Wednesday 12 June 2019
In July 2019, the States of Guernsey agreed to develop a distance charging scheme as new way of raising revenues from motoring. Work will now begin to develop a pilot scheme.
The intention is that a similar total level of revenue would be raised as under the current excise duty on motor fuel. There are no proposals to change the current charges on first registration of vehicles or to reintroduce an annual charge on ownership ("motor tax").
Why make a change now?
The money raised for fuel duty has a big role to play in funding public services, but as people use less fuel and move towards electric vehicles, that source of funding is becoming unsustainable. Therefore, we need to find a fair model for generating revenue that's fit for the 21st Century.
The volume of motor fuel used has declined from nearly 34 million litres in 2008 to less than 30 million litres in 2018. This volume decrease is having an adverse effect on income from excise duty meaning that percentage increases in the rates are not resulting in similar percentage increases in income.
There are a number of reasons for the decline in the volume of motor fuel used:
- Increased efficiency of internal combustion engines - the average vehicle produced now is approximately 30% more efficient than it was twelve years ago
- Change in driving habits - the use of public transport, cycling and walking are being promoted as alternatives of using the car
- An increased number of vehicles which do not use motor fuel as their energy source
It is anticipated that, under the current arrangements, revenues from duty on motor fuel will reduce by approaching 50% within twenty years and virtually disappear by 2050.
What is 'distance charging'?
Distance charging is a means for charging motorists relative to the distance they travel. There is also the potential for charges to be differentiated, for example dependent on the vehicle's weight, engine size/power or CO2 emissions.
Whilst distance charging has traditionally relied on a system of toll booths, advances in vehicle tracking technology have created the opportunity to accurately charge drivers on the basis of per mile travelled by using in-car technology.
The States recognises that there is still work to be done on the rates of charging and how distance is measured and those details will be included within a future piece of work.
Is this to raise more money?
No, the intention is to find a way of maintaining a similar level of revenue and ensuring that is shared amongst all vehicle users.
It is recognised that the proportion of vehicles using motor fuel will continue to decline and those using non-internal combustion engines (such as electric vehicles) will result in a fall in motor fuel volumes and consequently a reduction in duty income. As a result, the number of people contributing through excise duty will also decrease.
Introducing a distance charging mechanism will help ensure the costs are shared fairly.
