A new report from New AutoMotive has called on the Chancellor to scrap plans for a significant increase in road tax for electric vehicle (EV) drivers in the upcoming Autumn Budget. The report, titled “Vehicle taxation: the next 25 years,” argues that radical tax reform is unnecessary to support the transition to cleaner transport and recommends a series of measures to ensure EVs remain a viable and affordable option for motorists.
One of the key recommendations in the report is to rule out pay-per-mile road pricing for EVs. Based on the experience of Iceland and New Zealand, the report warns that such a policy could have a detrimental impact on EV sales. Both countries saw a decline in EV adoption following the introduction of pay-per-mile road pricing.
The report argues that road pricing is unnecessary to address the negative impacts of driving on society and the environment. As EVs become more prevalent, air pollution and greenhouse gas emissions will significantly decrease, mitigating these concerns. Additionally, the report suggests that the impact of EVs on road wear and congestion is often overestimated.
Instead of implementing road pricing, the report recommends reforming road tax (vehicle excise duty) to ensure that all vehicles, regardless of age, are taxed based on their efficiency. This would mean that owners of less efficient vehicles would pay more, while owners of more efficient EVs would pay a fair rate.
Under the previous administration’s plans, drivers of cleaner cars were set to pay up to 10 times more than owners of older, more polluting petrol and diesel vehicles. This would have created a significant “EV tax penalty” that could have discouraged people from adopting EVs. The report argues that this penalty should be avoided to ensure that more people can benefit from the advantages of electric vehicles.
The report also recommends only modest increases in fuel duty for petrol and diesel vehicles. While freezing fuel duty has not hindered decarbonisation efforts, a gradual increase of 2 pence every 3 years would provide sufficient revenue to ensure that drivers of internal combustion engine vehicles continue to contribute to the cost of their emissions.
Finally, the report calls for a VAT cut on public charging. This measure is both necessary and affordable and could be funded through gradual increases in road tax.
Ben Nelmes, CEO of New AutoMotive, stated, “It’s crucial to avoid the creation of an electric car tax penalty that could hinder the adoption of EVs. Our recommendations provide a balanced approach that benefits both motorists and the environment.”
The report’s findings offer valuable insights for the Chancellor as he prepares for the Autumn Budget. By implementing these recommendations, the government can create a more supportive environment for EV adoption and accelerate the transition to cleaner transport.
