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Putting the car in for its annual MoT could be about to get more painful. As well as paying for new tyres and shock absorbers or whatever, motorists could also be hit with a new per-mile levy charged by the government and based on the odometer reading collected by the mechanics.
Driven 7,000 miles since the last MoT check? That will be £70 then on the basis of a new 1p per mile levy. To be clear, this is not government policy, but the latest proposal from the Tony Blair Institute, the centrist think tank.
Newer car owners wouldn’t escape the levy. They would be required to self-report their mileage, providing a photo of their odometer when paying their vehicle excise duty. Van and truck drivers would pay a higher rate of, say, 2.5p to 4p per mile. Penalties for “clocking” or odometer tampering would be ramped up.
The system could be introduced as early as April next year and the sweetener would be that the chancellor, Rachel Reeves, would not have to go ahead with the widely expected 5p per litre rise in fuel duty in the budget next week. The new tax would raise just as much instead — about £3.3 billion.
The levy would then be ratcheted up steeply over the years to offset the tumbling of revenues from fuel duty as motorists in their millions switch from petrol and diesel powered cars to electric vehicles (EVs). It would be “easy to understand and easy to implement”, according to the think tank.
That sounds like wishful thinking. Any new tax risks being politically explosive. Any new tax on motorists doubly so, given the history of fuel duty — never raised once in 12 years by ministers terrified of “War on motorists” style headlines and the threat of truck-driver blockades.
But the policy wonks are absolutely on to something when they argue that some kind of road-pricing has to be the least worst answer — not just to fill the void left by those falling fuel tax receipts but also to address the worsening levels of traffic congestion which plague business and the economy.
The fuel tax problem will soon be very pressing. Fuel duty raised an estimated £24.7 billion last year, according to Office for Budget Responsibility estimates. That is a meaty 2.2 per cent of all tax receipts — or £850 per household. Add in VAT (which in a cheeky case of HMRC double-dipping is levied on the full price including the duty) and the total haul is closer to £30 billion.
With EVs projected to account for 50 per cent of all cars on the road by 2032 and 90 per cent by 2040, the “running on empty” light will soon be flashing red at the Treasury. The Institute for Fiscal Studies has warned that those dwindling receipts will be a major concern in the medium term.
Meanwhile, congestion is bad and getting worse. Delays on English motorways and A roads amounted to 10.5 seconds per vehicle mile in 2023, up from 9.3 seconds in 2022, according to Department for Transport data. The societal cost of traffic jams is set to reach £120 billion by 2025 and could rise to £300 billion by 2050, it reckons.
For a government pledged to deliver “growth, growth, growth”, easing the bottlenecks that delay and disrupt the flow of goods and people around the country should be a no-brainer. If you want to improve productivity, liberating gridlocked workers is a great place to start.
Nudging more passengers on to public transport would be one benefit of road-pricing. Incentivising those with the flexibility to travel at less congested times of the day or week or to take alternative routes would be an even greater prize.
That is where more sophisticated road pricing ideas than the institute’s blunt penny-a-mile proposal come in. More versatile technology is ready to be harnessed or soon will be — whether through tolls at pinch points or telematics in cars or GPS technology in smartphones.
The pressure for road pricing is intensifying. Sir John Armitt, chairman of the National Infrastructure Commission, recently suggested that, while politically difficult, it was becoming “inevitable”. The transport select committee sees “no viable alternative”. The AA and RAC are both in favour.
Carefully communicated and very gradually introduced, this doesn’t have to be a PR car crash. The most important thing is that ministers need to stress it will be revenue-neutral. Overall, the average motorist will pay no more in total motoring taxes, though late switchers to EVs will in effect subsidise early switchers.
Heavy road users will pay more but that seems fair — given they contribute more to congestion, road damage and noise. Light road users, those below the 7,000 mile per year average, or off-peak motorists, should overall pay less if the system is calibrated carefully.
The other essential is that the principle of road pricing gets cross-party support. It’s a 20-year project which needs consistent policymaking, immune from the five-year electoral cycle.
That’s a harder nut to crack. The Conservatives have been fiercely opposed in the past. Rishi Sunak at the Tory manifesto launch in June — held symbolically at Silverstone — pledged to oppose per-mile pricing and said he would ban local mayors and councils from introducing such schemes.
But at some point the party is going to have to stop weaponising motoring taxes or explain how it proposes to make up the £30 billion fiscal shortfall.
Labour has been silent. Its manifesto found space to proclaim the crowd-pleasing target of fixing one million potholes but had nothing to say on the awkward subject of road pricing.
Evidence from Singapore, where a rudimentary form of road pricing was first introduced in 1975, and Stockholm is that early opposition tends to fade as people enjoy the benefits of quicker journeys.
Road pricing won’t be high on Reeves’s agenda next week. But an acknowledgement that it at least needs to be explored and costed is long overdue. For anyone wanting to be thought serious about either growth or fiscal rectitude, the time for ducking and denial is past.
Patrick Hosking is Financial Editor of The Times
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