Rishi Sunak was today warned against adopting a pay as you drive scheme to fill a £40 billion tax hole caused by the switch to electric vehicles as motoring campaigners said it would be viewed as a ‘poll tax on wheels’ .
The Chancellor is said to be ‘very interested’ in the idea of a national road pricing system, which would see motorists charged for every mile they drive, and he is currently considering its merits.
A similar type of scheme was dramatically shelved by Labour in 2007 amid uproar that drivers could be charged up to £1.50 a mile.
The re-emergence of the policy has sparked a swift backlash, with The AA warning of a driver revolt and urging ministers to come up with a ‘more imaginative solution’.
Road pricing in England is currently limited to schemes such as the M6 Toll in the Midlands, the Dartford crossing on the M25, London’s Congestion Zone and a handful of small tunnels and bridges.
But a national policy is now being considered amid fears the switch to electric vehicles will leave a massive tax shortfall because of the hit to key Treasury revenue raisers such as Fuel Duty and Vehicle Excise Duty, according to the Times.
However, any move to impose such a scheme would likely spark accusations of the Government undermining its drive for more people to buy electric vehicles because one of their main benefits is the fact they are cheaper to run than traditional alternatives.
It came amid reports Boris Johnson wants to accelerate his green plans – including bringing forward a ban on the sale of new petrol and diesel cars to 2030 – as critics claim the PM’s fiancée, Carrie Symonds, an environmental campaigner, is driving the push.
A ban on the sale of new petrol and diesel cars will have a massive impact on the Government’s coffers, with VAT on fuel currently generating almost £6billion a year.
Fuel Duty, currently charged at 57.95p per litre on petrol and diesel vehicles, is on course to raise £27.5billion this financial year and is forecast to bring in even more in the coming years.
Meanwhile, Vehicle Excise Duty (VED) – which is charged on the purchase of cars based on their emission levels – is expected to raise £7.1billion.
A Government source told The Times that the Treasury had analysed potential options for a national road pricing scheme as officials try to figure out how to replace lost tax revenues.
However, the source said such a scheme was not ‘imminent’.
Edmund King, AA president, urged the Government not to adopt a road pricing scheme as he warned it would be incredibly unpopular with motorists.
‘While the push toward electric vehicles is good for the environment, it is not good for the Exchequer,’ he said. ‘The Government can’t afford to lose £40bn from fuel duty and car tax when the electric revolution arrives.
‘It is always assumed that road pricing would be the solution but that has been raised every five years since 1964 and is still perceived by most as a “poll tax on wheels”.
‘We need a more imaginative solution and have proposed “Road Miles” whereby every driver gets 3000 free miles, with one third more for those in rural areas, and then a small charge thereafter.
‘Combined with commercialising the roads with an adopt-a-highway scheme with naming rights such as the Minecraft M1, Manchester Utd M6 or Adidas A1, this should be prove a more popular solution.’
A similar road pricing plan was shelved by the Labour government in 2007 amid fears drivers would be billed up to £1.50 a mile.
The proposals sparked a massive backlash with almost two million motorists signing a petition against the move.
The Department for Transport at the time said it was ‘rubbish’ to suggest the government had ever planned a national road pricing scheme, insisting it had only put in place plans for local tolls.
Under the plans, which involved letting local areas set up ‘pay-as-you-go’ networks, drivers would have paid to install a black box in their cars so they could be monitored by electronic tracking via satellite or roadside beacons.
They would then be charged between 2p and £1.50 per mile depending on the time of day and levels of congestion, in a move that was slammed as ‘stealth tax’ by campaigners.
Such a scheme appeared again two years later when The Climate Change Committee, led by former CBI chief Lord Turner, said it wanted ministers to introduce compulsory road pricing to prevent global warming.
Speaking at the time, Mr King had said such a move would be ‘political suicide for any party’.
Brian Madderson, Chairman of the Petrol Retailers Association, said: “We are deeply concerned about the government’s potential road pricing proposals. It is unfathomable that the government would introduce a measure that would only succeed in discriminating against the poorest in society.
“Public transport infrastructure in rural communities is near non-existent, with millions solely relying on their private vehicles to travel. If the regressive road pricing ‘poll-tax like’ regime came into force, those living in rural areas on low incomes would be hit the hardest as it could become unaffordable to run a car. This method of taxation has already been rejected by the British public in 2007 when proposed by the Labour government, so it is startling to see that these proposals are even being considered.
“There has been a clear lack of consideration to the inflationary hit to goods and services. 100% of fresh food is moved by road, along with over 80% of all other goods. It will be the consumer that has to bear the brunt of any increased transport costs.”
The PRA propose that cyclists and other road users should also be included in any pay-by-the-mile approach and they pay the same rate as petrol and diesel vehicles, as a tiered pricing system would be wholly discriminatory.
A Treasury source told the Times: ‘The Treasury regularly explores lots of different policy options. ‘This is no different.’
It came as it was revealed a crackdown on new petrol and diesel cars could come earlier than expected, with Mr Johnson due to outline plans to accelerate his green agenda in the coming days.
Mr Johnson stepped up calls for more action last week as he said there is ‘no time to waste’ and called on world leaders to put forward ambitious commitments to tackle the climate change crisis.
There is now a growing expectation that the PM will soon announce the Government’s planned ban on the sale of new petrol and diesel cars will be brought forward from 2040.
Mr Johnson has already said he would like this to happen by 2035 but insiders believe he will pledge to bring forward the deadline to 2030.
Car manufacturers are already preparing for the changes with the latest Department for Transport figures showing that sales of electric vehicles have rocketed by nearly 170 per cent in the UK in this year alone.
Mr Johnson last week promised to set out a ten-point action plan to tackle climate change as he marked one year until Britain hosts the UN COP26 climate summit.
The Prime Minister’s plan will outline proposed action in areas such as cutting emissions from transport, electricity and buildings, and using hydrogen and other new technology.
The UK – which has a legal target to cut greenhouse gases to ‘net zero’ by 2050 – is co-hosting a climate action summit for world leaders next month to bring forward more ambitious plans and set net zero targets ahead of next year’s COP26 meeting.