Car tax changes could see pay-per-mile road pricing scheme introduced soon to charge drivers more

Road pricing, and particularly pay-per-mile tax systems, have been supported in recent years as a method to fill the black hole that is to be left by dwindling fuel duty receipts.

Estimates have varied as to how much will be lost from fuel duty receipts, although most experts and organisations believe it will be between £20billion and £35billion.

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With the uptake of electric vehicles gaining steam, those in the Treasury are believed to be looking into prospects of introducing a nationwide road pricing scheme, The Telegraph reported.

In response to a Transport Committee report highlighting the black hole funding issue, Adam Smith said it became an "early issue" for the former Chancellor.

He claimed that the Treasury were more supportive of a pay-per-mile scheme in response to fears that electric cars would have a dramatic impact on revenue from fuel duty and Vehicle Excise Duty (VED).

Currently, electric vehicles do not pay car tax, although this will change in the new financial year from next April when they will be charged at the same rate as the least polluting vehicles.

Labour is also looking to reintroduce the original 2030 deadline to ban the sale of new petrol and diesel cars and vans following the decision from former Prime Minister Rishi Sunak to delay the ban by five years.

A Government spokesperson has told GB News that an announcement is expected "in due course", which could see drivers required to switch to electric vehicles at a far earlier stage.

Speaking to The Telegraph, Smith said: "The Transport Select Committee had reported in favour of the introduction of a road pricing scheme in February 2022.

"It broadly agreed with the recommendation to start preparatory work on a road pricing scheme."

In August 2021, the Tony Blair Institute for Global Change reported that the UK Government would see annual fuel duty revenues "plummet" in the coming years.

It reported that the Government would lose over £30billion in revenue, requiring tax rises of up to 6p by 2040 with smaller receipts from petrol and diesel sales.

The research - entitled Avoiding Gridlock Britain - said "unfairness will rise" as electric vehicle owners don't pay for fuel and will still have lower tax contributions next April when laws change.

Some experts have also suggested giving certain drivers "free miles" if a pay-per-mile scheme were to be launched, with rural drivers expected to benefit given the distance they need to travel to access certain necessities and services.

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Chancellor Rachel Reeves is expected to unveil the first Labour Budget in the Autumn Statement on October 30, in which the MP for Leeds West and Pudsey could launch new road pricing measures.

It also remains to be seen whether Reeves will make changes to the current rate of fuel duty, with the 5p per litre cut being frozen since March 2022 in response to the Russian invasion of Ukraine.