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Isle of Man introducing new road tax for EVs, will the UK follow suit?

In order to make up for lost revenue from fuel sales, the Isle of Man is introducing an annual charge – or road tax – for EVs. Currently, low and zero emissions vehicles pay zero tax, but is the new charge on the Isle of Man a sign of things to come for the UK?

The start of 2020 has brought some potentially unwelcome news for EV and hybrid owners on the Isle of Man. As of April, the 280 EVs and 706 Manx hybrids, which until now have followed the UK in having no VED liability, will be subject to a £14 charge.

Whilst predictably the Isle of Man Green Party called the tax a ‘retrograde step’, Infrastructure Minister, Ray Harmer, said that it was a necessity as the amount collected from petrol and diesel would decrease rapidly over the coming decade. The target for EV uptake on the IoM is 10,000 cars by 2030 – with a 30 per cent increase each year estimated.

EV owners on the IoM might feel more than a bit hard done by for doing their bit, as during 2019 it was decided that whilst rapidly expanding the number of charge points on the island, the government would also bring in a fee where previously charging was universally available for free.

Ray Harmer reckons the introduction of what is a pretty small charge is a pragmatic step: “We all know that we need to move to a new environment with electric vehicles and so forth, but we also have to raise vehicle duty to maintain our roads, so it is a difficult balance. The highways need to be repaired and we need money to do that.”

The IoM's Green Party countered this argument, however, saying that whilst tax could ultimately be anticipated, it was a backwards move to introduce a charge before most people had made the leap into EVs.

What about the UK?

At the moment, we're still very much in the early adoption phase. EVs make up a very small percentage of cars on the UK's roads and whilst sales are growing rapidly, petrol and diesel vehicles which incur VED ensure the government's coffers remain well stocked. However, given that the government is looking to ban the sale of new petrol and diesel cars by 2040, and in the meantime more and more people will switch to EVs, there is going to be a hole where once VED cash sat.

According to The Institute of Fiscal Studies (IFS), that hole will be around £28bn in size and revenue from increased electricity usage won't even touch the sides in terms of making up the shortfall. Whilst going over to zero emissions vehicles is clearly the way forward, an EV is still a car. It still takes up room on the road and causes congestion. It still damages the roads – more so in many cases thanks to additional weight. And all of this needs to be mitigated.

The IFSs answer – and to be frank, it's the one that makes most sense – is road pricing where people pay a fee depending on the journeys they undertake. For example, driving into a city at rush hour would cost far more than bimbling over to your gran's on a Sunday afternoon.

Unfortunately road pricing is far from popular among a public wary of being monitored and worried that it'll get stung for using a piece of infrastructure more than others who don't use it so much – despite the fact that on paper, that would seem to be the fairest way. The Government Select Committee for Transport is soon to be restarting the conversation on road pricing once again, after the Labour government abandoned its conversations in 2005.

It states: “The £40 billion annual income from Fuel Duty and Vehicle Excise Duty is likely to decline sharply in future, and may end entirely if the government keeps its pledge to fully decarbonise road transport within two decades. This income will need to be replaced if the government is to continue to invest in transport infrastructure and prepare the transport network for a new greener future.”

Don't expect road pricing to become a serious concern for a while yet. The government is, thankfully, committed to encouraging people into EVs through zero tax and also lowering the Benefit in Kind on zero emissions-capable company cars. Down the line, however, it'll almost certainly be the way in which we pay to drive.

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