Pay-per-mile car tax must be introduced in upcoming Budget, Tony Blair's think tank urges Rachel Reeves

23 October 2024, 20:57

Rachel Reeves should introduce a pay-per-mile tax, Sir Tony Blair's think tank has said.

Cars and vans should be charged 1p per mile and heavy goods vehicles between 2.5p and 4p per mile under the proposed £10bn tax raid on motorists.

The Tony Blair Institute (TBI) said it should be introduced as soon as possible before more people go electric and get used to driving with low taxes.

Revenues are expected to drop by 40 per cent in the next 10 years, accounting for inflation, the think tank said.

They will be almost completely eliminated by 2050 if almost every car is electric, as has been predicted.

Read more: Rachel Reeves to bankroll Ukraine war effort using £2.26bn profits from frozen Russian assets

Read more: Chancellor Rachel Reeves set to raise inheritance tax in upcoming Budget raid

"Under our proposals, the government would hold fuel duty at its current level and instead add a rising pay-per-mile charge on almost all road users – both electric and conventionally powered vehicles," a TBI report said.

"By design, our proposed system works to maintain motoring-tax revenue in real terms despite increasing electrification.

"Compared to plans inherited from the previous government, our reforms would raise almost £3bn of extra revenue per year by the end of this parliament and almost £10bn per year by the end of the next."

The TBI went on to say: "If the government does not act quickly to develop a clear plan on how to address these other social costs of driving, more and more road users will buy electric vehicles on the implicit promise that they will not be taxed.

"Trying to introduce a new tax system later will only become more difficult."

A government spokesman said: "We have no plans to introduce road pricing.

"We are committed to supporting our automotive sector as we transition to electric vehicles in order to meet our legally binding climate targets."