'Road Duty' needed to ensure electric vehicles 'don't put pressure on public finances'

07 Jun 2023

Think tank the Resolution Foundation has called for the government to urgently reform road taxes so that the transition to electric vehicles 'doesn't put pressure on public finances and road congestion'.

The Foundation stated that electric vehicles accounted for one in seven new cars bought in 2022. It said that this is good news for both the planet and motorists as electric vehicles are cleaner and cheaper to run.

However, the think tank suggested that the transition to electric vehicles creates challenges for the government as the lower running costs associated with electric vehicles are partly due to lower taxation relative to petrol and diesel vehicles.

It said that the transition to largely tax-exempt electric vehicles 'is creating a growing fiscal hole in the £32 billion of revenues currently collected via Fuel Duty and Vehicle Excise Duty (VED)'.

Commenting on the matter, Jonny Marshall, Senior Economist at the Resolution Foundation, said: 'The switch from fossil-fuel-powered cars to electric vehicles is a key part of Britain's net zero transition, and it's happening quicker than most people expected. This is good news for the planet and motorists as electric vehicles are cleaner and cheaper to run.

'But unless we modernise road taxation to reflect the cars that are on our streets today and in the future, we risk putting more even pressure on the public finances and our crowded roads.

'We need a new GPS-based 'Road Duty' for electric vehicles to offset falling Fuel Duty revenues and ensure that the net zero transition doesn't leave poorer drivers in older cars bearing the burden of vehicle taxation.'