Ignore the howls around pay-per-mile. We can't afford not to tax electric cars
a day ago
- #UK public finances
- #tax reform
- #electric vehicles
- The UK's public finances are on an unsustainable trajectory, with government debt projected to rise to 270% of GDP by the 2070s if policies remain unchanged.
- Fuel duty revenues are expected to halve by the 2030s and drop to nearly zero by 2050 due to the shift to electric vehicles (EVs), costing the Treasury £15.5bn annually.
- Rachel Reeves proposes a pay-per-mile tax for EVs starting in 2028, with a suggested rate of 3p per mile, averaging £250 per year—less than the £600 paid by petrol/diesel drivers.
- The proposal has faced criticism, with some arguing it's the wrong time, but delaying reforms has worsened the issue of declining fuel duty revenues.
- The pay-per-mile tax, while not addressing congestion costs, is a necessary step to prevent further pressure on Treasury revenues and adapt to technological changes.
- Failure to reform motoring taxes could exacerbate larger fiscal challenges, such as rising pension and healthcare costs, highlighted in the OBR's report.