We must replace fuel duty as we transition to electric cars but politicians are afraid to support road pricing. They shouldn’t be
At present, people generally will fill up their tanks and not then think too closely about how far they are travelling
Last week saw the release of a ground-breaking report from the Campaign for Better Transport on the familiar subject of pay-as-you-drive, or road pricing as those in the transport world tend to call it.
Familiar because pay-as-you-drive is not a new idea. It was first suggested, as far as I can see, way back in the mists of time in 1964. It was given new life in the early years of the Blair government which correctly identified the environmental advantages of switching to this form of vehicle taxation.
It was then killed off by a huge petition against the idea on the Downing Street website, and by the vote against a London-style congestion charge in Manchester.
I managed to get the idea into the Lib Dem 2010 manifesto for government, in the teeth of stiff opposition from my Scottish colleagues, but after the coalition was formed, the Treasury pair of George Osborne and Danny Alexander (who represented Inverness), sat down together to lose bits of the two parties’ respective manifestos they disliked, and quickly dumped it.
In 2016 Edmund King at the AA came up with an interesting concept called Road Miles, effectively a trading scheme based on miles undertaken, but that too ran into the sand.
A decade earlier, the then transport secretary Alistair Darling, opined that road pricing was 10 years away, and always would be.
So what is different now? The answer is the arrival of necessity.
In the past, those advocating pay-as-you-drive were arguing for radical change to an existing system which many people regarded as well-established and perfectly acceptable.
Given the choice to do something or do nothing, the latter usually wins. Changes mean winners and losers, and while the winners keep shtum, the losers complain noisily
In short, no change was seen as necessary. Given the choice to do something or do nothing, the latter usually wins. Changes mean winners and losers, and while the winners keep shtum, the losers complain noisily. It is the reason that to this day, water rates for households are absurdly still based on the 1989 rateable value of the property, although rates were abolished in 1992.
But change is certainly necessary now. Each year the Treasury collects about £35bn from motoring taxes, a huge sum that is then deployed to those parts of the public sector that do not raise income but which need massive expenditure, such as schools, hospitals and the armed forces. That income stream will soon be disappearing fast as electric vehicles replace those powered by petrol or diesel.
Treasury officials I have spoken to are acutely aware of the need for change and acutely aware that the longer they leave it, the more difficult any transition will be. This is because more and more people are buying electric cars and getting used to the idea that they have nothing to pay for the privilege other than when they charge their vehicle – no road tax, no fuel duty. That is clearly not sustainable as we go forward.
The stumbling block has been the politicians, terrified that any move towards pay-as-you-drive will cause uproar among motorists, a group the Conservatives in particular are very wary of upsetting.
Ministers have to date gone as far as saying that in the future, the amount of revenue raised from motorists needs to stay about the same, but no further. Even that statement was slipped out so that hardly anyone noticed.
But here is the second change. The report from the Campaign for Better Transport does not simply rehearse the environment, economic and social benefits that a pay-as-you-drive system can deliver, although it does do that.
The potential game changer is that the charity has conducted extensive surveys involving 3,000 people from across England, and conducted in-depth focus groups – the first such survey I can remember. And the results are striking.
Pay-as-you-drive, far from being a hand grenade, can actually, if sold sensibly, be a vote-winning policy
The results should give ministers the confidence they need to act. Pay-as-you-drive, far from being a hand grenade, can actually, if sold sensibly, be a vote-winning policy.
The survey revealed a high level and mature understanding that the present system has to change as fuel duty from petrol and diesel vehicles decline to zero. 60% who took part in the research agreed that there is a need to reform the present taxation arrangements.
Moreover, support for pay-as-you-drive increased within the focus groups as the potential applications of such a system were explained. At the start, 41% of participants expressed support for a change to pay-as-you-drive. At the end, that figure had increased to 49%. Those opposed had declined from 21% to 18%.
Another element that attracted the participants was the direct link between how far you drive and what you pay, welcomed both for the concept itself, but also for the transparency it provides.
It might be argued that this link already exists in terms of payment for fuel, which of course is related to distance travelled, but it is an obscure link, and also it ignores the fixed cost, akin to a standing charge, that is Vehicle Excise Duty (VED). In fact once the annual payment for VED has been made, there is to a degree a perverse incentive to drive to get your money’s worth, as it were.
At present, people generally will simply fill up their tanks and not then think too closely about how many miles they are travelling. By charging per mile, participants felt it put them more in control of what they pay, and would mean they would question whether each journey was one they wanted to make by car, or indeed at all.
At this time when we have a cost of living crisis, that control proved to be quite an attractive idea.
Clearly, there are many different ways in which a pay-as-you-drive scheme could work. The Campaign for Better Transport report identified three of these options as potential front runners.
In the first, a simple per mile charge for electric vehicles is introduced, to run alongside fuel duty and VED for existing non-electric vehicles. Over time, the first income stream will increase and the second decline.
This option has the benefit of simplicity and minimal disruption to the existing vehicle fleet, but it could be seen as disincentivising the uptake of electric vehicles, although at worst this would delay the uptake, given that the government has a set a date beyond which new diesel or petrol vehicles will not be available for purchase.
In the second, a change to pay-as-you-drive is made for all vehicles at the same time. This could be related to the cleanliness of the vehicle, meaning a lower charge for electric vehicles and a higher one for those which pollute.
In the third, a more complex model is introduced which varies the charge according to when and where a journey takes place, and possibly to the emissions from the tailpipe. Such a scheme would be more focussed and enable government objectives to be more closely met, but there is a danger that an overcomplicated scheme could put people off, as well as potentially generating unforeseen loopholes.
In reality, there are many tunes that can be played on this instrument. As well as the variables referred to above, there could, for example, be a different charge for specific groups such as blue badge holders, or essential workers.
There could be a lower charge per mile for those who live in rural areas where public transport is not a realistic option, although it might be argued that those who moved there did so in the knowledge that this was the case.
In the survey, 63% of those opposed to pay-as-you-drive said their main concern was that it would penalise people who in practice have no alternative means of transport other than the car.
On the other hand, 69% of those who opposed the idea said they would be more supportive if public transport was cheaper and more accessible.
One surprising finding was that people seemed less bothered about a system that tracked them in real time than a system based on automatic number plate recognition via roadside cameras. Perhaps people have become comfortable with the mobile phone in their pocket being continually live tracked.
The clear conclusion from this exercise is that the public is much more willing to embrace pay-as-you-drive than the government believes, though this was predicated on the fact its introduction did not constitute some sort of stealth tax
In any case, the clear conclusion from this exercise is that the public is much more willing to embrace pay-as-you-drive than the government believes, though this was predicated on the fact its introduction did not constitute some sort of stealth tax.
Nevertheless, it is a complex and radical change, and open to misleading attack by the extreme petrolhead brigade. It is good therefore that pro-motorist organisations like the AA and the RAC Foundation are in favour of the concept which will go some way to blunting the noise from the petrolheads.
It is also vital in my view for a consensus to be arrived at across the political parties, or the opportunity to attack it may prove to be too electorally tempting for one of them.
The reason HS2 is still on track, despite its grotesque overspend and other problems, is because Andrew Adonis, as the Labour transport secretary, took steps to involve and sign up the Conservatives and the Lib Dems (although the latter did not really need signing up). Without that approach, HS2 would have been killed off by now.
So the message to the government is clear: seek to get agreement from the other parties on the principle, get some non-political experts to come up with options, but most of all, get your head out of the sand and get a move on.
ABOUT THE AUTHOR: Norman Baker served as transport minister from May 2010 until October 2013. He was Lib Dem MP for Lewes between 1997 and 2015.
This story appears inside the latest issue of Passenger Transport.
Pay-as-you-drive could be popular
by Passenger Transport on Oct 6, 2022 • 2:57 pm No CommentsWe must replace fuel duty as we transition to electric cars but politicians are afraid to support road pricing. They shouldn’t be
Last week saw the release of a ground-breaking report from the Campaign for Better Transport on the familiar subject of pay-as-you-drive, or road pricing as those in the transport world tend to call it.
Familiar because pay-as-you-drive is not a new idea. It was first suggested, as far as I can see, way back in the mists of time in 1964. It was given new life in the early years of the Blair government which correctly identified the environmental advantages of switching to this form of vehicle taxation.
It was then killed off by a huge petition against the idea on the Downing Street website, and by the vote against a London-style congestion charge in Manchester.
I managed to get the idea into the Lib Dem 2010 manifesto for government, in the teeth of stiff opposition from my Scottish colleagues, but after the coalition was formed, the Treasury pair of George Osborne and Danny Alexander (who represented Inverness), sat down together to lose bits of the two parties’ respective manifestos they disliked, and quickly dumped it.
In 2016 Edmund King at the AA came up with an interesting concept called Road Miles, effectively a trading scheme based on miles undertaken, but that too ran into the sand.
A decade earlier, the then transport secretary Alistair Darling, opined that road pricing was 10 years away, and always would be.
So what is different now? The answer is the arrival of necessity.
In the past, those advocating pay-as-you-drive were arguing for radical change to an existing system which many people regarded as well-established and perfectly acceptable.
In short, no change was seen as necessary. Given the choice to do something or do nothing, the latter usually wins. Changes mean winners and losers, and while the winners keep shtum, the losers complain noisily. It is the reason that to this day, water rates for households are absurdly still based on the 1989 rateable value of the property, although rates were abolished in 1992.
But change is certainly necessary now. Each year the Treasury collects about £35bn from motoring taxes, a huge sum that is then deployed to those parts of the public sector that do not raise income but which need massive expenditure, such as schools, hospitals and the armed forces. That income stream will soon be disappearing fast as electric vehicles replace those powered by petrol or diesel.
Treasury officials I have spoken to are acutely aware of the need for change and acutely aware that the longer they leave it, the more difficult any transition will be. This is because more and more people are buying electric cars and getting used to the idea that they have nothing to pay for the privilege other than when they charge their vehicle – no road tax, no fuel duty. That is clearly not sustainable as we go forward.
The stumbling block has been the politicians, terrified that any move towards pay-as-you-drive will cause uproar among motorists, a group the Conservatives in particular are very wary of upsetting.
Ministers have to date gone as far as saying that in the future, the amount of revenue raised from motorists needs to stay about the same, but no further. Even that statement was slipped out so that hardly anyone noticed.
But here is the second change. The report from the Campaign for Better Transport does not simply rehearse the environment, economic and social benefits that a pay-as-you-drive system can deliver, although it does do that.
The potential game changer is that the charity has conducted extensive surveys involving 3,000 people from across England, and conducted in-depth focus groups – the first such survey I can remember. And the results are striking.
The results should give ministers the confidence they need to act. Pay-as-you-drive, far from being a hand grenade, can actually, if sold sensibly, be a vote-winning policy.
The survey revealed a high level and mature understanding that the present system has to change as fuel duty from petrol and diesel vehicles decline to zero. 60% who took part in the research agreed that there is a need to reform the present taxation arrangements.
Moreover, support for pay-as-you-drive increased within the focus groups as the potential applications of such a system were explained. At the start, 41% of participants expressed support for a change to pay-as-you-drive. At the end, that figure had increased to 49%. Those opposed had declined from 21% to 18%.
Another element that attracted the participants was the direct link between how far you drive and what you pay, welcomed both for the concept itself, but also for the transparency it provides.
It might be argued that this link already exists in terms of payment for fuel, which of course is related to distance travelled, but it is an obscure link, and also it ignores the fixed cost, akin to a standing charge, that is Vehicle Excise Duty (VED). In fact once the annual payment for VED has been made, there is to a degree a perverse incentive to drive to get your money’s worth, as it were.
At present, people generally will simply fill up their tanks and not then think too closely about how many miles they are travelling. By charging per mile, participants felt it put them more in control of what they pay, and would mean they would question whether each journey was one they wanted to make by car, or indeed at all.
At this time when we have a cost of living crisis, that control proved to be quite an attractive idea.
Clearly, there are many different ways in which a pay-as-you-drive scheme could work. The Campaign for Better Transport report identified three of these options as potential front runners.
In the first, a simple per mile charge for electric vehicles is introduced, to run alongside fuel duty and VED for existing non-electric vehicles. Over time, the first income stream will increase and the second decline.
This option has the benefit of simplicity and minimal disruption to the existing vehicle fleet, but it could be seen as disincentivising the uptake of electric vehicles, although at worst this would delay the uptake, given that the government has a set a date beyond which new diesel or petrol vehicles will not be available for purchase.
In the second, a change to pay-as-you-drive is made for all vehicles at the same time. This could be related to the cleanliness of the vehicle, meaning a lower charge for electric vehicles and a higher one for those which pollute.
In the third, a more complex model is introduced which varies the charge according to when and where a journey takes place, and possibly to the emissions from the tailpipe. Such a scheme would be more focussed and enable government objectives to be more closely met, but there is a danger that an overcomplicated scheme could put people off, as well as potentially generating unforeseen loopholes.
In reality, there are many tunes that can be played on this instrument. As well as the variables referred to above, there could, for example, be a different charge for specific groups such as blue badge holders, or essential workers.
There could be a lower charge per mile for those who live in rural areas where public transport is not a realistic option, although it might be argued that those who moved there did so in the knowledge that this was the case.
In the survey, 63% of those opposed to pay-as-you-drive said their main concern was that it would penalise people who in practice have no alternative means of transport other than the car.
On the other hand, 69% of those who opposed the idea said they would be more supportive if public transport was cheaper and more accessible.
One surprising finding was that people seemed less bothered about a system that tracked them in real time than a system based on automatic number plate recognition via roadside cameras. Perhaps people have become comfortable with the mobile phone in their pocket being continually live tracked.
In any case, the clear conclusion from this exercise is that the public is much more willing to embrace pay-as-you-drive than the government believes, though this was predicated on the fact its introduction did not constitute some sort of stealth tax.
Nevertheless, it is a complex and radical change, and open to misleading attack by the extreme petrolhead brigade. It is good therefore that pro-motorist organisations like the AA and the RAC Foundation are in favour of the concept which will go some way to blunting the noise from the petrolheads.
It is also vital in my view for a consensus to be arrived at across the political parties, or the opportunity to attack it may prove to be too electorally tempting for one of them.
The reason HS2 is still on track, despite its grotesque overspend and other problems, is because Andrew Adonis, as the Labour transport secretary, took steps to involve and sign up the Conservatives and the Lib Dems (although the latter did not really need signing up). Without that approach, HS2 would have been killed off by now.
So the message to the government is clear: seek to get agreement from the other parties on the principle, get some non-political experts to come up with options, but most of all, get your head out of the sand and get a move on.
ABOUT THE AUTHOR: Norman Baker served as transport minister from May 2010 until October 2013. He was Lib Dem MP for Lewes between 1997 and 2015.
This story appears inside the latest issue of Passenger Transport.
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