VED could be replaced by a ‘pay as you drive’ road tax

A recent report produced by the Transport Committee (a House of Commons group of MPs) recommends that the Government replaces the current vehicle excise duty (VED) system with a tax based on how far you drive. The report suggests that telematics systems in vehicles could be used to determine the charges.

Why change the system?

By 2030 only new cars and vans with zero emissions at the tailpipe can be sold. By 2050 this will need to be the case with almost all vehicles. Given the current VED system charges are based on carbon emissions this would mean that as the transition to net zero progresses the Government will receive less and less tax revenue. Most of the current £35bn+ VED tax receipts are used to maintain and develop the road network. This revenue will therefore need to be replaced with a different form of taxation.

What are the recommendations from the report?

Well the good news is that the Transport Committee recommends that any new road charging scheme should be ‘revenue neutral’ and therefore motorists should pay the same or less than what they are paying currently. The recommendations note the need for removing congestion and relieving traffic across the UK, and for this to happen there would need to be a disincentive for driving vehicles. The role of technology and data feature heavily, with the Committee keen for the Government to explore the use of telematics in vehicles to track mileage and driving behaviours.

The conclusion…..a road price scheme is recommended with charges determined by the distances travelled by vehicles. Of course such a scheme would mean that the more you drive the more you pay and some members of the public would take issue with ‘Big Brother’ monitoring their vehicle usage. It would also make it difficult for those that rely on their own vehicle for commuting to pay less than what they pay currently, particularly if the journeys are long and cannot be easily replaced by public transport. But it’s hard to argue the system wouldn’t be fair. If you use the roads more by default you would cause more congestion and wear and tear and so should pay more to maintain and develop the network, right?

Please let us know your thoughts. How would you be impacted by these recommendations?

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