COMMENT: + The Pay Per Mile Car Tax Proposal

Buckle up, British motorists: a seismic shift in how we pay for our road use might be just around the corner. Rumours are swirling that the Labour government is eyeing a revolutionary pay-per-mile car tax system, potentially transforming the financial landscape for millions of drivers across the UK. This proposal, which could see drivers charged for every mile they travel, has ignited a firestorm of debate and raised pressing questions about fairness, feasibility, and the future of motoring in Britain.

At the heart of this contentious issue lies a £22 billion-shaped hole in the government's coffers. As the UK races towards its electric vehicle (EV) future, traditional sources of automotive revenue are drying up faster than a puddle on a summer's day. The current system of Vehicle Excise Duty (VED) and fuel duty, which has long been the backbone of road-related taxation, is becoming increasingly unfit for purpose in an electrified world.

But why the urgent need for change? The answer lies in the government's own ambitious green agenda. With the sale of new petrol and diesel cars set to be banned from 2030, and EVs exempt from VED, the Treasury is staring down the barrel of a significant revenue shortfall. Fuel duty alone currently rakes in about £28 billion a year – a sum that will rapidly diminish as more drivers switch to electric power.

The proposed pay-per-mile system is being touted as a potential solution to this looming fiscal crisis. However, the devil, as always, is in the details. Several implementation methods are currently under discussion, each with its own set of challenges and implications:

• GPS Tracking: One option involves using GPS technology to accurately track the miles driven by each vehicle. While precise, this method raises significant privacy concerns.

• Annual Odometer Readings: A simpler approach would be to base charges on annual odometer readings. However, this could be prone to tampering and wouldn't account for miles driven outside the UK.

• Telematics Devices: Similar to those used by some insurance companies, these devices could provide accurate mileage data without full GPS tracking.

• Smartphone Apps: A more tech-savvy solution could involve drivers using smartphone apps to log their journeys.

The rate at which drivers would be charged is also a subject of intense speculation. Experts at the Resolution Foundation have suggested a figure of around 6p per mile, while the Campaign for Better Transport argues that 2p per mile would be more reasonable. At the higher rate, drivers would reach the current £190 annual VED fee after just over 3,000 miles – a distance many commuters could cover in a matter of months.

But who stands to lose the most if this system is implemented? The answer, unfortunately, is not straightforward. Rural dwellers, who often have no choice but to drive long distances due to limited public transport options, could find themselves disproportionately affected. Commuters, particularly those priced out of city centres by soaring housing costs, might also face a significant hike in their annual motoring expenses.

Key workers, many of whom rely on their vehicles to provide essential services, could also be hit hard. The prospect of nurses, care workers, and other vital professionals facing increased costs for simply doing their jobs has raised concerns about the potential wider societal impacts of the scheme.

Interestingly, the change could potentially benefit some drivers. Those who currently pay high VED rates due to owning older, more polluting vehicles, but who drive relatively few miles, might actually see their annual costs decrease under a pay-per-mile system.

The government, for its part, is walking a tightrope. On one hand, it needs to find a way to replace the lost revenue from fuel duty and VED. On the other, it must be careful not to introduce a system that could be seen as punitive or unfair, particularly at a time when many households are already struggling with the cost of living.

Iain Reid, head of Editorial at Carwow, summed up the dilemma succinctly: "In an ideal world, you would hope that the current tax burden on drivers wouldn't increase with a switch to per-per-mile charging. But the noises and signals coming from the new Government suggest that they are looking for ways to increase money coming into the Chancellor's coffers."

As the debate rages on, one thing is clear: any move towards a pay-per-mile system will need to be carefully considered and implemented with transparency and fairness at its core. The potential for such a system to exacerbate existing inequalities or create new ones is real and must be addressed head-on.

Moreover, the government will need to consider how such a system aligns with its other policy objectives. Will it encourage or discourage the adoption of electric vehicles? How will it impact efforts to reduce congestion and improve air quality in urban areas? And crucially, how will it be perceived by the public?

As we stand at this crossroads of automotive taxation, the road ahead appears both challenging and uncertain. What's clear is that the way we pay for our road use is set for a major overhaul. Whether the pay-per-mile system will be the answer remains to be seen, but one thing is certain: the journey to a new taxation model promises to be anything but smooth.

Written by Matt Morris – Holdcroft Motor Group, and first published by CarSupermarket.com 

www.holdcroft.com

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READERS' COMMENT

All comments are filtered to exclude any excesses but the Editor does not have to agree with what is being said. 200 words maximum

George Markus, Willesden - London

The Pay Per Mile scheme should be encouraged. And for all road users including motor bikes and cyclists.

Jenny Smith, Hamptead London

Big Brother is really watching us. The technology now allows the car actual speed to be shown electronically rather than mechanically. This can be easily transmitted to a central point (perhaps the Mayor of London’s office) and then auto fined against the car rather than the driver. Very worrying.

David Starkie, United Kingdom

To put this in perspective, last year public expenditure (subsidy) on rail alone exceeded £20bn. Contrast that with the cash cow of road use.