Government under pressure to introduce £70 a year pay per mile road charges

The gradual move from petrol and diesel vehicles to electric cars has sparked an urgent need for a rethink on road usage charges, says Tony Blair's thinktank. With fuel duty income predicted to plummet, alternatives such as pay-per-mile schemes need to be considered, the Tony Blair Institute has said.

Rachel Reeves is anticipated to announce the end of a temporary 5p reduction in fuel duty, possibly coupled with an inflationary increase in tax on petrol and diesel at the pumps, in the Budget next Wednesday. However, the Institute suggests that instead of reinstating fuel duty rates as planned, Reeves should introduce a simple road pricing system of 1p per mile for cars and vans, and between 2.5p to 4p for lorries and heavy goods vehicles.

A new report from the institute argues that this change would generate the same revenue from motorists as the Treasury expects to raise from ending the 2022 temporary cut in fuel duty – making it potentially less politically contentious if implemented now rather than later. Attempts by the Blair government in 2007 to introduce widespread road tolling were met with public opposition and a record number of people signed a parliamentary petition in protest.

However, the rise of electric cars and the feared loss of fuel duty income, which generates about £25 billion annually, has reignited calls for reform. According to The Guardian, the Institute has posited that introducing a minimal road pricing scheme would be instrumental in updating UK's vehicle taxation system for the burgeoning electric-vehicle epoch and aid in averting a detrimental surge in road congestion. It is predicted that the initial rate of charging may tally at an annual cost of approximately £70 for the average driver, calculated using mileage data sourced from car odometers during their yearly MOT test.

The report hints at retaining but freezing fuel duty and suggests its eventual obsolescence as vehicles transition to zero-emission, with the estimated per-mile charge reaching between 10 to 12p by mid-century. Recent weeks have seen surging discussions on potential reforms, further fuelled after Sir John Armitt of the National Infrastructure Commission mooted road pricing as "inevitable".

Pro-reform groups such as the Campaign for Better Transport have been calling for pay-per-mile charges on electric vehicles. Even motoring organisation RAC acknowledges impending changes; earlier this year, Simon Williams, the RAC's head of policy, pronounced: "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 clarified the situation, stating: "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."