The chancellor Rachel Reeves has been urged to reform vehicle taxation by charging motorists by the mile or face a massive revenue gap.
With the UK transitioning away from petrol and diesel vehicles towards zero emission vehicles, the letter from the Campaign for Better Transport warns that revenue from fuel duty will decline by an estimated £5 billion a year by 2033.
Silviya Barrett of Campaign for Better Transport 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.”
The easiest immediate solution, the letter says, would be a simple charge levied on zero emission vehicles (ZEVs) on a per-mile basis. Having an adequate transition period would enable industry to prepare. And exempting existing ZEV drivers would incentivise uptake before the implementation date.
“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,” Ms Barrett said.
Research by Campaign for Better Transport showed that 65 per cent of the public believe it is fair for ZEV drivers to be taxed but at a lower rate than petrol and diesel drivers versus only 19 per cent who disagree.
Campaign for Better Transport leads a Pay-as-you-drive Forum, which comprises 37 organisations including transport industry and sector bodies, NGOs and think tanks. While different members of the Forum have slightly different perspectives, all would support a Treasury move on vehicle taxation, believing it is important that ZEV drivers should fairly contribute.
ADEPT President, Ann Carruthers, said: “As we transition to a decarbonised transport system, it’s crucial that we address the funding gap created by declining fuel duty revenues.
“A well designed, pay-as-you-drive system would provide both a sustainable funding source for our vital road infrastructure and also encourage the shift towards greener travel choices that are crucial for our net zero ambitions.”
RAC 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.
“Our research suggests drivers broadly support the principle of ‘the more you drive, the more tax you should pay’. Whatever any new taxation system looks like, the most important thing is that it’s simple and fair to drivers of both conventional and electric vehicles. 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’re not in favour of charging different amounts per mile based on the type of road driven on.
“We believe the Treasury needs to get moving on creating this new system sooner rather than later.”
