A new pay-per-mile car tax could be among Rachel Reeves' “best options” at some point in the future, motoring experts have suggested. In her speech today (Monday) at Labour's annual party conference, hinted at tax rises in November's Budget.
And while a pay-per-mile is highly unlikely to be brought in now it is seen as a possible option for the years ahead.
Motoring specialists at Carwow have suggested that some road users could be at risk of paying 9p per mile, instead of the £195 paid now by most drivers to tax their vehicles.
This would mean a whopping £900 bill if you drove 10,000 miles in a year. Carwow commented after new research from the Resolution Foundation put forward the idea of a new per-mile fee tied closely to vehicle weight.
The experts suggested that lighter vehicles should pay less to use the road, with heavier cars slapped with the toughest fees. The Resolution Foundation added that linking weight to distance would “make the tax fairer” with those who drive the most paying higher bills.
Carwow said: “With fuel duty revenues falling as more people go electric, experts warn the Treasury will eventually need to find a replacement. Pay-per-mile charging, linked to vehicle weight, is one of the leading options being floated. Drivers don’t need to worry about an immediate new tax, but it’s worth knowing that the debate has begun.”
Despite the Government encouraging road users to switch to electric vehicles, mass adoption of EVs is still set to cause a massive financial headache for the Treasury.
Petrol and diesel cars bring in around £35billion per year through fuel duty and VED rates, with officials facing an economic black hole as more drivers make the transition.
In their latest ‘Call of Duties’ report, the Resolution Foundation explained how the new charges could replace the existing standard tax which is considerably lower for newer, cleaner vehicles. Electric cars pay just £10 in VED fees across year one, followed by £195 per year from the second year on the road.
Meanwhile, the most polluting petrol and diesel owners are paying £5,490 to get behind the wheel in year one, followed by annual rates of up to £760 per year.
The Resolution Foundation has suggested a new per-mile fee would be a “material change in the cost of EV driving”. But, the specialists claim the move would still ensure running costs are cheaper than petrol and diesel vehicles.
The Resolution Foundation said: “To give some illustrative figures: Fuel Duty equates to around 6p + VAT per mile for a typical car, so EV VED could be applied at (say) 6p per mile (and no VAT) for a car weighing a typical 1,800kg.
“The charge for a light, 1,000kg EV could then be proportionally lower at around 3p per mile; and a 2,800kg car would be charged around 9p per mile.”