Drivers could face pay-per-mile charges as Government considers road pricing to plug £40bn tax hole
UK motorists could be charged for every mile they drive under plans being considered by Chancellor Rishi Sunak.
The Chancellor is reportedly “very interested” in the idea of a road pricing scheme to help fund the black hole left by declining fuel duty revenues.
According to The Times, Mr Sunak has been presented with a Treasury paper on a new national road pricing scheme that would see motorists tracked and charged according to their road use.
The pay-as-you-drive scheme could help fill a predicted £40 billion a year shortfall in revenue as drivers switch to electric cars.
Currently, the Government makes £28bn a year from fuel duty, which accounts for 57.95p of the cost of a litre of fuel. However, with plans to ban the sale of new petrol and diesel cars from 2030, this income is set to fall rapidly. Along with the loss of VAT on the fuel duty and vehicle excise duty, which is currently free for electric cars, it represents a near £40bn shortfall.
Previous governments have considered a pay-as-you-drive road pricing scheme but it has never got past the planning stage. Tony Blair’s Labour government abandoned plans for such an approach in 2007 after 1.8m people signed a petition against it.
RAC head of roads policy Nicholas Lyes said that a move to electric vehicles required a new approach to road funding but warned that it must be implemented carefully to avoid infuriating drivers.
He said: “As more electric vehicles come on to our roads, revenue from fuel duty will decline so it’s inevitable a new system will have to be developed. While not paying car tax is clearly an incentive to go fully electric at the moment, we will very soon need a system that can levy tax on both conventionally fuelled and battery electric vehicles fairly. If this isn’t addressed, we risk finding ourselves in a situation where petrol and diesel drivers continue to pay all the tax for using the roads which is unsustainable.
“But drivers are firm in their views that any new system must not be used as a way to increase the tax burden on them. Drivers are also clear that tax revenues from any replacement for fuel duty should be solely reinvested back into the road network.”
Edmund King, president of the AA, said that a “imaginative solution” was needed that didn’t unfairly penalise certain groups. He highlighted a proposal he made in 2017 where drivers would be given a free allowance of 3,000 miles per year, with bigger allowances for those in rural areas.
He added: "It is always assumed that road pricing would be the solution but that has been raised every five years since 1964 and is still perceived by most as a 'poll tax on wheels'."