A pay-per-mile road pricing system must be brought in now, according to Tony Blair’s thinktank, which is urging the chancellor to overhaul motoring taxes.
Rachel Reeves is widely expected to confirm the end of a temporary 5p cut in fuel duty, and possibly announce an inflationary rise in the tax paid on petrol and diesel at the pumps, in her budget next Wednesday.
However, the Tony Blair Institute has suggested that instead of restoring fuel duty rates as planned, Reeves should 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.
A new report from the institute argues that the change would generate the same revenue from motorists as the Treasury expects to raise from an end to the 2022 temporary cut in fuel duty – and thus acting now could be less politically toxic than later.
Attempts by the Blair government in 2007 to introduce widespread road tolling were met with an enormous public backlash and a record number of people signed a parliamentary petition objecting.
However, the expected switch to electric cars and the subsequent decline in fuel duty, which brings in about £25bn a year to the exchequer, has reinvigorated calls for reform.
The institute said 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”.
It envisages the early level of charging to cost the average motorist about £70 a year, which would be payable based on mileage readings taken from cars’ odometers at their annual MOT check.
Fuel duty would not be abolished but frozen and eventually become redundant as vehicles become zero-emission, with the price per mile rising to about 10-12p a mile by 2050, the report suggests.
There have been weeks of speculation about reforms, intensified after the head of the National Infrastructure Commission, Sir John Armitt, said road pricing was “inevitable”. Groups including the Campaign for Better Transport have also urged reform to bring in pay-per-mile charges for electric vehicles.
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Reeves has warned that the country faces a £22bn “black hole” in its finances. The Tony Blair Institute also urged her to change fiscal rules to allow for investment, and to overhaul stamp duty while raising council tax on more expensive houses.
The Treasury was approached for comment.