Consultation on the future of road tax in the UK urgently required

By Claire Evans, fleet consultancy director at Zenith

Tackling vehicle emissions must be a priority for Government, business and consumers.

At Zenith, we’re acutely aware of the role that the road transport industry must play in reducing carbon emissions and improving our air quality.

Poor air quality is the largest environmental risk to public health in the UK, accounting for thousands of deaths every year and costing us anywhere from £8-20 billion, according to the Government.

Reducing road transport emissions is also essential if the Government is to hit its 2050 net zero target but what our industry needs to deliver this, is certainty.

So it was with great interest to me that the Office for Budget Responsibility (OBR) published their Fiscal Risk & Sustainability Report, last week.

The report sets out the main risks to the public finances, including macroeconomic and specific fiscal risks.

It included some interesting findings on electric vehicles (EVs) and the hole that will be left in the Government budget from fuel duty as more drivers switch to EVs.

It also raised some questions about whether we are on track to meet the Government’s declared national ambitions, known as Nationally Determined Contributions (NDCs) under the Paris Agreement, and legislated carbon budgets.

At Zenith, we’ve been looking closely at a number of areas we believe need to be developed in order to speed up the UK’s transition away from petrol and diesel vehicles. There are two key areas the report looks at that I’d like to develop a little further.

Road tax

The report suggests that the increased take-up of electric vehicles is expected to cost £13bn a year in lost fuel duty by 2030, and that efforts to tackle climate change by transitioning away from fossil fuels are “rapidly eroding the £39bn the Government currently receives in tax revenues from petrol and diesel driven vehicles”.

Put simply, as more people switch to EVs, which have no fuel duty, that revenue stream closes off. It’s clear that this will need to be replaced with an alternative form of road user tax, but so far there’s been little indication that the Government has begun to seriously look at this.

We believe we need a consultation urgently on the future of road tax in the UK, taking the views of everyday drivers, haulage firms and other road users into account, so that we can have clarity on what this will look like in the future under a national framework.

Alternative fuels

The OBR report has highlighted an ‘increased risk’ of not meeting the 2030 target for emissions reduction for surface transport, due to delays in the development of the ZEV mandate, and low electric van uptake.

The truth is that the battery technology is not developed enough or at the right cost to facilitate a significant shift to EV vans and HGVs in the near term. Not to mention farming and construction vehicles.

While alternative low carbon fuels, such as HVO (hydrotreated vegetable oil) are not zero emissions, their impact is far lower than that of fossil fuels, and they offer a way to lower emissions immediately.

While the technology continues to develop, alternative fuels have an important role to play. We’d like to see a pragmatic response from Government, with a clearer role for these fuel types in future road transport strategies.

The Government has made robust and meaningful progress and the UK is above the European average and well above some other advanced economies like the US and Japan, in our uptake of EVs.

It’s positive to have the ZEV mandate in place and this is something we fully support, as is the confirmation of future benefit-in-kind (BIK) rates, which determine the tax people pay on company cars which are EVs.

However, the puzzle is not complete and as an industry we urgently require long-term thinking and direction from legislators in all areas.

Providing clear direction is vital for our industry to invest with confidence. Any area of uncertainty will only lead to a delay in the developments of new product and charging infrastructure that must be in place to support fleet operators and consumers to make cleaner mobility choices.

We welcome discussion now on all these issues and can help government to define a policy that will both support revenue needs whilst balancing the net zero goals, so that we can introduce changes that are well considered and give everyone using our roads time to adjust and plan.