Fuel duty is running out of road. But until the grid is decarbonised, carbon is still emitted when electric vehicles are charged. That means the Treasury needs to devise a tax that discourages excessive motoring
Motoring creates other problems beyond congestion. Vehicles cause 27,000 serious injuries or deaths each year, and are responsible for 10% of the country’s air pollution and one-fifth of its greenhouse-gas emissions. The Treasury levies fuel duty of 53p per litre on the price of petrol and diesel as a way of reflecting these externalities. The tax has long failed to keep pace with inflation but it will still haul in £30bn this year, 2.9% of all tax receipts.
To fill the budgetary hole the Treasury could tax something other than motoring. Raising income tax by five percentage points would do the trick. But even if that were politically palatable, leaving motoring untaxed would result in more of it. Until the grid is decarbonised, carbon is still being emitted whens are being charged. So the government also needs to encourage a reduction in motoring miles to help meet its climate targets.
Road pricing means charging motorists for driving on public roads. Singapore is the flag-carrier for this approach: the city-state has had it since 1975. Road pricing already exists in limited form in Britain, from tolls on motorways and bridges to the congestion zone in central London. A national version would probably mean charging people based on the distance they drive. But the politics of road pricing is tricky; operational questions loom, too.
In its report the committee urged the government to look at “telematic” technology—black boxes that transmit information about a vehicle’s location and speed to receivers. A system of dynamic pricing would have the benefit of encouraging people to drive during quieter times of the day, reducing air pollution and alleviating congestion.
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