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Pay per mile road tax is not a new idea, but it is hitting the headlines again recently as a solution to lost revenue from fuel duty.
Around £25 billion a year is raised for the treasury from taxes and duties on petrol, diesel and other fuels. However, with more businesses and consumers opting for electric vehicles, this figure is likely to decrease in the future. A pay-per-mile tax has been suggested as a way to fill in this shortfall.
Campaign For Better Transport director, Silviya Barrett, has written to the government to state that “ZEV drivers should fairly contribute towards vehicle taxation” and calling for a “simple charge” based on “regular odometer readings”.
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CBT director, Silviya Barrett, 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. 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.” |
As the name suggests, pay-per-mile road tax would see drivers pay tax based on the number of miles they drive. The further you drive, the more you pay.
It would replace the current VED system or 'road tax', which taxes a vehicle depending on vehicle type, age, fuel type and - crucially - its measured CO2 emissions. Higher polluting vehicles are taxed a higher rate of VED.
Last year, the Resolution Foundation think tank suggested a figure of 6p per mile (plus VAT) to offset the fall in Fuel Duty.
With the average UK car mileage being 7,400 miles, a 6p-a-mile duty would see the average motorists having to fork out £444 per year.
The existing annual standard VED rate for modern petrol and diesel cars is £190.
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.
However, the opposition points out that fuel duty is already a tax-per-mile scheme, with drivers paying 52.95p (inclusive of the temporary 5p cut) on every litre of petrol and diesel they pump into their cars.
60% of 18-24 year olds in a GoCompare survey opposed the scheme; perhaps unsurprising since this cohort are already being squeezed by high insurance costs and second hand car prices still not back to pre-covid levels.
The scheme could encourage road users to switch to public transport, which would be good news for those concerned about the environment and reaching net zero targets. However, the tax would disproportionally affect those who can’t use public transport, such as the disabled and those living rurally.
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Edmund King, AA president, said: “If in the future a system is introduced, it must have incentives for those dependent on their cars in rural areas, disabled drivers, and shift workers. 'The scheme should be overseen by an independent body and should not aim to raise more revenue than is currently raised from drivers. Any scheme would need the support of drivers and should give them other benefits, otherwise it could backfire.” |
It already appears likely that the government will increase the existing fuel duty tax by 5p, following a freeze implemented following Covid. Currently, this freeze provides motorists with £1 billion in tax relief.
All pay-per-mile taxation schemes are still in their infancy and are unlikely to be implemented soon.
