Motorists face the prospect of being charged for every mile they drive under radical plans to plug Britain’s black hole in public finances.
The Resolution Foundation — a think tank with close links to Labour — has urged Chancellor Rachel Reeves to overhaul motoring taxes, warning that fuel duty revenues are collapsing as drivers switch to electric vehicles.
Its proposal would see drivers hit with an annual levy plus a per-mile charge ranging from 3p to 9p, with heavier vehicles paying more to reflect the strain on Britain’s roads. The system could raise as much as £20bn a year, the report said, potentially covering two-thirds of the Chancellor’s looming £30bn fiscal gap.
Adam Corlett, the report’s author, said: “Motoring taxes are an important part of the tax system but they are also an obvious and significant fiscal risk.” He suggested miles could be logged via MOT checks, self-reporting or telematics, while also recommending cutting VAT on public charging points and reversing the long-standing freeze on fuel duty.
Fuel duty currently brings in around £28bn annually, but the Office for Budget Responsibility predicts this will fall to £22.6bn by 2030. Corlett said raising the levy by 3% a year and gradually reversing the 5p temporary cut could see the tax rise to nearly 70p per litre by the decade’s end.
Motoring groups immediately pushed back, warning that road pricing would unfairly hit drivers while raising concerns over privacy and tracking. Ian Taylor, from the Alliance of British Drivers, said: “It would almost certainly put prices up and probably the only way to administer it is to track everyone, which has freedom and privacy implications.”
The report comes as Reeves faces intense pressure ahead of her November Budget, with speculation she may need to raise up to £30bn in fresh taxes to meet her fiscal rules.
A Treasury spokesman declined to comment on the proposals, saying only: “The Chancellor makes tax policy decisions at fiscal events.”
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Reeves urged to slap drivers with pay-per-mile tax that could raise £20bn