Rachel Reeves' Road Pricing Balancing Act
3 min read
With Rachel Reeves announcing that drivers of electric cars will face a pay-per-mile charge from 2028, Tom Scotson reports that road pricing has been a ‘third rail’ issue in politics for decades
Road pricing – where motorists are charged according to which roads they use and when – is an idea beloved of economists and hated by politicians.
Even Tony Blair in his pomp was forced into retreat when he tried to introduce it two decades ago, and Sir Sadiq Khan regularly is obliged to deny any plans to introduce a version for London.
So, Rachel Reeves went where angels fear to tread when she introduced a new tax on owners of EV and hybrid cars based on their actual mileage rather than the flat tax that is Vehicle Excise Duty.
The Chancellor has got away with it – for now – because of the peculiar politics of motoring at the moment, according to former Department for Transport official Michael Dnes.
He points out that the most pro-motorist newspapers support measures to level the playing field between drivers of electric cars and users of petrol and diesel vehicles. EV drivers, meanwhile, generally admit that they should pay a share of the costs of the roads they use (and are still getting a very good deal after the new tax comes in).
Ministers also, perhaps wisely, avoided the full ‘spy-in-the-sky’ system in which the state would automatically track mileage through GPS-style tracking and have opted for a much more basic scheme – now subject to consultation.
Instead, owners can guestimate the mileage and have it checked and verified during MoTs. It’s basic and wide open to abuse, but Dnes says it has worked well in other countries.
No one doubts the need for some sort of revenue raiser. At the start of the century, fuel duty in the UK raised two per cent of GDP. Ever since, this figure has been falling and, by 2030, it will amount to just 0.8 per cent of GDP.
EV drivers will be charged 3p per mile, while plug-in hybrid drivers will pay 1.5p per mile, with rates increasing in line with inflation. The Office for Budget Responsibility expects the new tax to bring in half the revenue that fuel duty accrues.
Dnes would have liked the government to be braver and at least open the door to tracking. “Many of us, me included, would like our vehicles to handle all that stuff for us, and for billing to be automated and accurate.”
But spooked by negative reaction to digital ID cards – a policy popular until espoused by the government – ministers are understood to be chary about anything that might be seen as enforced tracking.
ID cards have long been a popular policy among all voter cohorts, including Reform. But since the Prime Minister announced the potential rollout, support has vanished. Data from More in Common suggests net support for digital ID fell from 35 per cent to -14 per cent in a matter of weeks.
As a result, it is clear that the government would prefer offering an opt-in policy for EVs, where drivers choose to install a GPS at their own convenience.
Still, a pay-per-mile scheme looks certain to be implemented, and over time, the economists’ dream of making all motorists pay for the roads they actually use – and when – is a tiny bit closer to becoming a reality.
