Road pricing is inevitable in the UK to replace lost tax revenue as the government phases out petrol and diesel cars in the coming years, transport experts have warned.
This is according to a Financial Times report which said Treasury papers published on Tuesday, alongside a broader net zero strategy document, outlined how the push towards electric vehicles would create a fiscal black hole requiring “new sources of revenue”. While none of the documents referred to road pricing — a concept which ministers are loath to discuss in public because they fear a voter backlash — experts said the government needed to start discussing how such a scheme could work.
Tuesday’s Treasury review warned that hitting the UK’s 2050 net zero carbon target would lead to receipts from five taxes drying up: fuel duty, vehicle excise duty, landfill tax, the carbon price floor and the emissions trading scheme. The document warned that the transition to electric vehicles would create a temporary tax vacuum equivalent to 1.5 per cent of gross domestic product by the 2040s that could only be partially replaced by carbon taxes. The alternative to new taxes was more state borrowing which would not be responsible, it concluded.
Stuart Adam, senior research economist at the Institute for Fiscal Studies, said it was “troubling” that the government had hinted at the need for new road taxes without being “upfront” about them. “What I’d like to see is proper road pricing, so we tax people not only on how far they drive but also the time and place . . . to ease congestion,” he said. “If the government is going to do it they need to prepare the ground in terms of the politics and the administration and technology.”
Toby Poston of the British Vehicle Rental and Leasing Association said it was “inevitable” that road pricing would be needed. “The longer we leave it, the more people will get used to the idea of having very low-cost transport . . . and it (road pricing) is going to be a shock,” he told the House of Commons transport select committee.
The Climate Change Committee, the government’s environmental adviser, has previously estimated that reaching net zero could cost £1.4tn by 2050. About a quarter of that would be funded by the government, according to the Office for Budget Responsibility. However, the CCC also said that moving to low-carbon alternatives would generate almost £1tn of savings.