Campaigners have called on the chancellor to introduce a controversial pay-per-mile road charging scheme on electric cars, warning of a £5bn “black hole” in tax revenues from motoring.
In a letter to Rachel Reeves, the Campaign for Better Transport (CBT) urged her to reform vehicle taxes, with fuel duty poised to dwindle in the coming decade as petrol and diesel cars are phased out.
The charity said it was an “urgent issue” as tax revenues were forecast to fall by £5bn between 2028 and 2033, and the public agreed that all vehicles should pay a fair share.
Silviya Barrett of CBT said: “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.”
CBT said the easiest first step would be to levy a small pay-per-mile charge on zero-emission vehicles, with a transition period exempting existing drivers.
The letter said the group “fully appreciate that such a change would be difficult and be criticised by the opposition”. However, it said its research showed that 65% of the public believe it is fair for electric car drivers to be taxed, but at a lower rate than petrol and diesel drivers.
Fuel duty is now 53p a litre for petrol and diesel vehicles. Zero-emission cars will also pay vehicle tax for the first time in 2025.
The charity is leading a forum of 37 organisations supporting reform, including motoring and other transport industry bodies.
One is the RAC, whose head of policy, Simon Williams, said: “With fuel duty revenue set to fall further as more electric vehicles come on to the road, a replacement form of taxation needs to be introduced to avoid losing billions.
“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. We believe the Treasury needs to get moving on creating this new system sooner rather than later.”
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The Confederation of Passenger Transport, which represents bus and coach operators, said “pay-as-you-go” taxation would help the UK meet net zero carbon targets and help curb congestion.
Previous governments have had to back away from the idea of pay-per-mile or road charging schemes as politically toxic, despite widespread support from experts and MPs on the transport committee.
The London mayor, Sadiq Khan, was forced to categorically rule out any moves towards road pricing in his next term in office, backtracking on previous statements supporting a policy, after the “war on drivers” became a big campaigning issue for Conservatives.
A Treasury spokesperson said: “We are committed to supporting our automotive sector as we transition to electric vehicles in order to meet our legally binding climate targets.”