UK road pricing plans: GPS tracking and pay-as-you-go could replace fuel duty and VED

Taxes on petrol and diesel could soon be scrapped alongside Vehicle Excise Duty (VED), with motorists instead paying taxes based on where and when they drive.

That’s the recommendation of the influential Transport Select Committee of MPs in its report on road pricing released today, which calls for a system of ‘dynamic tax charges’ to be introduced that’s based around a telematics system logging details of every journey individuals make by car.

They call the proposed system ‘dynamic’, as it will be able to charge drivers different amounts at busy periods or in areas where traffic is to be discouraged. Rates will also differ according to the type of vehicle being driven, and the system should be designed so that it can be used to modify driver behaviour in future, the report says.

One aspect of policy the report highlights is the government’s stated objective to shift 50 percent of urban car journeys to public transport or pedal-power as soon as 2030, in order to meet its net zero carbon target. Road pricing is one of the levers MPs say will be required. It’s thought the government is likely to back the plans, and it has previously been reported that Chancellor of the Exchequer Rishi Sunak is in favour of road pricing schemes.

£35 billion fuel duty and VED black hole

The Transport Committee MPs say the government has just two years to plan for a ‘world leading’ telematic charging system – likely to use the built-in GPS tracking capability of drivers’ own smartphones – or risk losing £35 billion as fuel duty and VED revenues dwindle in the electric car switchover. 

Road pricing has been a contentious political issue for decades, and the subject has previously been considered ‘politically toxic’ after a previous Labour government under Tony Blair proposed and then withdrew similar proposals due to a voter backlash.

However, the Transport Committee says the switch to electric cars means the economic picture has changed, and if the government does nothing then fuel duty revenues will melt away leaving a black hole in public finances. Of the £35 billion currently raised from fuel duty  and VED, just 20 percent is spent on roads, with the rest going on general government expenditure.

Electric car tax burden to rise?

At present, EV drivers benefit from a vastly reduced cost of motoring compared to traditional petrol and diesel powered cars. “In signalling a shift to any alternative road charging mechanism, the Government must make it clear to motorists who purchase electric vehicles that they will be required to pay for road usage, as is currently the case for petrol and diesel vehicles,” the report states, adding: “Cheaper driving is likely to lead to more driving… increased congestion will make it harder for the government to achieve its transport policy objectives.”

The Committee report does have some good news for drivers, in that it recommends the switch to road pricing “should be revenue neutral and not cause drivers, as a whole, to pay more than they do currently”. However, given the soaring rates of taxation piled onto drivers over recent decades, they may have reason to be cynical about future intentions, especially with a system designed to offer economic levers that change driver behaviour. 

As well as the increasingly urgent need to plan for reduced fuel duty revenues, the MP’s report suggests central government action is required swiftly to prevent a confusing patchwork of low emissions zones and charges springing up in metropolitan areas across the country.

GPS car tracking and privacy

Addressing fears that a proposed telematics system represents an invasion of privacy, the report points to the fact that some young drivers already voluntarily install black boxes that monitor driving habits in order to reduce insurance premiums, suggesting there’s evidence that the public “are prepared to provide data access in exchange for efficient services and systems”.

In response to the report, John O’Connell, chief executive of the TaxPayers’ Alliance told Auto Express: “Road taxes should be designed to manage traffic jams and pay for repairs, not simply shake down motorists for more money. 

“Politicians are right that drivers as a whole should not pay any more, moving Britain on from VED and punitive levels of fuel duty. But road pricing cannot just be a tool for the taxman to replace lost revenues, given that drivers are already often overtaxed.

“Any road pricing system should be set up to only consider cutting congestion on the roads, not raising any more money it needs to do that.”

Find out how much company car tax you’ll pay on electric cars…