Pay-as-you-drive: what do people think about vehicle taxation reform?
The way motoring is taxed needs to change. Electric vehicles (EVs) are a vital part of tackling climate change, but drivers of electric cars and vans don’t pay fuel duty or vehicle excise duty, so as more people make the switch, tax revenues will plummet.
Distance-based road pricing, or pay-as-you-drive, is one solution. The perceived unpopularity of pay-as-you-drive among motorists has so far prevented action. But the public mood hasn’t been tested in a while.
For our latest report we wanted to understand how the British public currently feels about reforming the system, in light of the rise of electric vehicles. In the most in-depth analysis of public views on pay-as-you-drive in recent years, we surveyed 3,000 UK adults and four focus groups. Our report revealed that:
- 60% of people who took part in the research agree there is a need to reform the current system of vehicle taxation
- 49% of respondents support the idea of pay-as-you-drive, after arguments for and against were discussed, while only 18% opposed it
Read Pay-as-you-drive: The British public’s views on vehicle taxation reform
What do people like about pay-as-you-drive?
There were two things about pay-as-you-drive that were particularly popular:
1. The money needs to come from somewhere to prevent the loss of tax income, so EVs should pay tax like other vehicles (though at a lower rate)
“There is going to be a massive black hole caused by the lack of revenue from electric cars, so if there’s a way for them not to get clobbered, but to pay their fair share, then I think it’s a really good idea.”
– Adrian, Stroud, focus group participant
2. It would make tax more transparent so people who drive less, pay less, helping with the cost of living
“I think it can be beneficial because, if it’s all open and clear, then people can budget better.”
– Joe, South West London, focus group participant
What could a pay-as-you-drive system look like?
National pay-as-you-drive could progress through three options (although some could be skipped or combined):
1. A simple per-mile charge for electric vehicles only. For non-electric vehicles, fuel duty and VED could stay as they are.
2. A simple per-mile charge for all vehicles, replacing fuel duty and VED. The per-mile charge should be higher for more polluting vehicles.
3. A smart scheme, which varies the charge according to when and where the journey takes place, so that journeys for which there is no public transport alternative can be charged less.
Can it be fair?
Any pay-as-you-drive system must be designed to be fair:
- Drivers of cleaner vehicles could be charged less
- Car journeys for which there is no public transport alternative could be charged less
- Drivers could be given a tax-free mileage allowance, with rural drivers receiving more
- A smarter system offers the option for targeted tax cuts to specific groups
- People concerned about privacy could opt out of a smart scheme, instead paying a flat per-mile rate, with mileage checked at their MOT
- Investing in road maintenance and public transport would improve options for all
Our report revealed that 69% of people would be more supportive of pay-as-you-drive if public transport was made cheaper with improved connectivity. So, a proportion of the money raised through pay-as-you-drive should be ring-fenced for public transport.
These findings should give Government the confidence to review options for vehicle taxation reform, working across parties, with stakeholders and the public to find a positive way forward. So we’ll be working closely with ministers, MPs, policy advisers and civil servants to ensure the system that replaces the current one is efficient, fair and places the shift to net zero at its heart.
