We support road pricing but things will be different
We have long, long, supported road pricing here. But it’s still true that it’s going to change things in ways some won’t like:
Rachel Reeves has been urged to consider a radical driving tax on electric vehicles (EVs) as a £9bn black hole looms from the loss of fuel duty.
PwC has suggested taxing EVs based on how far they drive to prevent the decline in petrol and diesel cars on the road blowing a hole in public finances.
The Government risks losing out on £9bn of fuel tax revenues by 2030, according to forecasts from PwC, when one in four vehicles on the road is expected to be electric. EVs do not incur fuel duty since they are fuelled by electricity.
Logically, the taxation of the two types of car - ICE and EV - should be different. ICEs do have that issuance of CO2 to deal with. But both also contribute to congestion, both require money to be spent on roads, A&E and so on. The taxation should reflect those differences. ICEs and EVs should be charged the same tax where they are the same (and we can get into EVs are heavier, more tyre wear, greater damage to roads etc if we like) and different taxes where they are different.
So, road pricing, yes. Great. The same for each type of vehicle.
But what should the CO2 tax be? Usefully, the Stern Review tells us this - 12 p per litre of fuel used. Which means that when we move to road pricing the fuel duty should fall to that 12 p per litre of fuel.
Excellent, we’ve now a logical taxation system for cars. The world is properly balanced for the costs transport imposes upon others.
There is though that one little difficulty. We’re not sure of this but we suspect it might well be true - ICEs will now be cheaper than EVs in their overall costs to drive. And the thing about logical systems is that if that’s the outcome then that’s the outcome.
If EVs, including all relevant costs, are more expensive than ICEs, including all their relevant costs, then that’s just what reality is telling us. ICEs are cheaper than EVs. Shrug.
Tim Worstall