £12 to use it on weekdays. A pay-as-you-drive pricing scheme was suggested back in 2007, but was later rejected after a petition of almost 2 million signatures against the plans.

As many as 40% of motorists currently think that a pay-as-you-drive would be fairer than the current system of fuel duty. 50% of motorists think that the people who drive moe should pay more tax to do so. Many motorists also agree that any tax revenues made from any fuel duty replacement should be reinvested directly into the UK’s road network.

Such a system does come with drawbacks though. In order to use such a pricing system, vehicle-tracking technology would need to be used, which raises privacy issues as well. One thing is for certain, and that’s the fact that electric cars are causing a reduction of revenue from the government, so it’s highly likely that something will be done about it sooner rather than later.

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