‘One way or another electric cars will have to pay an increasing share’

I have been playing with the States tax reform calculator. This reveals, as I expected, that allowances such as pension contribution and mortgage interest tax relief will come out of the new 15% band. More importantly, if your spouse has little or no income, so does the transferred personal allowance. As a result many will receive less than the oft-quoted benefit of this change and some will get none at all.

Let’s move on to social insurance. Leaflet 50 – the guide to benefits and contributions – tells us that Class 3 contributors, non employed and pensioners, are already receiving the proposed allowance of £11,122 and so will not gain from this either.

What about motoring taxes? Sales of motor fuel are in decline for several reasons. This process will accelerate as our vehicle fleet is updated, particularly as the introduction of an MOT is likely to speed up the scrapping of older cars. The reintroduction of an annual motor tax – partially offset by reduced fuel duty – therefore makes sense, if it is done intelligently. So why on earth does the proposal include CO2 emissions? The CO2 emitted by a car is directly related to its fuel usage. Including emissions as part of the calculation of road tax means as cars use less fuel there will be a double whammy of lower fuel duty and lower road tax receipts. It is therefore a matter of common sense to return to a system based simply on weight, which is already included in registration particulars. A charge of £6 per 50kg (cwt) would equate to £120 for a one tonne car or £288 for a 2.4 tonne SUV. For comparison, the 2007 rates for similar petrol vehicles would be around £180 and £408 respectively when adjusted for inflation.

There is no point in using tax to encourage the transition to electric cars. This will be driven by availability which is outside our control. Furthermore we have to recognise that if we want to continue raising upwards of £20m. a year from motoring, then one way or another electric cars will have to pay an increasing share.

Lawrence Harding
Torteval

Deputy Adrian Gabriel, President of the Committee for the Environment & Infrastructure, responds:

Thank you for the opportunity to reply to the motor tax part of your reader’s letter.

The reader is right to point out that fuel duty has been decreasing for many years and is predicted to continue to fall as vehicles become more fuel efficient and as electric vehicle ownership increases. Less income from fuel duty means less money for public services.

The transport tax element of the 2026 Tax Reform package seeks to address this by proposing that all vehicles using the road pay something towards maintaining them. However, to avoid just adding another tax on top of fuel duty, this has been combined with a reduction in fuel duty.

Of course, not all vehicles are the same, which means that we had to make a decision as to what criteria had to be considered when determining how this figure should be charged. We explored different options including emissions only, weight only, vehicle size and engine size, as well as different ways to apply the charge.

In the end, we decided to go ahead and propose a combination of vehicle weight and emissions as it enables the policy objectives to be met. An added benefit to the customer is that this information is declared by manufacturers in a recognised method on a vehicle’s registration document, and therefore enables the customer to self-calculate the potential charge. This reflects the fact that the heavier the vehicle, the more it impacts the road infrastructure, but also reflects the fact that vehicles with higher emissions contribute more greenhouse gases. This is aligned with Guernsey’s commitment to encourage the uptake of cleaner, low-emission vehicles through its Integrated Transport Strategy, and commitment to decarbonisation.

While CO2 emissions can be linked to the amount of fuel a vehicle burns, it is not a direct correlation. Vehicles with similar fuel use can have different certified emissions figures due to differences in engine technology, fuel type, hybrid systems and emissions-control equipment. Equally, a vehicle’s environmental impact is not determined solely by the amount of fuel it consumes.

Electric vehicles will be in the lowest emissions category but will still be required to pay an annual vehicle tax as part of the requirement for all vehicles to contribute to the upkeep of our infrastructure.

The combined approach was recommended as it reflects two different policy objectives and provides a fair and balanced approach between contributing towards infrastructure costs and the environmental impact caused by vehicles depending on the emissions produced.

The user pays principle for fuel will still apply as fuel duty will continue under the proposals. The rate is just proposed to reduce by 25% in recognition that people will being contributing through other methods.