Treasury ‘missed opportunity’ on road pricing and car tax as experts warn of urgent action

Martin Lewis gives money-saving advice on VED car tax

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In the Budget announcement on Wednesday, Rishi Sunak unveiled plans for a number of policies affecting drivers around the UK. The most wide-spread change was the continued freeze on fuel duty, which could save the average UK driver £1,900, compared to the pre-2010 escalator.

There were also announcements for HGV drivers having their VED frozen until 2023 as well as investing £32.5million in roadside facilities.

The only mention of car tax in the Budget was relating to company car tax (CCT) which confirmed that rates already announced for 2022-23 will remain frozen until 2024-25.

Many industry experts are concerned about the Government’s slow approach to the issue of car taxation and road pricing.

The Tony Blair Institute for Global Change released a report in August which called on changes to be made to account for the move away from petrol and diesel vehicles.

It claimed that the UK is on track to lose almost £30billion in revenue because of the switch to electric cars, since they wouldn’t need to pay fuel duty.

To account for the losses, tax rises equivalent to up to 2p on income tax would be required by the end of next parliament, followed by a rise of up to 6p by 2040.

Caterina Brandmayr, head of climate policy at Green Alliance, called on urgent action to be made.

She said: “While the Treasury is facing an inevitable drop in fuel duty revenue in the coming years, it remains silent about any plans to reform road taxation.

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“But the Chancellor cannot afford to put this off any longer, as doing nothing is not an option, and sudden tax changes are unlikely to go down well with the public.

“That’s why the Government urgently needs to start a conversation around what a fairer and more sustainable road tax system should look like.”

Road pricing is often discussed as a potential alternative and various organisations have pointed to it as the most logical option to replace fuel duty.

The RAC found that a “pay-as-you-drive” scheme would be the most popular option for road pricing and is seen as fairer than the current system of fuel duty.

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