Pay by mile to replace fuel duty?

Grey_Critic

Taxes are not as they often appear worked out on the back of a fag packet. The decision not to apply VED to electric vehicles for instance. There was long term planning involved - one obvious point being how to incentivise people to switch, grants being another.

Road pricing has been discussed for years.  Besides the *How do we make it work* factor the current system of taxing fuel is easy to collect. As cars have become more economic and therefore in theory less polluting VED was reduced to encourage us to buy vehicles with lower emissions, then VED was tweaked to make up the shortfall.

The chancellor keeping fuel duty held is not being altruistic - every time there is a rise in the price then his take rises do he cannot lose. The real problem is that as the take up of EVs rises and petrol/diesel fuelled vehicles are phased out so there is a decrease in the overall income from VED and Excise duty.

Personally I suspect owners of EVs are going to get a rude awakening when some form of road pricing is introduced for them.

troffasky

Sandtree said:

So highly polluting but light sports cars pay less than the efficient average family car? 

If you accept that you need to raise £Xbn and so the question is really just what behaviour you are trying to drive by how you divide up that amount amongst car owners... not really sure why you'd want to drive people to lighter vehicles? If you are trying to do some form of efficiency on EVs then surely doing a comparison of battery capacity and range is much more realistic than weight which penalises cheaper cars to sports cars with the same battery weight. 

There is more than one dimension to this, and we have all computers and whatnot nowadays so you can take multiple factors into account without worrying about running out of quill pens. A "highly polluting but light sports car" attracts a higher score because its polluting and I don't want to breathe pollution. A car with an extra quarter ton of batteries attracts a higher score because wear on the road is related to the fourth power of axle weight. A car driving into a city centre at 0830 on a Monday attracts a higher score than one that comes in at 0200 because the roads are congested. Etc. I'm sure you can think of your own factors to score on.

Sandtree

troffasky said:

Sandtree said:

So highly polluting but light sports cars pay less than the efficient average family car? 

If you accept that you need to raise £Xbn and so the question is really just what behaviour you are trying to drive by how you divide up that amount amongst car owners... not really sure why you'd want to drive people to lighter vehicles? If you are trying to do some form of efficiency on EVs then surely doing a comparison of battery capacity and range is much more realistic than weight which penalises cheaper cars to sports cars with the same battery weight. 

There is more than one dimension to this, and we have all computers and whatnot nowadays so you can take multiple factors into account without worrying about running out of quill pens. A "highly polluting but light sports car" attracts a higher score because its polluting and I don't want to breathe pollution. A car with an extra quarter ton of batteries attracts a higher score because wear on the road is related to the fourth power of axle weight. A car driving into a city centre at 0830 on a Monday attracts a higher score than one that comes in at 0200 because the roads are congested. Etc. I'm sure you can think of your own factors to score on.

But only one dimension was suggested?

As already mentioned, more than a decade ago I was talking to tech companies about using trackers to replace VED with schemes based on usage and they were giving away their tech to us (an insurer) to put them in a stronger position with the anticipated bidding on governmental contracts.

Petriix

There is precisely zero reason why the burden of taxation should be maintained at current level in respect of private motoring.

If motor vehicles are to be targeted then the emphasis should be on the largest companies which profit from road use. I'd suggest starting with the supermarkets and big online retailers.

Per mile pricing is highly regressive because poorer people are typically less able to afford to live as close to the schools and work places. Just because fuel duty already suffers from the same unfairness isn't a good argument for perpetuating it.

Grey_Critic

Reading an article in The Telegraph came across this little gem

***Cars are a vital source of funds for the Treasury, with vehicle excise duty and fuel duty together raising around £35bn annually: 4pc of Government revenues.

EVs, however, do not contribute any tax, meaning revenues will dwindle as more people choose green cars.***

That is not small change so it will have to be made up somehow

Sandtree

Petriix said:

Per mile pricing is highly regressive because poorer people are typically less able to afford to live as close to the schools and work places. 

Not sure where you have lived but my life has been split between medium sized cities/large towns and London and certainly on the work front the opposite has been true... inner cities are poor areas with short commutes to the offices in the city centre and suburbs and surrounding villages are where the richer live with longer commutes into the centre.

London is different in that almost no one drives to work but again lower grade roles tend to be 100% commute in by public transport where as the more well heeled are living in Surrey, Kent etc, driving to the local train station before using the £4k season ticket to get the train in.

ComicGeek

Grey_Critic said:

Reading an article in The Telegraph came across this little gem

***Cars are a vital source of funds for the Treasury, with vehicle excise duty and fuel duty together raising around £35bn annually: 4pc of Government revenues.

EVs, however, do not contribute any tax, meaning revenues will dwindle as more people choose green cars.***

That is not small change so it will have to be made up somehow

EVs do contribute tax, in that there is still VAT charged on sales and VAT on energy used for charging.

While not in the same ballpark, there is also an estimated £2.8bn annual cost due to air pollution that a quicker move to EVs would help. And the significant climate change impact costs.

We should be thinking about fuel duty in the same way as tax on cigarettes - that the only aim is get the duty/tax down to zero as this means we have successfully eliminated usage. There are always other things that the Govt can find to tax - and this is going to slowly reduce over the next 20 years, not suddenly fall off a cliff.

Bizarrely I was just watching the Yes Prime Minister episode this morning about introducing cigarette taxes! 

Money_Grabber13579

Petriix said:

There is precisely zero reason why the burden of taxation should be maintained at current level in respect of private motoring.

If motor vehicles are to be targeted then the emphasis should be on the largest companies which profit from road use. I'd suggest starting with the supermarkets and big online retailers.

Per mile pricing is highly regressive because poorer people are typically less able to afford to live as close to the schools and work places. Just because fuel duty already suffers from the same unfairness isn't a good argument for perpetuating it.

On the contrary, there is every reason why tax on private motoring should be maintained at current levels (in the government’s eyes). Ultimately, a long term goal is to reduce the attractiveness of the private motor vehicle in favour of mass public transport systems and to do that, one of the options is to make the private car financially unattractive. So whilst electric vehicles might help with the climate problem in the short term, the government will not want to create a problem where car use actually increases as a result.

There is also a problem with your “everyone else should be taxed except me” argument. When taxes are levied on anyone except the end consumers, who do you think ultimately pays? It’s you and me.  So if you follow the strategy of taxing HGV’s taking goods to supermarkets, those costs will be passed into the supermarket and ultimately to the end consumer in the form of higher prices.  All business has a target profit margin which they want to achieve and so if their costs increase, they put up their prices to maintain that profit margin.

Grumpy_chap

Money_Grabber13579 said:

a long term goal is to reduce the attractiveness of the private motor vehicle in favour of mass public transport systems 

That is a possible long term goal that some may have.

Is that the long term goal of the Administration setting tax rates?

troffasky

I would say not, given that it hasn't increased since 2010.