Tax vehicles based on efficiency, says new report

According to a new report from New AutoMotive, radical tax reform is unnecessary to support the country’s transition to electric vehicles.

It found the government should look to tax all vehicles, regardless of age, on their efficiency rather than at a flat rate, to ensure owners of less efficient vehicles pay more.
 
As a result of the current road tax policy introduced during the previous administration, drivers of cleaner cars are paying up to 10 times more than owners of older, more polluting petrol and diesel vehicles.
 
The report says that the government should rule out pay-per-mile road pricing which - based on sales figures from Iceland and New Zealand - has the potential to stall the strong EV take up in the UK. Both countries experienced a slump in EV sales after implementing the policy.
 
The report also found that imposing road pricing to pay for the negative impacts of driving on society and the environment is unnecessary.
 
Air pollution and greenhouse gases will quickly reduce as a result of the EV transition, whilst the impacts on road wear and congestion from vehicle use are much smaller than commonly assumed. The lower costs of transport introduced by switching to EVs will be better for the economy.
 
Finally, only modest increases in fuel duty are required to ensure that drivers of petrol and diesel vehicles continue to pay for their driving emissions.
 
Freezing fuel duty has not significantly undermined our decarbonisation efforts to date, so a gradual increase in fuel duty of 2 pence every 3 years will provide enough revenue to ensure drivers of internal combustion engine vehicles continue to pay their way.
 
Ben Nelmes, CEO of New AutoMotive, said: “It’s wrong to think that the transition to cleaner transport will take the public finances over a ‘cliff edge’.
 
“Electric cars aren’t a sin to be taxed but a boon for the economy. Our recommendations suggest a way forward for the Chancellor that is simple and would avoid the kind of bad outcomes seen in other countries that introduce pay-per-mile charging on electric cars.
 
“Our recommendations would avoid the creation of an electric car tax penalty that is currently due to come into force in April 2025, and which may prevent more people from accessing the benefits of getting a used electric car. EVs can be  good for motorists and the taxman - a win-win for people and the planet.”