By Richard Sallnow, Transport Expert at PA Consulting
With the government having now decided to introduce a per-mile charge on electric vehicles (EVs), the UK is taking significant and necessary steps to address the looming shortfall in transport funding caused by the shift away from traditional fuel duty. This move extends the existing tax framework – currently applied to petrol and diesel through fuel duty – to new vehicle types, ensuring that all road users contribute fairly to the upkeep and improvement of the UK’s national infrastructure.
The Treasury has set out a simple, mileage-based charge for EVs (eVED), verified annually via an odometer reading, such as part of the MOT. This approach is not surprising, it’s cost-effective, straightforward to implement, and avoids the need for intrusive technologies or complex enforcement mechanisms. This simple scheme could also be just the start, which puts in place a foundation scheme and platform that can later evolve towards a more technologically advanced scheme.
However, there are a number of significant challenges ahead which will need careful consideration for a successful roll-out of the new tax:
- New taxes bring new and innovative ways for tax evasion – there will need to be a close eye on how easy/hard it could be to adjust the odometer reading, or tamper with the software used in EVs in 2028. What capabilities will the DVLA and DVSA need to be alert to odometer readings that have been tampered with, and what mechanisms will be in place to enforce in response? The solution for compliant customers is likely to be easy to implement, but how challenging will the solution for those wanting to evade payment be to manage?
- Customer account-based solutions can be complex to design or develop – making an annual tax payment is simple, however, the solution designed to collect a per-mile charge will need to accommodate a more frequent service than just an annual payment. For example, drivers may want to make monthly payments based on accurate monthly milage, or at the least, the service will need to accommodate car sales at any time throughout the year. These more nuanced needs of the service create a complexity that the DVLA and DVSA will need to prepare for. Some cities have already experienced the challenges with building in-house account-based solutions and will often turn to outsource these services owing to the complexity involved.
- Opt-in digital solution provides opportunity – the option of an ‘opt-in’ digital solution is an ideal way to provide the public with a choice that means when travelling outside of the UK in their vehicle, they are not charged a per-mile fee. This may be of particular interest to those in Northern Ireland who might do a majority of mileage in the Republic of Ireland. There are many questions, however, on how the digital solution might work: Will it use an onboard unit? Will the DVLA/DfT look to negotiate access to vehicle telematics? Might this element of the service be outsourced to private sector (or accessed through APIs)? What will the mechanism to check and enforce those that deliberately want to cheat the system look like?
- Electric foreign vehicles could be seen to be ‘exempt’ – with a high volume of foreign vehicles using UK roads each year, there will need to be a consideration on what proportion are electric, and whether is it fair that they do not contribute to the road maintenance (the principle for introducing eVED). There might need to be a solution at the ports that capture the odometer reading as EVs come into and leave the country, to enable a per-mile payment. There is likely minimal appetite within the ports to introduce an activity that could lead to vehicle queues, but the question has to be asked whether it is ‘fair’ to ignore this.
The three years given to design and implement the eVED scheme is feasible; however, DfT, DVLA and DVSA will need to rapidly get to grips with the core functionality needed plus the nuances. In parallel, now is the time to consider what the long term evolution of eVED might be to ensure this first phase is designed in a way that allows for a more technologically mature and intelligent solution in years to come – one that might rely on vehicle telematics as the main source of mileage used, to offer variant pricing models across the road network.
Ultimately, while the shift to per-mile charging for EVs represents a major change, it is a pragmatic and necessary evolution that will safeguard the future of UK transport funding and support investment in our road network. But, as with any implementation, and especially a scheme which pulls on so many moving parts, there are many complexities that need to be considered to avoid bumps in the road ahead.
Richard Sallnow is a roads expert at PA Consulting.
