UK highway pricing plans: GPS monitoring and pay-as-you-go may change gasoline tax and VED

Taxes on petrol and diesel could soon be abolished along with the Vehicle Tax (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 out today, which calls for the introduction of a “dynamic tax pricing” system based on a telematics system that logs details of every trip people take by car.

They call the proposed system “dynamic” as it will be able to charge drivers different amounts at peak times or in areas where traffic is intended to be discouraged. Tariffs will also differ by vehicle type, and the system should be designed so that it can be used to change driver behavior in the future, the report said.

One aspect of the policy that the report highlights is the government’s stated goal of shifting 50 percent of urban car journeys to public transport or pedal boats by 2030 in order to meet its net-zero carbon goal. Road pricing is one of the levers MEPs say will be needed. The government is thought to be likely to back the plans and it has been previously reported that Chancellor of the Exchequer Rishi Sunak is in favor of road charging.

£35 billion fuel tax and VED black hole

Transport Committee MPs say the Government has just two years to plan a “world-leading” telematic charging system – likely to use the built-in GPS tracking capability of drivers’ own smartphones – or risk facing £35billion in fuel taxes and VED lose When you switch to electric cars, your income dwindles.

Road charging has been a contentious political issue for decades, and the issue was previously seen as “politically toxic” after a previous Tony Blair Labor government put forward similar proposals and then withdrew them following backlash from voters.

But the Transport Committee says the switch to electric cars means the economic picture has changed and if the government doesn’t act, fuel tax revenues will melt away, leaving a black hole in public finances. Of the £35 billion currently raised from fuel taxes and VED, only 20 per cent is spent on roads, with the rest going to general government spending.

Tax burden for electric cars increase?

Currently, EV drivers are benefiting from greatly reduced driving costs compared to traditional gasoline and diesel powered cars. “In signaling a shift to alternative road pricing, the government must make it clear to motorists who buy electric vehicles that they will have to pay to use the road, as is currently the case for petrol and diesel vehicles,” the report said adding: “Cheaper driving is likely to lead to more driving…increasing congestion will make it harder for the government to meet its transport policy goals.”

The committee’s report contains some good news for drivers, as it recommends that the move to road pricing “should be revenue neutral and should not result in drivers paying more overall than they currently do”. However, given the rising tax rates drivers have been saddled with in recent decades, they might have reason to be cynical about future intentions, particularly with a system designed to offer economic levers that change driver behavior.

Alongside the ever more urgent need to budget for reduced fuel tax revenues, the MP’s report suggests the central government must act quickly to prevent a confusing patchwork of low emission zones and metro levies from emerging across the country.

GPS car location and privacy

Addressing concerns that a proposed telematics system is an invasion of privacy, the report points to the fact that some young drivers are already voluntarily installing black boxes that monitor driving behavior in a bid to lower insurance premiums, suggesting that there is evidence that the public is willing to provide data access in exchange for efficient services and systems”.

In response to the report, John O’Connell, CEO of the TaxPayers’ Alliance, told Auto Express: “Road taxes should be designed to manage congestion and pay for repairs, not just scare motorists away from more money.

“Politicians are right that drivers shouldn’t be paying more overall, taking the UK away from the VED and fuel tax penalties. But road pricing cannot only be a tool for tax officials to make up for lost revenue, as drivers are already often overwhelmed.

“Any road pricing system should be set up in such a way that it only considers reducing congestion on the roads and not raising more money than is needed to do so.”

Find out how much company car tax you pay for electric cars…