Abolishing the annual Vehicle Excise Duty (VED) and introducing a flexible system of road pricing to target congestion are two of the ideas suggested in the Institute of Fiscal Studies Green Budget, launched today.
With the £40 billion revenue from motoring taxes set to erode as more people switch to electric, hybrid and alternatively-fuelled vehicles, the IFS has called for swift action to tackle the expected revenue decline and the social costs of motoring, such as congestion.
The IFS believes that a system of road pricing, where charges vary by time and location is the best way to recoup the costs of congestion from drivers.
Another option – which could be a stepping-stone to road pricing – could be the introduction of a flat-rate tax per kilometre driven, which the IFS says would continue to raise revenue and discourage driving once alternatively-fuelled vehicles replace petrol and diesel.
Echoing views articulated in the BVRLA’s pioneering report, Road to Zero: time to shift gear on tax, the respected think tank encourages immediate action on the design of a new tax system fit for a zero emission future, before existing taxes are eroded.
See the IFS Green Budget 2019 on their website.