Campaigners have urged Chancellor Rachel Reeves to impose a pay-per-mile scheme on British drivers to address the anticipated decline in revenue from fuel duty.
In the UK’s drive towards net zero, more drivers are expected to switch from fuel and petrol cars to zero-emission vehicles (ZEVs).
The transition will leave the government with a “looming black hole” as the funds from fuel duty will decline by an estimated £5 billion a year by 2033. The warning comes from the public transport charity Campaign for Better Transport (CBT) that has predicted a “massive revenue gap,” if the Treasury fails to carry out a taxation reform.
“The new Chancellor faces a looming black hole. She can avoid it, in a way which is fair and which garners broad public support. But she should start now, as this issue will only get more pressing.
“It should be cheaper to drive a zero-emission vehicle than a more polluting vehicle, but it’s only fair that these drivers should pay a share, and a pay-as-you-drive model can achieve this,” said the CBT Director of Policy and Campaigns Silviya Barrett.
Her comments come amid expectations within the industry of a rise in fuel duty in the government’s upcoming Autumn Budget.
Difficult Change
The policy can prove controversial with owners of electric vehicles, who have taken on the cost of switching from traditional cars in response to government net zero targets. Road pricing could also affect disproportionately rural communities due the lack of nearby amenities and public transport options.Low-income households, where many cannot afford to live close to city centres, could be another group to bear the brunt of the taxation scheme.
Charging ZEV drivers based on how far they travel could see operation costs increase for small businesses, such as delivery services.
“We fully appreciate that such a change would be perceived as difficult and criticised by the opposition and by certain representative groups. However, our research demonstrated the general public supports such a move,” Barrett said in the letter.
The Alliance of British Drivers (ABD) has disagreed with CBT’s warning about a “black hole in the nation’s vehicle-based tax revenue.”
The ABD suggested that a special electricity tax (SET) on charging EVs would be a “the simplest and quickest” alternative to road pricing.
“SET could be rated to ensure the Treasury received the same tax yield as for petrol and diesel vehicles, varied by the mass of the vehicle. It really is that simple. There is no requirement for a separate and expensive road pricing scheme, currently under consideration by the government,” the ABD said.
“They are a threat to our privacy as well as our freedom. The government should recognise that drivers are charged many times over for using the road,” the petition, started on August 19, says.
Voices in favour of road pricing, including by RAC and the Confederation of Passenger Transport (CPT), pointed to the benefits of a new taxation system.
“A pay-per-mile system could be set up according to vehicles’ emissions with EV drivers paying the least to further encourage take-up and ‘gas guzzlers’ paying the most,” said RAC Head of Policy Simon Williams.
Alison Edwards, CPT’s director of policy and external relations, said that the pay-as-you-go vehicle taxation could help curb congestion and make buses and coaches quicker and more attractive.
