Rachel Reeves is facing pressure to reconsider her plans on fuel duty and revamp the country’s taxation system as the shift towards electric vehicles (EVs) continues. A recent report from the Tony Blair Institute is calling for an immediate implementation of a pay-per-mile road pricing system, urging the Chancellor to reform motoring taxes.
In her upcoming budget announcement next Wednesday, Reeves is expected to confirm the end of the temporary 5p cut in fuel duty and potentially announce an inflationary increase in fuel taxes for petrol and diesel. However, the Tony Blair Institute suggests that instead of reinstating fuel duty rates, she should consider a straightforward road pricing scheme—charging 1p per mile for cars and vans and 2.5p to 4p for lorries and heavy goods vehicles.
The institute argues that adopting this new pricing model could generate the same revenue that the Treasury anticipates losing from the end of the temporary fuel duty cut introduced in 2022, making it a politically viable option now rather than later. Historically, reform attempts by the Blair government in 2007 to implement widespread road tolling faced significant public backlash, leading to a record number of objections.
Nonetheless, the anticipated rise in electric vehicle usage, along with a corresponding dip in fuel duty—which contributes approximately £25 billion annually to the Treasury—has reignited calls for such reforms. According to the institute, introducing a low-level road pricing scheme would be an essential step in modernizing the UK’s motoring taxation for the electric vehicle era while also helping mitigate a rise in road congestion.
The initial costs under this proposed system could average around £70 a year for the typical motorist, determined by mileage logged during annual MOT checks. It is suggested that while fuel duty would remain in place for now, it would eventually become obsolete as zero-emission vehicles become more common, with the proposed charge per mile projected to increase to around 10 to 12p by 2050.
As discussions surrounding these reforms continue, they have gained traction, particularly following comments from Sir John Armitt, head of the National Infrastructure Commission, who stated that road pricing is “inevitable.” Advocacy groups such as the Campaign for Better Transport are also pushing for the introduction of pay-per-mile charges for electric vehicles.
Reeves has highlighted a looming £22 billion “black hole” in the nation’s finances. The Tony Blair Institute has further recommended that she amend fiscal rules to facilitate investment and consider reforms to stamp duty while increasing council tax on higher-valued properties.
In response to the ongoing debate, a government spokesperson emphasized, “We have no plans to introduce road pricing. We are committed to supporting our automotive sector as we transition to electric vehicles to meet our legally binding climate targets.”