6p per mile ROAD DUTY charge proposals could cost taxi drivers over £2,000 each year
In the face of declining fuel duty revenue as more drivers transition to electric vehicles (EVs), a prominent think tank has recommended the introduction of a new "Road Duty" charge of 6p per mile on electric cars. The Resolution Foundation argues that this fee would help alleviate the financial strain caused by the shift away from petrol and diesel vehicles while still maintaining the appeal of electric vehicles in terms of affordability and running costs.
However, concerns have been raised about the potential impact of such road pricing charges on industries heavily reliant on high- mileage road usage, such as the taxi industry. The resolution of this issue largely depends on who would be responsible for paying the proposed charge. Ideally, the Government would acknowledge that service industries providing alternatives to private car ownership are beneficial and should be exempt from the charge. An exemption for wheelchair-accessible vehicles (WAVs) could also be considered to support individuals who rely on taxis for transportation.
In the absence of exemptions, the burden of the additional cost would likely fall on passengers, albeit only during the duration of their taxi journeys. This would result in increased costs for dead mileage, which refers to the distance covered by taxis without passengers. Consequently, passengers may have to pay around 10-12p per mile travelled as part of a new taxi tariff. For taxi drivers covering 40,000 miles per year, this could amount to an exorbitant bill of £2,400.
The Chancellor of the Exchequer, tasked with overseeing the country's finances, faces the urgent need to take action as nearly a third of revenue generated from fuel duty could vanish before the end of the decade due to the shift toward green motoring. This decline in revenue is attributable to the declining sales of new diesel carsandthesurgingpopularity of electric vehicles (EVs).
Nevertheless, the impact on public finances, caused by the decline in diesel car sales and the rise of EVs, is expected to be mitigated by a temporary increase in revenue from petrol cars. In 2019, prior to the pandemic, income from fuel duty stood at £28 billion, with £16.4 billion (58.6%) derived from the 32.9 million cars in circulation across the UK at the time.
Analysis conducted by the RAC Foundation suggests that, under an optimistic scenario regarding the future adoption of EVs, the figure of £16.4 billion could plummet to £11.4 billion (a reduction of £5 billion or 30.5%) by mid-2028. This £5 billion reduction is approximately equal to the annual expenditure on operating, maintaining, and enhancing the country's motorways and major A Road.
The RAC Foundation predicts that the decline in revenue would occur even more rapidly if not for a temporary rise in the number of petrol and plug-in hybrid cars on the road, as some drivers shift away from diesel but not directly to EVs. This preference for petrol vehicles could result in an increase in fuel duty derived from petrol- powered cars in the short term.
The proposal for a Road Duty charge on electric cars aims to address the financial challenges posed by the transition to greener motoring while ensuring that EVs remain an attractive option for consumers. However, careful consideration must be given to the potential implications for industries such as the taxi sector, and exemptions or alternative solutions may be necessary to strike the right balance between revenue generation and supporting vital services.
