Among the measures announced in last month’s Spring Statement was a 5p cut to fuel duty aimed at easing the skyrocketing cost of fuel crisis. This cut won’t save the average household more than a Tesco’s meal deal per tank, but it will inflict a £5 billion puncture in the government’s coffers that will be increasingly difficult to patch. The cut is also a reminder that fuel duty is quite simply no longer fit for purpose as we transition to net zero.
The drawbacks to introducing a fuel duty cut are clear: while the cost-of-living crisis needs urgent action, fuel duty cuts do not make a meaningful enough impact on household budgets to justify jeopardising our long-term climate ambitions. By their nature, fuel subsidies encourage consumption and therefore contradict the Government’s ambitious plans to ban the sale of new petrol and diesel engine vehicles by 2030.
Cutting fuel duty is also unfair. About 40% of the poorest households don’t own a car meaning that the cut to fuel duty relieves the SUV driving wealthy, rather than the low income households who are struggling the most. Furthermore, because electric vehicles (EVs) are exempt from fuel duty and vehicle excise taxes, those well off enough to afford the upfront cost of an EV are effectively freeriding on our public roads. Taken together, the result of this regressive fuel duty cut is that the lowest income households will end up paying a greater share of an ever-dwindling tax base.
The problems caused by the fuel duty cut is due to be compounded by our national transition to EVs, already well underway. EV sales surged 76% in 2021, no doubt factored into the recently announced EV charging strategy which seeks to increase EV charging points ten-fold by 2030. Alarmingly, research estimates that due to the exemption of EVs from fuel and vehicle excise duty there will be a £35 billion shortfall in tax revenues before the end of the decade.
Even as the cost-of-living crisis intensifies, the fuel duty cut is short sighted and inadequate, costing the government substantially while providing little relief to those who need it most. An obvious solution presents itself: a national road pricing scheme.
Simply put, a national road pricing scheme is a charge for usage of the road network. In addition to reducing congestion in key areas it would ensure those who use the roads most pay the most. A national road pricing scheme can be relied upon to sustainably generate revenue for our transport infrastructure ambitions as fuel duties dry up.
Reassuringly, the technology to facilitate a national road pricing scheme is already available. Today, insurance companies use ‘telematics’ from a black box installed in vehicles to charge motorists per mile driven. Though other options are available, this technology could be feasibly and progressively rolled out across the country in stages, with line of sight to a 2030 horizon.
It’s not such a radical idea either, localised road pricing schemes already exist across the UK in various forms such as toll roads, congestion charges and low emissions zones. Existing larger scale road pricing schemes, such as those in Singapore and London, use a combination of number plate recognition and toll gates to charge motorists in an attempt to reduce congestion on city roads. In theory, an all-encompassing national road pricing scheme would reduce red tape and simplify the current patchwork of devolved schemes whereby rules are different whether you’re in London, Manchester or Birmingham.
Of course, a proposal for an increased use of tracking technology would rightly raise concerns about privacy, and with trust in our institutions low, it is imperative that a robust legal framework be created to assure the public that their data will be used in a way that maintains their privacy and autonomy.
But the greatest challenge to road pricing is not technical or legal, it’s political. Successive Conservative Governments have baulked at the idea of new taxes but the consequences of inaction on the public finances are now becoming too great to ignore as fuel duty is cut once again after more than a decade of being frozen. In fact, a national road pricing scheme would not be a ‘new tax burden’ but a replacement for the inefficient, inequitable and increasingly obsolete fuel consumption tax the public is currently burdened with.
Churchill once said “never waste a good crisis” and at its heart, our current cost-of-living crisis stems from a reliance on fossil fuels. Now, as we move towards a low carbon economy, we will have to devise new and fair ways to replace ever dwindling revenue streams drawn from fossil fuel consumption.
The Government must now summon up the political will to begin consultations for a pilot to lay the groundwork for the introduction of a national road pricing scheme by 2030, which brings the opportunity for a greener, fairer UK, and build on our world leading reputation for ambitious policy.
Will is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Ruiyang Zang]
