The Government needs to start developing a new road pricing scheme now to ensure a smooth transition from today’s emissions-based motoring tax regime.
That was the message from the British Vehicle Rental and Leasing Association (BVRLA) to the Transport Committee, which is conducting an inquiry into road pricing.
BVRLA director of corporate affairs, Toby Poston, told MPs that there is a clear need for a new national road pricing scheme to be developed as more zero emission vehicles are seen on UK roads.
“We are removing fossil fuels from the equation, so the current emissions-based tax system will see revenues plummet,” he said.
“Any new road pricing scheme must be easy to pay and have the simple objective of providing a revenue-neutral replacement for fuel duty and Vehicle Excise Duty (VED).
“It should be based on a simple ‘distance driven’ model that considers vehicle weight, emissions and use case, with discounts given to shared mobility solutions – such as car clubs, rental cars, buses and taxis – to incentivise more sustainable travel choices.”
With the sale of new internal combustion engine (ICE) cars and vans ending from 2030 and hybrids from 2035, and the Government consulting on a ban on new diesel trucks from 2040, the number of plug-in vehicle registrations is estimated to rise rapidly to around 3 million by 2025, 10 million by 2030 and 25 million by 2035.
KPMG’s Mobility 2030 team expects the already-growing sale of zero emission cars and vans to reach 98% of sales in 2031 and 27% of the parc by 2030.
Dwindling tax take from EVs
It leaves the Treasury urgently needing a plan to plug a potential £40bn shortfall from road taxes, including fuel duty.
At £28.4bn in 2019-2020 (excluding VAT), tax revenues from the fuel duty account for a significant 2% of GDP, while Vehicle Excise Duty (VED) receipts were estimated to account for £6.5bn.
Poston told the Transport Committee: “It is imperative that road pricing is considered and trialled now to ensure a smooth transition into a new system.
“Drivers and fleet operators need clarity on future taxation as they make the transition to zero emission road transport.”
The session also included representatives from RAC Foundation, the Renewable Energy Association and the Road Haulage Association. The phasing out of petrol and diesel vehicles puts around £34bn of fuel duty revenue at risk.
Read more about road pricing in the October edition of Fleet News.