Pay-per-mile is perfect tool to ensure fuel tax equity for drivers

• 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.

Kapsch TrafficCom is a globally renowned provider of transportation solutions for sustainable mobility with successful projects in more than 50 countries. Innovative solutions in the application fields of tolling, tolling services, traffic management and demand management contribute to a healthy world without congestion.

With one-stop-shop solutions, the company covers the entire value chain of customers, from components to design and implementation to the operation of systems.

Kapsch TrafficCom, headquartered in Vienna, has subsidiaries and branches in more than 25 countries and is listed in the Prime Market segment of the Vienna Stock Exchange (ticker symbol: KTCG). In its 2023/24 financial year, about 4,000 employees generated revenues of EUR 539 million.

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