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New ‘Pay as You Drive’ Tax On UK Motorists

The UK government has recently announced that a formal enquiry will take place concerning the potential adoption of a new way to bill motorists for their use of the national road network.

Discussions will focus around the possibility of instigating a new “pay as you go” style of taxation; currently a combination of fuel duty and Vehicle Excise Duty (VED) levies provides sizeable revenue for the Treasury, but these could potentially be scrapped in favour of a new approach.

Pay as you goNow, a national debate could well be in the offing to see if a different approach to taxation could work. With the current government policy to phase out conventionally fuelled vehicles within the next couple of decades, the increasing reliance on electric vehicles could see a sharp drop in revenue from fuel duty – which in conjunction with VED, the Treasury receives around 40 billion pounds annually.

One aspect up for debate is that of fairness to owners of new and used cars; many low-mileage drivers may well feel some resentment at having to tax their vehicles at the same rate as those who rack up large distances annually, while rising fuel and insurance policy costs could even lead to motorists abandoning their cars for shorter journeys, or even entirely. That would certainly reduce government revenue.

In 2007, a similar scheme was initially discussed, but that was well before the electric revolution, and the scheme was abandoned after an online petition opposing changes was created and signed by more than 1.8 million people.

However, now the possibility of lower income is a real concern, and the Institute for Fiscal Studies has asked MPs to consider some alternative funding models.

The motor trade is entering a period of uncertainty, thanks in part to the worldwide emissions scandals and the increased awareness of burning fuels on climate change and the environment.

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So, a replacement tax could well be a timely idea, perhaps penalising drivers who use the roads more than other users. However, given the lack of any clear policy at present, a natural concern for many motorists is that they will end up paying even more for their vehicles than they do at current levels.

Hence a general debate is a sensible step, both to work out how to plug any funding gap and get the wider population on board.

To that end, there will be public consultation in early 2020; which will gain feedback on several areas that attribute to motoring, such as, the impact on the environment, road safety, congestion and much more. Crucially, both drivers and non-drivers will form part of the study.

A range of possible funding models could include extra levies on larger goods vehicles, increasing the number of clean air zones, workplace changes, the use of congestion charges and road tolls.

Whatever the result, it’s clear that this is now a good time to start looking at the impact motoring has in different ways around our daily lives.