With the Autumn Budget looming Rachel Reeves is scrambling to fill a black hole in public finances estimated to be as high as £50 billion by some economists. Now the Chancellor is said to be weighing up an astonishing pay-per-mile system for all UK drivers as she scrabbles to fill the gap.
Ms Reeves has already confirmed tax rises and spending cuts are on the cards for next month’s Budget – and it appears new levies could be placed on EV drivers to raise revenue. Drafted proposals are said to include taxes on the weight of the car or a pay-per-mile system, which could see motorists changed for how often they drive. Reports say these are being considered as drivers of EVs don’t pay fuel duty but still contribute to congestion and deterioration in road quality.
Rhydian Jones, motoring expert at Confused.com car insurance, said: “Ahead of the Chancellor’s Autumn Budget, there are discussions that a pay-per-mile tax for drivers could be introduced. This proposed system would see motorists charged for road taxes based on how often they drive, rather than paying a fixed annual rate.
“A move to pay-per-mile charging would mark a major shift in how motorists are taxed and could redefine the cost of driving for millions across the UK, and could also give another boost to drivers going green in an effort to cut down on longer term costs.”
Families and commuters are expected to be among those hit the hardest whilst the new system will benefit drivers who drive less.
The Office for Budget Responsibility (OBR), which independently monitors the health of the British economy, says fuel duties are a “significant source” of Government revenue and are expected to raise £24.4 billion in 2024-26.
Mr Jones said benefits for drivers include:
Bringing costs down for those who drive less, such as remote workers or pensioners
Potentially reducing congestion on roads as drivers will consider using their car less to avoid costs
Drivers of lower-emission or electric vehicles could still benefit from reduced rates, supporting the shift towards greener motoring
However, he said this change could also be challenging for others, including:
Commuters, families and those living in rural areas who could face higher costs as they take longer and more frequent journeys
Those who drive longer distances or during peak hours could be hit hardest if variable rates apply depending on time.