As the UK accelerates towards an electric vehicle future, the question of how to replace the £25 billion in annual fuel duty revenue has become increasingly pressing. Now, a prominent thinktank founded by former Prime Minister Tony Blair is urging Chancellor Rachel Reeves to grasp the nettle and introduce a comprehensive pay-per-mile road pricing system across the country.
The Case for Road Pricing Reform
In a new report, the Tony Blair Institute argues that the expected switch to electric cars will lead to a precipitous decline in fuel duty, which currently brings in about £25bn a year to the exchequer. To plug this looming fiscal hole, the institute is calling on Reeves to introduce a simple road pricing system of 1p a mile for cars and vans, and 2.5p to 4p for lorries and heavy goods vehicles.
Bringing in a low-level road pricing scheme would be a crucial step in reforming the UK’s system of motoring taxation for the electric-vehicle era [and] help prevent a growth-stifling rise in road congestion.
– Tony Blair Institute report
The institute contends that acting now to introduce road pricing could be less politically toxic than waiting until later. Under their proposed scheme, the average motorist would pay about £70 a year, based on mileage readings taken from cars’ odometers at their annual MOT check.
Freezing Fuel Duty
Rather than restoring fuel duty rates as planned, the institute suggests that Reeves should freeze the tax and let it gradually become redundant as vehicles become zero-emission. The price per mile would then rise to about 10-12p a mile by 2050 to maintain revenue.
Facing the £22bn “Black Hole”
The Chancellor has warned that the country faces a £22bn “black hole” in its finances. In addition to road pricing, the Tony Blair Institute urged Reeves to change fiscal rules to allow for investment, and to overhaul stamp duty while raising council tax on more expensive houses.
The government has thus far resisted calls for road pricing reform. A spokesperson stated: “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.”
A Controversial History
Attempts by the Blair government in 2007 to introduce widespread road tolling were met with fierce public opposition, with a record number of people signing a parliamentary petition objecting to the plans. However, the fiscal pressures created by the shift to electric vehicles have brought the issue back to the fore.
Road pricing is inevitable to replace lost fuel duty income. The longer the government delays, the harder it will be.
– Sir John Armitt, Head of the National Infrastructure Commission
- Other groups like the Campaign for Better Transport have also urged a shift to pay-per-mile charges for electric vehicles.
- A low initial charging rate of 1p per mile is proposed to make the transition more politically palatable.
- Road pricing revenue could help fund the rollout of EV charging infrastructure and public transport improvements.
An Unavoidable Debate
With the sale of new petrol and diesel cars set to be banned from 2034, the clock is ticking for the UK to find a sustainable replacement for fuel duty revenue. While road pricing remains politically contentious, many experts argue that an equitable pay-per-mile system is the best long-term solution.
As the Chancellor weighs her options ahead of the budget, the road pricing debate looks set to shift into a higher gear. The UK’s ability to successfully navigate the transition to electric motoring may well depend on policymakers finding a palatable way to make Britain’s roads a sustainable source of revenue for decades to come.
