Drivers should be taxed per mile starting with EVs, think tank says

In its ‘The Future of Driving’ report, the centre-right think tank said that road transport in Britain generates too much congestion and air pollution and that drivers are paying more through taxation than is invested back in the road network.

CPS argues that fuel duty and vehicle excise duty should be replaced with a per-mile charging system, with higher mileage allowances for those living in rural areas to ensure fairness. This should initially apply only to electric vehicles, which would still pay less than their petrol or diesel counterparts.

The report also shows that there is strong public backing for clean-air zones to tackle air pollution. However, focus groups made clear that local governments need to work harder to bring the public on board and avoid the perception that such measures are simply about raising money.

London expanded its ultra-low emission zone in late 2021 and subsequently raised an estimated £93.6m of additional revenue over the following year.

In 2021/22, drivers paid £33bn in fuel duty and vehicle excise duty, but the government spent only £5.4bn on national roads and £6.4bn on local roads in the same period.

“This system is not fair for drivers or the general public, who suffer the consequences of polluting vehicles through negative health outcomes,” the report said.

It suggests introducing a ‘pay as you drive’ scheme for every zero-emission vehicle (‘ZEV’), becoming the only form of motoring taxation for such vehicles. ZEVs would be charged a flat rate for every mile they drove, but would still pay significantly less than their petrol and diesel counterparts.

While everyone would receive a set allocation of tax-free miles every year, the allocation would be higher for those living in remote areas with fewer transport alternatives.

Eventually, as the share of ZEVs on the roads grew, this new per-mile charging system could completely replace fuel duty and vehicle excise duty for all vehicles, exchanging an “outdated and onerous” tax system with something “future-proof” and fairer towards drivers.

The report also shows that voters remain concerned about air quality and congestion, with significant numbers believing that the government has not done enough to tackle either issue.

Dillon Smith, the report’s co-author, said: “Driving is a fundamental part of life for millions of people up and down the country. 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.”

Tom Clougherty, CPS research director and co-author, 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.”