Road pricing in the spotlight in Commons debate

Hobhouse, the party’s spokesperson on energy and climate change, led a debate on this issue in Westminster Hall on 19 October.

Hobhouse said that if the Government is serious about encouraging the uptake of electric vehicles, it must ensure that the infrastructure is there, such as public electric vehicle charging points. She suggests providing grants for electric car conversion, saying these will help lower-income families who are struggling with the cost-of-living crisis, while also being part of the movement to less carbon-intensive transport options. If we are to transition to net zero sustainably, the Government must find a way to fill the taxation income gap caused by declining fuel duty, she said.

On possible solutions, Hobhouse said one approach would be a scheme based on mileage. Other factors, such as emission levels or road type, could be added into the mix. She cited recent Campaign for Better Transport findings that say the public appear to be open to the idea of road pricing, otherwise known as pay-as-you-drive. She said there is a consensus backing pay-as-you-drive. A system based on rewarding those who drive less, rather than a flat rate, could lead many members of the public to use their cars less and use public transport more, she believes. The idea that drivers who drive more should pay more in tax, and that those who drive less should pay less, was popular in the survey and it is clearly the right direction to take, she argued.

Hobhouse continued: “Reforming the system towards pay-as-you-go would also bring transparency to vehicle taxation. Many drivers are unaware of the level of fuel duty that exists within the price that they pay for fuel. It is important that we bring clarity and openness to the vehicle taxation system when we reform it.”

Huw Merriman, Conservative, and the chair of Parliament’s Transport Select Committee, said the reason why we need road pricing is not just to fill the upcoming fiscal hole, but because devolved mayors, in using their powers, are creating a patchwork of road-pricing schemes, and it will be difficult for the Government to get into that space with that patchwork already in place.

Richard Foord, Lib Dem, said we need to expand fuel duty relief for rural communities, so that it brings down prices immediately and eases the cost of living in the short term.

The Exchequer Secretary to the Treasury, Felicity Buchan, responded to the debate for the Government. She began by setting out ‘the background’ to the present system of vehicle taxation, with fuel duty and vehicle excise duty at the heart of it.

The minister reminded MPs that the rural fuel duty relief scheme gives support to motorists by compensating fuel retailers in some select rural areas. She said that as road users switch to electric vehicles, tax receipts from fuel duty and vehicle excise duty will decrease if the present system remains unchanged. “The net zero review indicates that tax receipts from fossil fuel-related activity will eventually trend towards zero,” she noted, with revenue from fuel duty projected to decline from 1.2 per cent of GDP in the middle of the decade to 0.2 per cent by the 2040s.

The Government are committed to ensuring that revenue from vehicle taxes ‘keeps pace with that change’, said Buchan, by which she presumably means the Government want to keep receipts from vehicle taxes at current levels in real terms, even in an all electric vehicle scenario.

“In considering how to replace those lost tax revenues, the Government will also consider the secondary impacts of existing vehicle taxes, not least in reducing road congestion,” Buchan continued, in what might be seen as a subtle hint that road pricing is within the Government’s thinking.

The minister would not be drawn on a suggestion from Hobhouse that ‘we disincentivise people from using their cars and incentivise more use of public transport’.

The full debate can be read here.

By Hamant Verma, CIOT Senior External Relations Officer