UK must have ‘honest conversation’ on replacing fuel duty amid electric car rise - Is pay-per-mile the solution?
Pay-per-mile taxes would likely charge electric cars, petrol and diesel drivers the same
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A new report has suggested that more must be done to protect the UK economy amid mounting financial issues for the Government, some of which stem from falling fuel duty revenue.
Experts have warned that the black hole left by the declining fuel duty rate has forced the new Labour Government to urgently think about solutions to plug the gap.
It comes as the UK looks to move forward with its 2035 goals to ban new sales of petrol and diesel cars as industry experts flag a proposed pay-per-mile system of car tax to deal with fuel duty losses.
However, they have urged the Government to act quickly as “road pricing cannot be dismissed” with the UK already dealing with a £22billion funding gap left by the previous Conservative administration.
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Cars which pollute more pay higher VED taxesPADue to transport being responsible for around a quarter of the total UK greenhouse gas emissions, the Government will need to consider quicker moves to reduce this.
One proposal includes launching incentives for the uptake of electric cars with experts saying the decarbonisation of transport must be an urgent priority.
Chair of the Council for Net Zero Transport, Lord Deben said: “Climate change will get worse every year, and this means that it is crucial for the Government and industry to work together to focus on delivering the UK’s legally binding target of net zero by 2050.”
He added: “As we move into delivery, we must also face the difficult questions that we know must be addressed.
“That’s why now is the time to have an honest conversation about what will replace fuel duty. Road pricing cannot be dismissed.”
Pay-per-mile taxes have been considered by Chancellor Rachel Reeves, who could look to introduce them in the October Budget announcement.
Claire Haigh, executive director at Zemo Partnership, commented: “The climate challenge is more urgent than ever. A record 15 national heat records have been broken so far in 2024. Emissions - especially from transport - will need to decline much more rapidly if the UK’s targets are to be achieved.”
She warned that the longer the UK delays its progress, “the more the net zero transition will cost”.
Haigh explained: “We must move fast to seize the opportunities. An ambitious industrial strategy would act as a catalyst for new technologies and innovation, bringing jobs and manufacturing to the UK. If we get this right, we will build a cleaner, safer and fairer future for us all.”
Pay-per-mile taxes would impact petrol, diesel and electric car drivers all of which have been paying different rates of tax.
Under the current Vehicle Excise Duty, more polluting vehicles are charged more, while electric cars are exempt.
However, from next April, electric vehicles will be required to pay the lowest rate of VED, as outlined by the previous Conservative Government.
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Electric cars will need to pay VED from next April
PAWhile pay-per-mile taxes have been suggested, experts have warned of the impact it would have on rural drivers who need to drive further than those in the city.