UK must revamp motor vehicle taxation system to reflect switch to electric vehicles, say MPs

The UK needs a new car tax for electric cars to avoid ‘zero income’ by 2040, MPs have said.

The Transport Select Committee has called for a change to the current tax system to reflect a move towards greener vehicles.

Pure electric cars are exempt from road tax and their drivers don’t have to pay fuel tax either – both bringing in around £35billion a year, according to the report.

The parliamentary committee said: “Policies aimed at achieving net zero emissions by 2050 are likely to result in zero government revenue from car taxation by 2040.”

“In addition to generating taxes to fund essential public services, car taxation plays a key role in managing congestion by regulating demand for the use of public roads.”

MPs added: ‘If the government fails to radically reform car taxation, the UK faces an underfunded and cluttered future.

The report urges the Treasury and the Department for Transport to have an ‘honest conversation’ about how to maintain investment in roads and public services as the UK shifts to vehicles that do not pay these two taxes on the vehicles.

He said the departments should work together to set up an independent body to make recommendations for a new road pricing mechanism by the end of the year.

The sale of new petrol and diesel cars and vans will be banned in the UK from 2030 as part of a move to revive the market for electric vehicles.

A survey last year found that participants believed electric cars would already outnumber diesel cars on UK roads by this time.

Huw Merriman, Tory chairman of the Transport Committee, said zero-emission vehicles were part of the government’s “ambitious” plans to bring the UK to net zero emissions by 2050.

“However, the resulting loss of two major sources of car taxation will leave a £35billion black hole in the finances unless the government acts now – that’s 4% of the total tax levy,” he said. he declared.

“Only £7billion of that goes back to roads; schools and hospitals could be hit if motorists don’t keep paying.

Steve Gooding of the RAC Foundation said “the silver lining of zero-carbon motoring is shrouded in a cloud of trouble for the Chancellor”.

The director of the Transport Research and Policy Group said: “Drivers choosing to go electric deserve to know what lies ahead, particularly if the promise of cheap running costs per mile is on the way. to be undermined by a future tax change.

A government spokesperson said: “The government is committed to ensuring that motoring tax revenues keep pace with the changes brought about by the switch to electric vehicles, while keeping the transition affordable for consumers. .

“We will respond fully to the committee’s recommendations in due course.”

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