Vehicle Taxation: The next 25 years

EXCERPT

In the near term we recommend that Government withdraws the increase in vehicle excise duty for EVs scheduled for April 2025 and introduce an efficiency-based VED system which applies to electric, petrol and diesel cars alike, irrespective of age. This would raise VED for certain cars sold pre-2017 which have benefited from 7 years of anomalously low rates - by a maximum of £85 a year for some petrol and hybrid cars, and £125 for some diesel vehicles, with the changes brought in over 2 years.

Many drivers of cleaner cars - not just electric cars or newer cars - will pay less. Government should rule out road pricing for this Parliament, instead providing forward guidance on vehicle tax levels, using a transparent methodology.

In the medium term - as we move towards a world where electric vehicles form the majority of cars on the road - it is appropriate that vehicle excise duty accounts for a greater share of road taxation, to reflect the fact that environmental impacts are more concentrated in production than in use.

A reduction in VAT on public charging is both affordable and necessary to get car owners without access to home charging to switch. It can, if necessary, be paid for by changes to VED.

Further research is needed on the harms of particulates from tyre wear, the main environmental externality of EVs, and the development of harder-wearing tyres.