Could motorists be taxed for every mile they drive? Fears of journey-based levy as Government says system must 'keep pace' with switch to electric vehicles

Downing Street has opened the door to charging motorists for every mile they drive – saying the tax system must ‘keep pace’ with the switch to electric vehicles.

It came after Tony Blair’s think-tank warned that billions of pounds of new taxes would be needed to plug the potential shortfall created by moving away from petrol and diesel cars.

In a report published yesterday, it said that ‘road pricing’ – under which drivers pay per mile or per minute spent on the roads – could replace the £30billion revenue generated from motoring taxes every year.

Asked about the think-tank’s proposals yesterday, Boris Johnson’s official spokesman did not reject the idea and said the Government would set out its own plans ‘in due course’.

He added: ‘We need to ensure the tax system encourages take-up of electric vehicles and that revenue from motoring taxes keeps pace with that change.

‘We want people to move to electric vehicles and that will necessitate an approach that keeps pace with that change.’

The Tony Blair Institute For Global Change has warned that billions of pounds of new road taxes are needed to plug the tax shortfall set to be created by the switch to electric cars

He continued: ‘We will set out our proposals in due course.’

One Whitehall source said that while officials were not yet working ‘proactively’ on road pricing schemes, ‘there is a circle to be squared there’.

The paper, by the Tony Blair Institute For Global Change, urged ministers to reveal how they plan to replace current motoring taxes within a year, warning it may become ‘politically impossible’ if they delay too long.

But the idea was rejected by motoring groups, with the AA saying a road pricing scheme is ‘likely to backfire’ because many drivers will see it as a ‘poll tax on wheels’.

The group added that motorists should be given a guaranteed ‘free miles allowance’ before any charges kick in.

In July, the Government unveiled its transport decarbonisation plan – part of the push to reduce carbon emissions to net zero by 2050 – but failed to explain how it will plug the financial gap created by moving away from fossil fuels.

Report urges ministers to reveal how they plan to replace current motoring taxes within a year

The Tony Blair Institute report estimates that, by 2040, the Treasury stands to lose as much as £260billion in revenue without any new taxes.

This would be due mainly to the fall in fuel duty and vehicle excise duty receipts – both of which fully-electric cars are exempt from.

The paper also warns that delaying too long threatens to undermine the Government’s ‘levelling up’ agenda.

This is because people in the more affluent South are more likely to be able to afford the higher upfront costs of electric cars – but will pay next to no tax to use them.

It would leave motorists in poorer parts who are reliant on fossil fuels ‘picking up the tab’ for maintaining the roads network.

The average driver currently spends around £1,100 a year on fuel and VED, of which around £750 is tax. But electric vehicle motorists pay only £320 a year, of which around £20 is tax.

Drivers of electric cars currently pay about 98% less in tax than owners of petrol or diesel cars

The paper added that ministers should consider four road pricing options. These include a ‘flat rate per mile’, where drivers are charged a fixed amount per mile, and ‘geographic or toll-based charging’, which means costs would vary depending on how congested certain routes are.

A ‘time-based rate’ would see motorists charged per minute and the final option is a ‘dynamic rate’, where charges vary depending on the road being used and the time of day.

A Treasury spokesman said: ‘As we move forward with the transition to electric vehicles, we will need to ensure that revenue from motoring taxes keeps pace with this change.

‘That we can continue to fund the first-class public services and infrastructure that people and families across the UK expect.’