EVs are ripping GBP 35 billion hole in UK budget If done right, pay-per-mile system could be more equitable than simply subsidizing EVs London, September 5, 2024 – The UK has set itself ambitious goals of reaching net zero by 2050, and is investing heavily in EVs (Electric Vehicles) – as reducing road traffic emissions is one of the key levers to reaching net zero.
EV numbers are increasing, amounting to almost 2 million vehicles on the road by July 2024. However, motorists switching to EVs are no longer paying fuel taxes and they are exempt from road tax, leaving a GBP 35 billion hole, or about 4% of total yearly tax revenue, in government financing. At the same time, the UK government plans heavy transport infrastructure investment.
“As EVs do not pay fuel tax or road tax, they are basically exempt from contributing to the upkeep of public roads, and also to general tax revenue. A well-calibrated pay-per-mile system could be a simple way of spreading these costs equitably and not just have other drivers cover the share of those who can afford an electric vehicle,” explains Tim Wray, mobility expert at Kapsch TrafficCom.
What is a pay-per-mile system?
A pay-per-mile system considers the distance travelled by motorists in their vehicles, as well as the type and emissions status of vehicles, and applies charges accordingly. That way, heavier road users pay their fair share, while less frequent users pay less.
Depending on the configuration, modern pay-per-mile systems can also be used to regulate traffic in sensitive areas, for example around schools or hospitals, and reduce traffic volume during peak traffic hours. Differential pricing, where motorists are incentivised to align their usage with transport policy, has been proven to influence customer behaviour in many industries already, such as public transport.
Time to act is now
While EV sales are soaring, the total number of electric vehicles on the road is still comparatively small. This means that coupled with the existing subsidies, a pay-per-mile system aimed at those that do not pay fuel tax could be introduced comparatively easily. But in a few years this will no longer be possible, so the time to act is now.
“In order to fully commit to the electric future and finance infrastructure upkeep, the fuel tax revenue question needs to be urgently addressed,” urges Tim Wray.
“The technology is already available and being used in countries around the globe, but the window for opportunity for an introduction in the UK is closing fast. We need to act now, or we will face increasing revenue pressures. Four per cent of yearly tax revenues cannot simply be ignored,” Wray concludes.
More information: Press | Kapsch TrafficCom
Sandra Bijelic 
Head of Corporate Communications 
Kapsch TrafficCom AG 
Am Europlatz 2, 1120 Vienna, Austria 
P +43664628 1720 
sandra.bijelic@kapsch.net