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Road pricing guaranteed

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Central to the UK government’s 10-point version of a green new deal is the ambitious promise of:

“Phasing out sales of new petrol and diesel cars and vans by 2030 to accelerate the transition to electric vehicles and investing in grants to help buy cars and charge point infrastructure.”

The new timetable is, to put it politely, challenging.  The Society of Motor Manufacturers & Traders, for example, commented that:

“We share government’s ambition for leadership in decarbonising road transport and are committed to the journey. Manufacturers have invested billions to deliver vehicles that are already helping thousands of drivers switch to zero, but this new deadline, fast-tracked by a decade, sets an immense challenge…

“Success will depend on reassuring consumers that they can afford these new technologies, that they will deliver their mobility needs and, critically, that they can recharge as easily as they refuel. For that, we look to others to step up and match our commitment…”

The technical challenges in creating an entirely new infrastructure, not just to recharge some 30 million electric vehicles, but also to service and repair them, are difficult enough.  But they pale into insignificance when compared to the financial implications.  These are hinted at in the response from the RAC Foundation:

“In many ways the easy part of all this is setting a deadline for banning pure petrol and diesel sales. But what happens in the lead up to this cliff edge? And how do we create a genuinely affordable mass market in electric cars between now and 2030? Currently, less than 1% of the UK’s 33 million cars are plug-ins.

“Battery-powered cars today come with the promise of comparatively cheap motoring and low fuel costs, and around two-thirds of the dwellings in England have either a garage or the potential for off-street parking, meaning that charging cheaply at home overnight may be a practical option for millions of drivers.

“However, it looks like the time has come when the Chancellor has to work out how to plug the revenue gap created by a drop off in the income from fuel duty on petrol and diesel sales. The hugely difficult balance he must strike is between blunting the incentive to go electric and protecting the public finances. The risk is that the Chancellor opts for an overly complex solution that promises much but falls flat on its face in practice.”

The “revenue gap” here is far from trivial.  According to the Institute for Fiscal Responsibility, the duty on fuel raised £28bn – 2.2 percent of the government’s total tax income – in 2019. There is a real danger that Britain could trigger something akin to France’s Gilets Jaunes protests if wealthy drivers are given grants and tax breaks to buy their new electric cars while the costs are loaded onto poorer drivers who will have no choice but to use second hand petrol and diesel cars beyond 2030.

If Britain had a functioning opposition party, serious questions would be being raised about where the missing £28bn is going to be raised. This though, is merely the start of the debate we need to have.  Someone is going to have to pay for the additional electricity generating capacity required to power all of the proposed additional electric cars.  It is likely that most electric car users will put their cars on charge when they come home from work; a time when general electricity demand is at its peak.  And so the local grid infrastructure will also have to be strengthened to carry the additional load.

This isn’t going to be cheap.  And the high costs involved raise questions of fairness.  At present, the UK funds its electricity infrastructure by loading the costs onto consumers’ bills.  Because of the price structures used by electricity supply companies, this already disproportionately disadvantages poorer households.  But at least there is an argument that those households benefit to some extent from keeping the lights on.  Adding the cost of the electric vehicle infrastructure onto electricity consumers’ bills, in contrast, would be wholly immoral.  In effect the poorer half of the population would face eye-watering electricity bills so that the richer half of the population can continue to enjoy cheap and happy motoring.

Even a Tory government – particularly one that depends upon 50 working class “red wall” seats for its majority – is unlikely to be sufficiently deranged to try to get the poor to pay the cost of rich people’s subsidised motoring.  Which is likely why Britain’s Chancellor, Rishi Sunak, has been touring the news studios floating a raft of new taxes on road use as an alternative to fuel duty.  As R.J. Partington at the Guardian reports:

“The government is exploring options for dealing with a £40bn black hole in the public finances, which would result from a proposed ban on the sale of new petrol and diesel cars within a decade…

“From the £40bn shortfall expected within 10 years, the IFS said most comes from fuel duty – with as much as £28bn paid last year by motorists filling up cars, vans and lorries at fuel stations. Almost £6bn comes from VAT on fuel, while another £6.5bn comes from vehicle excise duty…

“The chancellor, Rishi Sunak, is understood to be considering options for addressing this shortfall, with potential solutions including a new national system of road pricing – which would mean motorists paying directly to use Britain’s roads.”

Ironically though, directly taxing the drivers of electric vehicles in this way would largely negate the current benefits of switching.  It costs around four pence per mile to power an electric vehicle charged at home.  A reasonably fuel efficient petrol car by comparison, would cost around ten pence per mile – much of the difference being the result of the taxes levied on petrol.  But if those taxes are levied directly via road use and congestion charges (which is the fairest approach) then the savings will disappear; effectively cancelling the tax breaks being mooted to persuade people to make the switch.

A functioning opposition party might point out that electric cars have a minimal role to play in a future low-carbon economy; and that a far more practical response would be to relocalise economic activity so that far more people are able to give up car ownership entirely.  Such an opposition party, though, would have to not be dependent upon political donations from the corporations that benefit from the mass market in cars.

As you made it to the end…

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