3p per mile car tax at Budget could be ‘poll tax on wheels’

But, nearly half of UK drivers (49%) believe that a pay-per-mile road tax system would be a fairer way to charge motorists according to new research.

The Treasury is suffering from a reduction in revenue from fuel duty, as more drivers switch from petrol or diesel cars to EVs. Chancellor Rachel Reeves will unveil a policy to introduce a 3p per mile fee for EVs when she delivers her November 26 Budget, it has been rumoured.

Successive governments have found the prospect of introducing per-mile charges for driving – sometimes referred to as road pricing – to be too politically toxic.

AA president Edmund King said: “Whilst we acknowledge the Treasury is losing fuel duty revenue as drivers go electric, the Government has to tread carefully unless their actions slow down the transition to EVs.

“The Zev mandate for 28% of new car sales to be zero emissions this year will not be met as sales are running at just 22%.

“We need to see the detail of this proposal to ascertain whether these new taxes will be equitable or a poll tax on wheels.”

The so-called poll tax – introduced by Margaret Thatcher’s government in Scotland in 1989 and then England and Wales the following year – was a fixed payment for all adults, which sparked violent protests.

But almost half of UK motorists back ‘pay-per-mile’ as a fairer road tax system – but many fear higher costs

The research also found that fairness is top of mind for most motorists, with more than half (51%) believing all motorists should pay the same rate per mile regardless of fuel type.

The findings from Carwow, the online car-changing platform, suggest growing openness to reforming how Britain taxes driving, as policymakers consider how to replace falling fuel duty revenues in the shift towards electric vehicles (EVs).

If pay-per-mile were introduced to replace VED, many drivers say they would change their habits. Almost a third (31%) would drive less to control their spending, 18% would consider switching to a more efficient or electric car, and 14% say the change could make driving unaffordable for them entirely.

Views also differ on how such a scheme should be structured. Just over half (51%) think all motorists should pay the same rate per mile, regardless of fuel type, while 28% believe electric-vehicle drivers should pay less to reflect their lower emissions.

On Carwow, customer enquiries for battery electric vehicles grew significantly by 39% year-on-year, in October, while hybrids rose by 26%. The debate is gathering pace as the UK’s switch to electric takes more money away from fuel duty revenues. The Office for Budget Responsibility forecasts that fuel duty receipts will fall by a fifth by the end of the decade, from £28 billion to £22.6 billion.

Iain Reid, Head of Editorial at Carwow said: “These findings show motorists recognise the need for a fairer, more sustainable system as fuel duty revenues decline, but they also highlight deep concern about affordability. A move towards pay-per-mile taxation made by the Chancellor will need to balance fairness, simplicity and cost – to avoid penalising those who rely most on their cars. That said, a 3p per mile rate (as rumoured) for EVs would still be significantly less than ICE car drivers are paying in duty on fuel.

“As it always is, the devil will be in the details; how will it actually be implemented? Before EVs, we effectively had a pay-per-mile system through fuel duty: the more you drove, the more tax you paid. Now, it’s trickier.

“To ensure confidence and protect privacy, any new system should make smart use of technology – for example secure, app-based mileage reporting that’s simple for drivers and transparent about how data is used. With the right tech in place, pay-per-mile could be automated and accurate without relying on intrusive location tracking or ***bersome manual readings.”

The Daily Telegraph said Ms Reeves’ EV scheme will involve users estimating how far they will drive over the following 12 months, and making an extra payment on top of vehicle excise duty (VED).

If they drive more they will need to top up this amount, while some of the money would carry over to the next year if someone clocks up fewer miles.

Journey examples of a 3p per mile fee include £12 between London and Edinburgh, £5 between Cambridge and Bristol, and £2 between Liverpool and Leeds.

EVs’ exemption from VED was removed in April.

Ginny Buckley, chief executive of EV advice site Electrifying.com, said: “This is yet another example of mixed messaging from the Government.

“Drivers are being encouraged to go electric, then hit with the threat of new taxes – you can’t drive the EV transition with one foot on the accelerator and the other on the brake.

“This adds extra cost for EV drivers who can’t charge at home and already pay more per mile on public chargers than many petrol drivers.

“It also penalises those who switched in good faith, based on promised savings.”

She added that if the Government introduces this it should also unfreeze fuel duty, which has not risen with inflation for more than 14 years.

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Tanya Sinclair, chief executive of lobby group Electric Vehicles UK, said there is “no doubt” the system of paying for vehicle usage “needs fundamental reform”, but stressed the importance of how this happens.

She added: “Government must take the time to consult properly, design carefully and communicate transparently – a process that will take years, not months.”

The Treasury was approached for a comment.