Switching to per-mile road user charging would be fairer and more popular than the current fuel duty regime and could even help address the cost-of-living crisis.  

Ministers should introduce a “simple” national road pricing regime with a fixed per-mile charge, to fill the growing hole in the public finances and address unfairness in roads policy

A new report presented in Parliament today says that to fill the growing hole in the public finances and address unfairness in roads policy, ministers should introduce a “simple” national road pricing regime with a fixed per-mile charge.   

Endorsed by former transport secretary Lord George Young, the ‘Miles Ahead’ report by cross-party think-tank the Social Market Foundation (SMF) reveals that the growth in electric vehicles – which do not incur fuel duty – will eventually leave the Treasury with a £30bn gap in tax revenue, equal to around 2p on the basic rate of income tax.  

To avert that shortfall, ministers must have the “courage” to tell voters that a shift to road charging is “inevitable and sensible”, the SMF said.  

That scheme could be “revenue-neutral”, meaning it raises the same sums as fuel duty but distributes the cost in a fairer way.  

SMF analysis shows fuel duty is “regressive”, falling more heavily on lower-income drivers. Even though such motorists drive fewer miles than richer ones, their fuel duty costs make up a greater share of their disposable income, the SMF calculated.  

Instead, a road-pricing regime with a flat rate for each mile driven and an annual “free” miles allowance for every driver would cut annual costs for almost half of all motorists, the SMF said. The free “mileage allowance” would be akin to the tax allowance, meaning low-use drivers would not pay any charge and high-mileage drivers would make a contribution proportionate to their use of the roads.  

The SMF also dispels the idea that road user charging is unpopular and finds growing support – the report includes polling showing that more people support (38%) than oppose (26%) road pricing as an alternative to fuel duty. The poll was carried out by Opinium, with a sample size of 3,000.  

The SMF also conducted focus group research, which showed that voters regard fuel duty as more unfair than other taxes.  

Speaking today, Lord Young said: “Successive administrations have looked at the case for road pricing and found it perfectly reasonable and sensible – then done nothing because they believe the public will not accept the change.   

“This report challenges that assumption. It shows that, as so often, the public are more sensible and mature than political debate gives them credit for. When voters think about the challenges ahead for transport and tax, they accept that road pricing is a prudent and necessary step to take.  

“The public are open to innovation because they know that the world has changed and will continue to change, so policy must change too. The welcome shift towards electric vehicles raises a clear question about the future of fuel duty levied on petrol and diesel. The unpopularity of that duty has grown steadily too. As this report shows, a well-designed system of road-pricing would be fairer and more popular than the status quo.”  

It’s the latest research showing that a switch to a pay-per-mile road charging system is essential – earlier this year, MPs on the Transport Select Committee said in a new report that there was no viable alternative, and that the Government must have “an honest conversation with the public” about the future of road pricing. 

Recommendations from the SMF report include “work at pace” by the Government to develop the infrastructure to support a simple national-level road pricing scheme, with a flat per mile rate and a free mileage allowance – and set out a timetable for implementing it.   

To reduce concerns about telematic devices in vehicles and enable swifter rollout, the infrastructure should include the ability to pay one’s road pricing bill using a mileage reading registered at the time of vehicle MOT, point of sale/scrappage of car and point of exiting the UK for foreign-registered vehicles.  

It also calls for the Government to reduce the burden on lower-income motorists during the transition period from ICE vehicles to EVs, by either abolishing fuel duty rates for petrol and diesel once road pricing is in place and implementing a road usage surcharge for ICE vehicle drivers. An alternative would be to have a flat-rate national road pricing scheme but reduce fuel duty rates to reduce the tax burden on ICE vehicle drivers.  

Other considerations include establishing a Road Pricing Commission to improve transparency around motoring taxation and show clearly that road pricing is to be used to tackle congestion and other societal harms.  

And it says the Department for Transport should identify areas where motoring-related externalities such as congestion are notably higher than the national average. Local authorities in these areas should then deploy schemes such as congestion charges, supported by central government funding.  

To access the SMF report, click here.