Tory leadership accused of ‘fantasy economics’ over EV tax

Last week outgoing Prime Minister Boris Johnson told the Commons Liaison Select Committee that it was “certainly the case that we will need a substitute for fuel duty”. However, he was forced to defend himself when Conservative MP and chair of the Transport Select Committee Huw Merriman accused No 10 of blocking the Treasury over the past three months from setting up a working body to investigate the issue.          

No 10 would not comment on the allegations when approached by E&T.

But Labour MP Ben Bradshaw told E&T that the delay was “typical of the fantasy economics that has been pedalled for the last two and a half years by Boris Johnson and has been reinforced by virtually all of the Tory leadership contenders”.

“We are going to have a massive hole in the public finances due to the transition to electric vehicles and the accompanying fall in excise duty and fuel duty,” he said.

Bradshaw, who sits on the Transport Select Committee, added that “without honesty from politicians about how that gap is going to be filled, while at the same time managing traffic volumes, it’s just treating the voters as if they are stupid”.

“Everybody who knows anything about transport and the public finances knows that a government is going to have to go down this route and the sooner it does it the better because the longer it puts this decision off, the bigger the hit to the public finances and the more likelihood there will be of congestion chaos on our streets because basically everyone driving an EV won’t be paying anything,” he said.

The committee published a report on road pricing in February, proposing a system based on miles travelled and vehicle type, which would enable the government to maintain the existing link between motoring taxation and road usage.

It urged the Treasury and the Department for Transport to start an “honest conversation” about how to maintain investment in roads and public services and recommended that the government set up a working body to look at the issue by the end of 2022.

Since then, reports from government advisors, the Committee on Climate Change and the Local Government Association have all looked at ways road pricing could be introduced.

However, the government was unable to say what specific work it had carried out so far.

Instead, a government spokesperson said: “The government has committed to ensuring that motoring tax revenues keep pace with the changes brought about by the switch to electric vehicles, whilst keeping the transition affordable for consumers.”

Bradshaw said it was “disappointing that the government has been so completely paralysed for months now” and that he “cannot see that changing now before the next election”.

He said the inertia was a result of “every minister, including Grant Shapps, spending all their time trying to shore up Boris Johnson”.

He added: “Now we face two months of a Tory election, where, again, nothing is being decided but completely unrealistic promises are being made about being able to cut taxes without saying where you are going to cut spending.”

Bradshaw described this as “economically illiterate”.