The cross-party Commons transport select committee said it saw "no viable alternative" to road pricing and that work should start immediately on creating a replacement for fuel duty, according to coverage published on 4 February 20221. The committee said UK motorists will have to pay by the mile to make up a £35bn tax shortfall that will arise from the shift to electric vehicles1.
Under the committee's proposal, new charges should entirely replace fuel duty and vehicle excise duty and be "revenue neutral", with most motorists paying the same or less than they do now1. The recommendation sits alongside separate calls from a committee for greater support for decarbonising heat in homes, which it said contributes 14% of all of the UK's emissions, and for the proposed ban on gas boilers in new homes in England to be brought forward by two years to 20231.
The road pricing call came on the same day that the chancellor, Rishi Sunak, set out measures to offset a 54% rise in the energy price cap from April1. The industry regulator Ofgem raised its cap on bills to £1,971 "in response to a surge in gas prices that has pushed dozens of utilities out of business"1. Sunak told the House of Commons that the "government is going to step in to directly help people manage those extra costs"1.
The package comprised a £200 discount on domestic energy bills applied from October, financed by the government and repaid by households in annual £40 instalments over the next five years; a £150 council tax rebate for 80% of all homes in England, starting in April; and some £144m of discretionary funding for local authorities to help vulnerable people1. Sunak said the new measures are worth £290m in funding for Scotland, and rejected calls for VAT to be cut, arguing that would disproportionately help wealthier households1. Some £68 of the £693 increase in the cap relates to industry-wide "supplier of last resort" levies1.
| Measure | Detail |
|---|---|
| Energy bill discount | £200 from October, repaid at £40 a year for five years |
| Council tax rebate | £150 for 80% of homes in England, from April |
| Discretionary funding | £144m for local authorities |
| Scotland funding | £290m |
The Resolution Foundation thinktank said cases of fuel stress, where energy bills in a household exceed 10% of disposable income, would double to 5m in April despite the steps announced by Sunak1. The Institute for Fiscal Studies said the package would not stop average incomes and living standards from falling over the coming year1. Fuel poverty charity National Energy Action described the measures as "woefully inadequate"1. Shadow chancellor Rachel Reeves called them a "buy-now-pay-later scheme that loads up prices for tomorrow"1.
Separately, Shell "triggered renewed calls for a windfall tax on oil and gas producers yesterday after cashing in on soaring prices to quadruple its adjusted profit to $19.3bn last year", making $6.4bn in the final three months of last year alone1.
Why it matters for households
The two announcements point in opposite directions for a household's energy independence. The immediate support is a loan in substance: the £200 discount is repaid at £40 a year for five years, so the relief in October is followed by a standing cost on bills until around 20271. The £150 council tax rebate is not repaid, but applies only in England1.
The road pricing proposal concerns motoring costs rather than home heating, and no rate per mile, start date or administrative mechanism has been reported1. What the committee set out is a principle: that fuel duty and vehicle excise duty be replaced entirely, and that the change be revenue neutral1. For households that have already moved to an electric vehicle, or are considering it, the tax treatment of motoring is therefore unsettled.
On heat, the committee's call to bring forward the ban on gas boilers in new homes in England to 2023 would affect new-build properties rather than existing homes1. The wider question of how existing homes are heated, and at what cost, is not addressed by the measures announced on 3 February1.
What happens next
The £200 discount applies from October 2022 and the £150 council tax rebate from April 20221. Sunak warned households to brace for further increases in energy costs in the autumn, saying "There's global forces at play here that drive up gas prices at the moment and I don't have a crystal ball"1. Gas and electricity providers are expecting to meet UK officials in the coming days to work out how the chancellor's proposals will operate, having been left out of the final round of talks1. No timetable has been reported for taking forward the transport committee's road pricing recommendation1.
Sources1 cited
- UK’s Sunak reveals £9bn plan to offset energy hike - Carbon Brief, carbonbrief.org