Is taxing electric cars a possible government failure?

The government has announced that electric cars will no longer have free road tax from 2025. Owners will pay £165 a year in road tax. Tim Slatter, UK chairman of Ford, has described the move as "short-sighted."

Of course the introduction of road tax on electric cars is going to affect sales, but I don't think it will be quite the game changer the UK chairman of Ford claims it is going to be.

When placed against the current cost of an electric vehicle, the road tax is going to be minimal, and I would argue is perfectly reasonable. Electric cars impose maintenance costs too. Batteries can cause more environmental damage (negative externalities) than fossil fuels.

The longer term picture is that, as fuel duties decline, we're going to have to get used to paying for road space. To my mind, and given the available GPS technology, it's only a matter of time before we are paying per kilometre driven, and there might even be differential rates depending upon the time you drive/level of congestion.