The Government rules out pay-per-mile road pricing

The Government has dismissed reports of an imminent announcement on a pay-per-mile road pricing scheme, allaying driver and industry concerns.

A definitive statement issued by the Department for Transport over fears that a pay-per-mile car tax could be introduced makes the government’s position very clear;

“We have no plans to introduce road pricing. We are committed to supporting our automotive sector as we transition to electric vehicles in order to meet our legally binding climate targets.”

While some forms of road pricing schemes do exist in the UK, such as toll roads, charges to enter bridges and tunnels, and zonal charging schemes in low-emission areas, where drivers pay a fee to enter a specific area with a particular vehicle, there have been ongoing discussions about the merit of the broader use of road pricing on public roads. In its short statement, the Department for Transport has quashed such thinking.

While the specifics of a road pricing scheme have never been clarified, it had been suggested that such a scheme could have seen the current Vehicle Excise Duty (road fund licence) and fuel duty revenues rolled into one pay-as-you-drive fee. In essence, the people who used the road the most would pay the most, while a government paper from 2022 suggested that, in principle, road pricing would have two purposes:

• Generating revenue
• Managing the costs of motoring, such as pollution, emissions and congestion.

The increasing number of EVs on UK roads will continue to see the value of tax revenues raised through the sale of petrol and diesel decline. The Office for Budget Responsibility (OBR) previously reported that the complete transition of all UK vehicles to battery power would “result in a revenue loss of 1.5 per cent of GDP (equivalent to £31 billion [€35.8] in today’s terms)”.

While battery electric vehicles will start to pay Vehicle Excise Duty starting in April of next year, this will not bridge the tax gap filled historically by petrol and diesel sales. Therefore, while not road pricing, other motorist tax-raising approaches may still need to emerge.