Road pricing – paying per mile rather than road tax – is back in the news, with the Tony Blair Institute (TBI) urging government to introduce such a scheme straightaway. Cars and bikes would pay an annual rate, based on a mileage check at MOT time.

TBI made the call in the run up to the October Budget, when Chancellor Rachel Reeves was expected to end a temporary 5p cut in fuel duty and possibly increase duty in line with inflation – fuel duty has been frozen for 14 years, falling well behind inflation in real terms.

The Government’s quandary is the fuel duty brings in around £25 billion a year, and VED around £8 billion, but as the UK’s transport fleet transitions to electric, income from the tax on petrol and diesel will decline. Electric cars and motorcycles currently do not pay VED, but will do from April 2025 – in the case of electric bikes, that will be the up to 150cc rate (now £25).

Replacing fuel duty income fully with a pay-per-mile, would need a rate of 6p per mile for cars, according to the Resolution Foundation. TBI’s suggestion is a lower rate of 1-2p/mile for cars and 3-4p/mile for HGVs – motorcycles aren’t mentioned – combining this with fuel duty.
The Government has denied that road pricing will be brought in this Autumn, but the issue of how fuel duty will be replaced clearly won’t go away.

Jim Freeman, Chair of the BMF said, “The BMF have been watching for this for years, ever since VED receipts started dropping with low-emission cars. Many have speculated that Sadiq Khan’s ULEZ extension plans were partly driven by Labour policy wonks to find out whether a camera-based road pricing system was feasible and whether the public would accept it. The recruitment of specialist staff, based not in London but the Midlands, at a data centre controlling the systems running the ULEZ charging and enforcement, was a trial run for a future Labour government extending the system nationally. I’d suggest anyone reading this might like to see whether numerous new traffic cameras have been added in their area. There seem to have been many observed in previously unmonitored sites, begging the question: what are they all for? My parting thought is that if charging is to be based on MOT mileages, that is potentially a classic case of policy makers being unaware of the possible unintended consequences of their policies.”

Anna Zee, BMF’s Political and Technical Services Director, added: “We are well aware that government income from fuel duty will fall if the fleet of ICE-powered vehicles is reduced as current policies intend and raising funds by road pricing has been mooted as an option for a long time. It is all too typical that motorcycling has apparently been ignored but given the TBI’s proposed rates for cars and HGVs could we infer that motorcycles would pay nothing? That would be very welcome but maybe it sounds too good to be true.
“VED is currently hypothecated to the National Roads Fund (NRF) so it makes sense that electric vehicles should make a contribution there, but currently the NRF is targeted primarily towards the Strategic Road Network, and additional funding is still required for the rest of the roads network. The BMF would welcome opportunities to discuss road funding with appropriate officials.”

Written by Peter Henshaw

Top image authors own.