Martin Lewis gives money-saving advice on VED car tax
Car tax updates could see a pay per mile system introduced in place of current emissions-based charges. The Transport Committee has opened a new inquiry into possible updates and has invited experts to offer written advice by 17 February.
Any new changes as a result of the inquiry may then be announced shortly afterwards but are not expected to be introduced any time soon.
Chair of the Transport Committee, Huw Merriman said the group would be “exploring” the likelihood of road pricing schemes offering a solution to lost revenue streams.
The Treasury has already warned the government could lose up to £40billion through the switch to electric cars due to a planned loss of existing charges for petrol and diesel owners.
Mr Merriman said: “A consequence of the transition to electric vehicles is a potential £40 billion annual fiscal black hole, due to the reduction in Fuel Duty and Vehicle Excise Duty (VED).
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“Something will have to change. We will be exploring whether radical road pricing or ‘pay-as-you-drive’ schemes can offer a revenue-raising solution to this problem.
“We will explore the practicalities of different schemes, the level of public support for them, and best practice from other countries.
“We will also assess whether new technologies and pricing can both be utilised to incentivise consumer behaviour change, reduce congestion and promote active travel.”
The inquiry will look at the case for introducing some form of road pricing and the economic, fiscal, environmental and social impacts of doing this.
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The analysis will also look at which particular road pricing scheme would be most appropriate for the UK and ant practicalities of introducing the schemes.
The Transport Committee said they will also consider the level of public support for any road pricing measures.
Road pricing proposals from other countries will also be considered to determine what lessons can be learned.
The Transport Committee has long considered a full review into changes to vehicle taxes.
They announced plans to look at the feasibility of road pricing over one year ago before the 2019 General Election.
In a recent statement, the Department for Transport (DfT) said the government had yet to announce a road pricing scheme.
However, they confirmed there was a need to ensure revenue from motoring taxes keeps pace with changes on the pad.
They added any changes to the tax system would be considered by the Chancellor with any further steps announced in due course.
It has not yet been confirmed whether electric cars would be liable for road pricing costs at all.
Under current rules, electric car owners are exempt from VED road tax charges as they do not emit any vehicle emissions.
Mr Merriman added: “The Government decision to bring forward the ban on the sale of new petrol, hybrid and diesel cars, recently announced in the ‘Ten Point Plan’ for a green industrial revolution, is considered a vital step along the UK’s path to net zero.
“This inquiry will help us get into the details and practicalities of the policy and the financial implications.”
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