The Death Of Fossil Fuels

[TopBadger]

https://www.theguardian.com/money/2025/ ... ves-budget

This, if true, is hardly likely to help the transition to EV's.

It's crazy enough that my old Euro6 diesel car attracted £100 less in VED each year than my EV - when VED is supposedly structure on polluting costs.

Not scheduled to 2028? Great, another thing Reform can oppose that will be popular with the masses.

[bjn]

https://www.theguardian.com/money/2025/ ... ves-budget

This, if true, is hardly likely to help the transition to EV's.

It's crazy enough that my old Euro6 diesel car attracted £100 less in VED each year than my EV - when VED is supposedly structure on polluting costs.

Not scheduled to 2028? Great, another thing Reform can oppose that will be popular with the masses.

Stupid on so many levels. Reeves might be in a bad place because of a decade and a half of Tory misrule, but she really is a dipshit. Reducing demand for oil improves balance of trade and increase energy security.

Pigovian tax the f.ck out of things you want people to do less of and subsidise the things you want people to do, at least until you get to the point of the bad thing being dead and the good thing being the norm.

[nekomatic]

Yes and no - I think everyone agrees that the revenue shortfall as people switch from ICE cars to electric needs to be met somehow, and much as we need to encourage that switch we also need to encourage switching from driving to public transport and active travel, so that’s really where the subsidies should go if anywhere. Hopefully the secret ingredient will be reinstating the fuel duty escalator so driving ICE remains comfortably more expensive than driving electric…

Storing electricity is like storing any perishable good, is an analogy I haven’t heard before but I like it
https://ember-energy.org/latest-insight ... mechanger/

That’s really good, thanks.

[IvanV]

https://www.theguardian.com/money/2025/ ... ves-budget

This, if true, is hardly likely to help the transition to EV's.

It's crazy enough that my old Euro6 diesel car attracted £100 less in VED each year than my EV - when VED is supposedly structure on polluting costs.

Not scheduled to 2028? Great, another thing Reform can oppose that will be popular with the masses.

Hedgehog in Private Eye (who I don't always agree with*) this issue is on the nose in pointing out that it is very unhelpful to the cities that the government is requiring to clean up their air, that government simultaneously applies policies that have the effect of encouraging SUV ownership and hence increased pollution from ICEs.

The government has had to bring back EV subsidies to keep EV sales growth going, in part because so many of its other policies are unhelpful to it. Though at least it has done that. In Germany, BEV sales fell about 25% in 2024 vs 2023. The UK is now the biggest market in Europe for BEVs, albeit they have a higher market share in a few places like Norway.

But the government, any government, is a bit between a rock and a hard place on this, because of the potential impact of environmental policies on the less well off. Several years ago, I several times asked, in various forums, how was the government to avoid the transition to EVs becoming another engine expanding social inequality. And the best anyone could do was say, "good question". Because they really really didn't like the implications of trying to avoid it.

Clearly we will eventually need to tax EVs rather than subsidise them. But if a per mile charge is to be introduced, it should clearly apply to all cars, not just EVs. But then, how do we avoid that being a tax on the poor, when it is increasingly the poor who are the residual users of fossil fuel cars. Because it is difficult for them to get access to the cheap charging those of us with our own drive and charger can have; and because there isn't the availability of cheap second hand old bangers you can repair yourself (though that's getting harder with even ICE cars becoming laptops on wheels), like in the ICE market.

The installation of chargers, and the price of electricity from them, is left to the market at the moment. But that will inevitably lead to social inequality. We understand that we can't just leave housing to the market when it comes to the less well off. I think we also need to understand that there is a social issue in car charging too, if we are to enforce people to use electric cars. Because plenty of the less well off depend on their cars, and will become unable to drive around in the old bangers they currently satisfy that requirement with. I think there needs to be a degree of regulation of the price of electricity from certain car charges, and some degree of compulsion in installing them, with socialisation of the costs, if this is not to be a source of growing inequality.

---
*And even less often do I agree with Dr B.Ching, but he is on the nose this week with an article on one major reason why doing railway work costs too much.

[dyqik]

Clearly we will eventually need to tax EVs rather than subsidise them.

Or we could just charge income, corporation and sales taxes, plus congestion charges, sufficient to make up for not taxing them.

[Gfamily]

Clearly we will eventually need to tax EVs rather than subsidise them.

Or we could just charge income, corporation and sales taxes, plus congestion charges, sufficient to make up for not taxing them.

There are externalities from the use of motor vehicles wider than those arising from their use of fossil fuels. I think it's reasonable for there to be a 'use' based tax .
Personally, I think it would be an option to introduce a 'per mile' levy on all vehicles. How, exactly, is left as an exercise for the appropriate authorities.

[dyqik]

Clearly we will eventually need to tax EVs rather than subsidise them.

Or we could just charge income, corporation and sales taxes, plus congestion charges, sufficient to make up for not taxing them.

There are externalities from the use of motor vehicles wider than those arising from their use of fossil fuels. I think it's reasonable for there to be a 'use' based tax .
Personally, I think it would be an option to introduce a 'per mile' levy on all vehicles. How, exactly, is left as an exercise for the appropriate authorities.

That's why I included congestion charging in my list. Registration fees are another option for taxing vehicle ownership externalities (as opposed to vehicle use externalities)

With the poor state of public transport across most of the UK, congestion charging linked to public transport availability seems like the fairest option: charging people for driving to where they have other options.

Much use of motor vehicles is driven* by the inability to move closer to work etc., due to the broken housing market. Until that's fixed, per mile charging doesn't seem particularly fair.

[TopBadger]

Clearly we will eventually need to tax EVs rather than subsidise them. But if a per mile charge is to be introduced, it should clearly apply to all cars, not just EVs.

Yup

But then, how do we avoid that being a tax on the poor, when it is increasingly the poor who are the residual users of fossil fuel cars.

You increase the tax free allowance by £250. Offsets the costs for those that drive, puts an extra £250 in the pocket of those that can't afford to drive or don't drive.

[IvanV]

But then, how do we avoid that being a tax on the poor, when it is increasingly the poor who are the residual users of fossil fuel cars.

You increase the tax free allowance by £250. Offsets the costs for those that drive, puts an extra £250 in the pocket of those that can't afford to drive or don't drive.

Unfortunately, it only puts 20% of £250 in their pocket, that being the rate of income tax. I don't think £50 is anywhere near the scale of this.

Feeling lazy, I just asked an AI how much fuel duty and VAT you would pay on fuel for an average car if you drove 7,000 miles in a year, and the answer is about £1400, or about 20p per mile. So if we are trying to tax the usage of cars at that kind of a rate, so that EVs pay the kind of tax that ICE cars currently pay, and then compensate the poor on that scale, we would have to increase the tax free allowance by, say, £7,000. Though there are complications because frequently there are multiple wage earners in a household. So maybe £4,000-£5,000 might do it, in the round. But probably you'd be taking quite a lot of people out of income tax altogether, and so they wouldn't get the full benefit of it.

And of course the comfortably off would also get this benefit too. So you'd have to get it back off them by increasing the rates of taxation higher up the salary scales to recover it from them. Best of luck with that.

My college tutor, the late James Mirrlees, winner of the Nobel Prize for his work on optimal tax theory, often used to say things like this: you should tax externalities like car driving properly, and then adjust for poverty by redistributing through the tax system. But in practice it tends to be tricky to do that. Probably he'd be able to tell you the most suitable way to do that taxation. But, as he'd be first to admit, it's only ever "second best". There is in principle a "first best" tax system, he often referred to, called "lump sum taxation". But only as a thought experiment. Because in effect it requires an omniscient and clairvoyant god to write down in advance the precise amount of tax you need to pay each year.

[Gfamily]

Feeling lazy, I just asked an AI how much fuel duty and VAT you would pay on fuel for an average car if you drove 7,000 miles in a year, and the answer is about £1400, or about 20p per mile.

My (non AI) calculations were different (for 7000miles/year average)
average consumption (petrol) -> 39mpg ==> 180gallons
Fuel cost (@£1.32/litre ==> ~£1100
Of which VAT @20% ==> £188.33
Duty Paid (£2.40/gallon) ==> £432
Total tax ~£620

[IvanV]

Feeling lazy, I just asked an AI how much fuel duty and VAT you would pay on fuel for an average car if you drove 7,000 miles in a year, and the answer is about £1400, or about 20p per mile.

My (non AI) calculations were different (for 7000miles/year average)
average consumption (petrol) -> 39mpg ==> 180gallons
Fuel cost (@£1.32/litre ==> ~£1100
Of which VAT @20% ==> £188.33
Duty Paid (£2.40/gallon) ==> £432
Total tax ~£620

And many thanks for being awake enough to check something I was too lazy to check. More tax than the price of the fuel. Where did it get it so wrong? Stupid me not to do the basic check.

So we are talking like a £2000 increase in the tax free band, which isn't quite as implausible as the £4000-£5000 I mentioned. But as that benefit goes to everyone, we have to take it back with higher taxes further up. And there still maybe issues of not everyone earning enough to get the benefit of the tax adjustment.

[Gfamily]

Feeling lazy, I just asked an AI how much fuel duty and VAT you would pay on fuel for an average car if you drove 7,000 miles in a year, and the answer is about £1400, or about 20p per mile.

My (non AI) calculations were different (for 7000miles/year average)
average consumption (petrol) -> 39mpg ==> 180gallons
Fuel cost (@£1.32/litre ==> ~£1100
Of which VAT @20% ==> £188.33
Duty Paid (£2.40/gallon) ==> £432
Total tax ~£620

I've done an extra step -
A link to a Google Sheets which has costs and levies for ICE (petrol) EVs (charge at home and charge elsewhere) and Petrol Hybrid

https://docs.google.com/spreadsheets/d/ ... sp=sharing

You can play around with the numbers to see what taxes/levies are collected with/without a per/mile levy, and how they compare with the amounts collected for ICEs

[dyqik]

Clearly we will eventually need to tax EVs rather than subsidise them. But if a per mile charge is to be introduced, it should clearly apply to all cars, not just EVs.

Yup

Why?

Why not just collect income and corporation taxes?

[TopBadger]

Clearly we will eventually need to tax EVs rather than subsidise them. But if a per mile charge is to be introduced, it should clearly apply to all cars, not just EVs.

Yup

Why?

Why not just collect income and corporation taxes?

Well, you could. But I think the concept of taxing usage / consumption makes sense for travel.

We could similarly make rail travel free and "just collect income and corporation taxes"... or make energy free... or food...

[dyqik]

Yup

Why?

Why not just collect income and corporation taxes?

Well, you could. But I think the concept of taxing usage / consumption makes sense for travel.

We could similarly make rail travel free and "just collect income and corporation taxes"... or make energy free... or food...

Yes, we could. Making public transport free is a pretty common political position. The mayor-elect of New York ran on it. A free bus runs down my street to the railway station.

EV costs can also be recovered with registration fees, excise taxes, sales taxes etc. it really doesn't have to be with use fees.

[IvanV]

Why not just collect income and corporation taxes?

For an exceedingly detailed study of the British taxation system, general good tax design principles, and how to improve the British tax system, based on a starting position of about 2008, check out the Mirrlees Review (2010). Unfortunately our tax system has only got worse, as exchequers prefer to grab tax in the least news-worthy way, rather than the most sensible way.

If we look back to the classic Diamond and Mirrlees (1971) work on optimal taxation, and Atkinson and Sliglitz (1976), and subsequent commentary, then we might come to the "theoretical" notion of the best kind of taxation system, ie, before considering practicalities.

This would say that the best way of achieving redistribution is through non-linear income taxes, and that indirect taxes - ie taxes on consumption - should focus on policy issues, such as reducing externalities, and also consumption decisions such as necessity vs leisure & luxury. Corporation taxes in this framework are a form of income tax. Business inputs should not be taxed, as such taxes are very distortionary, and likely to result in double, treble, taxation, etc.

In a sense, we kind of have that system in very approximate form. On the indirect taxation side, basic food has a zero rate of tax, household energy has a low rate of tax, but almost all other consumption is taxed - which is a bit more than just leisure. The occupation of houses is taxed on a non-linear scale (community charge), which means that lower income people typically in less valuable houses pay not much, but it used to be a lot more progressive under the rates system. VAT ensures that business inputs are generally not taxed. Externalities like road fuel is taxed. There are high taxes on alcohol and tobacco, because they are bad for you.

Then we have non-linear income tax, at least in terms of salaries. But the rich get a lot of their income from other sources, and the taxation of non-salary income, including business income taxes such as corporation tax, is probably best described as a bit of a mess.

From a practicality point of view, consumption taxes are easier to collect, harder to avoid. Though high taxes on small items, like tobacco, present a criminal opportunity for avoidance through smuggling, etc. Also the rich consume more, so indirect taxes, at least catch their consumption, if they are able to some large part of their income in places where it will experience low tax.

If we did concentrate more or less entirely on income taxes, as in effect you suggest, then the highest rates of taxation on income would probably have to be up around 65-70%. And, unfortunately, that's at a level where it is hard to sustain, because of the potential for tax avoidance activities, ie legal tax planning. Taking your income in forms other than salary. That goes on anyway for the rich even at our current tax rates, but it would spread downwards. We have seen neighbouring countries that used to have tax rates like that eventually recognising that they need to be lower, just from a practical point of view. And those countries had consumption taxes on top.

Corporation taxes are a form of income tax, and are particularly tricky. The profit of a company, at some point, becomes a matter of opinion, such are the range of reasonable treatments an accountant can make. It is also easy to attribute profits to other countries with lower tax rates, especially if you are a multinational with an international supply chain. During those years, like the 1960s-70s, when off-air television was very profitable, the ITV companies paid franchise fees on their profits. But in practice they paid almost nothing, such was what accountants could do. So that was changed to a charge on their income, which is harder to redefine. And then they paid a lot, until broadcast competition reduced the value of those business opportunities. So high rates of corporation tax are particularly easy to avoid, and so likely to be self-defeating. In a sense you can catch that income "later" when it is paid out to shareholders, etc, and tax it then. But this is tricky too because the rich are inclined to receive their corporate dividends in Bermuda or the Cayman Islands, and route it via Vanuatu, the Isle of Man, Jersey, and through various trusts and companies, until the taxman has no idea.

Chancellors tend to like to have a "broad tax base", ie, tax a lot of different things, as it reduces the risk of hits to one source of taxation. By international standards, Britain has low rates of local taxes, which tends mainly to be property taxes, though there are plenty of countries with other kinds of local taxes. In the US, for example, consumption taxes tend to be local taxes. There are countries with local income taxes. Etc.

Road use would in general be something that we ought to tax, as travelling along a road in your own vehicle is a bit of a luxury in comparison to using public transport, and because there are externalities from road use - pollution (even with EVs) and congestion. We all benefit from the road system to a degree - even if you are housebound your food arrives by road in the end, for example. And so to some extent there is a degree of public funding of the road system for all that there is road taxation. Indeed for a long time road taxation was not hypothecated to road maintenance and development. Only recently has the annual vehicle tax been hypothecated, and the fuel tax remains chancellor's general income. Despite that hypothecation, that does not cover the full cost of the roads, anywhere near.

[jimbob]

Since being introduced to it on bad science I’ve been addicted to checking Gridwatch. Today (11/11/19) we’ve consistently had over 10GW from wind, I’m hoping this time next year that will be a laughably small number.

17Gw just now

[Grumble]

Reeves looking to restrict access to the heat pump grant apparently, which is going to reduce the number of installs quite significantly I would think. It might be the right thing to do politically, but anything that keeps us using fossil fuels longer is a bad thing.

[bjn]

Reeves looking to restrict access to the heat pump grant apparently, which is going to reduce the number of installs quite significantly I would think. It might be the right thing to do politically, but anything that keeps us using fossil fuels longer is a bad thing.

It's a dumb move economically. You want to grow the industry because learning curves are a thing, as more pumps are installed, we get better at installing them and making them, which drives down costs. So it starts expensive, but gets more affordable over time.

It also reduces the demand for expensive foreign gas as well as our exposure to volatile fossil fuel prices, and improves our foreign exchange position.

She did take the energy efficiency levies off of electricity bills, which is a good idea (don't tax the things you want people to do), but in doing so reduced the amount of money available. It should just be replaced by funding from general taxation, or even better, a tax on carbon (as if, sigh).

The mantra "expensive foreign gas" is what they should be hammering home to get the message through.

[Grumble]

Reeves looking to restrict access to the heat pump grant apparently, which is going to reduce the number of installs quite significantly I would think. It might be the right thing to do politically, but anything that keeps us using fossil fuels longer is a bad thing.

It's a dumb move economically. You want to grow the industry because learning curves are a thing, as more pumps are installed, we get better at installing them and making them, which drives down costs. So it starts expensive, but gets more affordable over time.

It also reduces the demand for expensive foreign gas as well as our exposure to volatile fossil fuel prices, and improves our foreign exchange position.

She did take the energy efficiency levies off of electricity bills, which is a good idea (don't tax the things you want people to do), but in doing so reduced the amount of money available. It should just be replaced by funding from general taxation, or even better, a tax on carbon (as if, sigh).

The mantra "expensive foreign gas" is what they should be hammering home to get the message through.

She hasn’t done anything yet AFAIK, it’s all just “anonymous briefings” to the press currently, and therefore deniable.

[Grumble]

As she’s looking to remove the majority of subsidy payments for heat pumps, maybe she could soften the blow by reducing VAT on them, like Belgium is doing (down to 6% in Jan).

[Sciolus]

This is what Cameron/Osborne did with solar panels. Create an entire new industry with huge economic, social and environmental benefits, employing large amounts of skilled manual labour, and then kill it stone dead by withdrawing support too soon to save a pittance.

[bjn]

This is what Cameron/Osborne did with solar panels. Create an entire new industry with huge economic, social and environmental benefits, employing large amounts of skilled manual labour, and then kill it stone dead by withdrawing support too soon to save a pittance.

It actually cost us billions. The "green crap" they cancelled would have significantly reduced the need for gas imports during the Ukraine war.