The shift from petrol and diesel cars to battery electric vehicles has created an urgent need to rethink how people pay to use the roads, according to Tony Blair’s think tank.
Income from fuel duty is set for a sharp decline leaving a black hole in government finances unless an alternative – such as pay per mile – is implemented.
Rachel Reeves is widely expected to confirm the end of a temporary 5p cut in fuel duty, and possibly announce an inflationary rise in the tax paid on petrol and diesel at the pumps, in her budget next Wednesday.
However, the Tony Blair Institute has suggested that instead of restoring fuel duty rates as planned, Reeves should introduce a simple road pricing system of 1p a mile for cars and vans, and 2.5p to 4p for lorries and heavy goods vehicles.
A new report from the institute argues that the change would generate the same revenue from motorists as the Treasury expects to raise from an end to the 2022 temporary cut in fuel duty – and thus acting now could be less politically toxic than later.
Attempts by the Blair government in 2007 to introduce widespread road tolling were met with a public backlash and a record number of people signed a parliamentary petition objecting. However, the rise of electric cars and the feared loss of fuel duty income, which brings in about £25 billion a year, has driven new calls for reform.
The Guardian reported he Tony Blair Institute argues that bringing in a low-level road pricing scheme would be “a crucial step in reforming the UK’s system of motoring taxation for the electric-vehicle era [and] help prevent a growth-stifling rise in road congestion”. It envisages the early level of charging to cost the average motorist about £70 a year, which would be payable based on mileage readings taken from cars’ odometers at their annual MOT check.
The report suggests that fuel duty would not be abolished but frozen and eventually become redundant as vehicles become zero-emission, with the price per mile rising to about 10-12p a mile by 2050.
There have been weeks of speculation about reforms, intensified after the head of the National Infrastructure Commission, Sir John Armitt, said road pricing was “inevitable”. Groups including the Campaign for Better Transport have also urged reform to bring in pay-per-mile charges for electric vehicles.
Even the RAC has argued a change is inevitable. Earlier this year, RAC head of policy Simon Williams said: “As more and more EVs come on to the roads the Government will need to tax drivers differently. We think replacing fuel duty with a pay-per-mile system as soon as possible is the way forward as then the only tax levied on fuel would be VAT. This would give retailers nowhere to hide.”
A government spokesperson said: “We have no plans to introduce road pricing. We are committed to supporting our automotive sector as we transition to electric vehicles in order to meet our legally binding climate targets.”
