Road pricing may be the best option as number of electric cars rises

If the demand is stronger than forecast, UK will face reduced tax revenue and greater congestion

Last modified on Sun 12 Sep 2021 06.39 EDT

It all seems so simple. By the end of this decade the government will ban the sale of petrol and diesel vehicles. Cars will be greener and cleaner, making it easier to achieve the goal of a net carbon zero future.

Boris Johnson will no doubt impress on fellow world leaders the rapidity of Britain’s transport revolution when he hosts the Cop26 meeting in early November. Rishi Sunak may even be persuaded to announce measures to speed up the transition in the budget in October, carefully timed for the week before the international gathering in Glasgow.

There are two ways the government’s plan could run into trouble. The first is if the transition happens more slowly than expected, because new battery electric vehicles are too expensive or if the infrastructure to keep them charged is not put in place again.

Alternatively, there’s the risk that demand for green cars is as strong – or perhaps even stronger – than forecast, in which case the government is going to face problems of greater congestion and reduced tax revenue.

The two are linked. One of the attractions of buying a new electric car is the lower tax involved. As a paper produced by the Tony Blair Institute for Global Change has shown, the cost of petrol, fuel duty and vehicle excise duty is about £1,100 a year for the average petrol or diesel car, while for electric vehicles it is only £320.

That reduces the overall cost of driving by 71% and, as the switch to green vehicles accelerates, will punch a massive hole in the Treasury’s tax take – £10bn by 2030, £20bn by 2035 and £30bn by 2040, according to the institute’s report.

As the cost of driving plummets, motorists will be encouraged to drive more and congestion will get worse. There is a high cost from gridlock, no matter whether a driver is sitting in a petrol, diesel, hybrid or battery electric vehicle.

All of which raises the question of whether technological innovation needs to be matched by new thinking in the way motorists pay to drive. Specifically, it raises the question of whether a system of road pricing would solve the dual congestion and revenue problems.

Actually, there’s nothing new about the idea of road pricing and it has always had its advocates. Back in the early 1960s, Harold Macmillan’s government was worried about snarl-ups on Britain’s roads and commissioned a study to look into the problem. The Smeed report duly arrived in 1964 and proposed user charging as a way of dealing with congestion.

It was easy to see the reason for ministerial concern. The number of cars on UK roads had hit 5m in 1960 and would double in the course of the next decade. However, with an election looming, no party was going to risk a fight with motorists, and so the Smeed report was kicked into the long grass.

Governments of left and right sought to respond to greater congestion by building more and bigger roads but this has been an ineffective approach. There are now 35m cars on the road and the jams have grown longer.

Over the years there has been the odd flirtation with different approaches, of which the congestion charge introduced by Ken Livingstone when he was mayor of London was the most significant.

The economic case for road pricing is the costs of driving at a snail’s pace in central London are higher than they are on rural roads in Northumberland and that difference should be reflected in the price paid by motorists. If it makes sense to have cheaper rail fares during off-peak hours and different prices for a cinema ticket for a Monday matinee compared with a Saturday night, then, logically, the same applies to use of the roads. Bankers who want to drive from their homes in west London to Canary Wharf for a 9am meeting could still do so but would have to pay a higher price than the pensioner couple going to a country pub on a Tuesday lunchtime. Modern technology in the form of Uber-style apps could vary the cost of driving on the same piece of road depending on the time and the traffic conditions.

In practice, of course, it is not quite as simple as the economists make out. For a start, a way has to be found to prevent politicians using road pricing as a cash cow. Charges might start low but the public would have every right to question whether they would stay low.

Another issue is what happens to people who need to drive on busy roads at peak hours but are not well-off. Care workers with multiple daily visits to make, for example, could not realistically be expected to rely on public transport.

Then, there is the question of whether road pricing would deter motorists from switching to cleaner vehicles because lower cost is clearly an incentive to buy an electric car.

The list of potential problems goes on. Is an Uberised system of road pricing, with all the complexity it would involve, technically feasible? Even if it is, what about the privacy issues that would be involved? To be sure, the UK already has plenty of surveillance on the roads (and elsewhere) but there would inevitably be pushback against the idea that the state would know exactly where you were whenever you were on the move.

All that said, there may be as many as 25m battery electric vehicles on the road by the mid-2030s. That means more traffic jams and a black hole in the public finances. It also means the political default position – doing nothing for fear of a motorists’ backlash – is not really an option.

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