Car tax plans would see EVs ‘pay per mile’ after drivers treated as ‘cash cows’

A new report, “The Future of Driving” from the Centre for Policy Studies, suggests that fuel duty and Vehicle Excise Duty (VED) should be scrapped and replaced with a per-mile charging system.

This would give allowances to motorists who live in rural areas to ensure fairness, as they would generally have to drive long distances to gain access to goods and services.

The report argues that the per-mile system should initially only apply to electric vehicles, which would still pay less than their petrol or diesel counterparts.

The new study, which is based on extensive polling and group work, argues that a “smarter approach” is needed for motoring taxation, as drivers have been seen as “cash cows” by authorities.

UK drivers paid around £33billion in fuel duty and VED in 2021 and 2022, although the Government only spent £5.4billion on national roads and £6.4billion on local roads in the same period.

It highlights that this system is not fair for drivers or the general public, who are more likely to suffer the consequences of polluting vehicles.

According to the report, 88 percent of the miles travelled in 2021 were by car, van or taxi, showing how the UK is a “nation of drivers”.

The “pay as you drive” scheme for zero emission vehicles would be a more suitable way of motoring taxation, in which a scenario would see them charged a flat rate for every mile they drive.

Everyone would be given a set allocation of tax-free miles every year, with the limit of miles being higher for those in rural areas with fewer transport alternatives.

Dillon Smith, CPS energy and environment researcher and co-author of the report, said: “Driving is a fundamental part of life for millions of people up and down the country. 

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“Our recommendations take into account public feeling on a variety of proposals, privacy concerns, and their financial impact, and deliver a solution which can lead to fairer, better, and more efficient taxation while tackling congestion and improving air quality in our big cities.”

The report suggests that eventually, once the share of EVs on the road grows, the new “per mile” system could completely replace fuel duty and VED for all vehicles.

This would look to future-proof a system of taxation which has long been criticised for being outdated and no longer sufficient.

Focus groups involved in the study were found to be supportive of Clean Air Zones and other similar initiatives, but there were some concerns.

They made clear that local authorities should work harder to educate the public and reassure them that these measures were not simply about raising money, with the report recommending improvements to communication strategies. 

Tom Clougherty, research director at the CPS and co-author of the report, said: “The Treasury has grown used to motorists being a cash cow, but with electric vehicles on the rise, those days are numbered. 

“We shouldn’t replicate the old, punitive tax system, but it is still important that all drivers pay a fair amount for the roads they use.  

“The ‘pay as you drive’ approach our report recommends would meet that objective and could be phased in gradually over the next decade or so – alongside targeted, local initiatives to manage congestion and reduce air pollution.”

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