Rachel Reeves encouraged to launch new pay-per-mile car taxes to ease impact on 'poorer households'

Some projections, including forecasts from the Tony Blair Institute for Global Change, estimate that the loss of fuel duty could cause the Government to lose £35billion a year.

In anticipation of the lost revenue, a growing number of experts and drivers are warming to the concept of road pricing to replace the current system of Vehicle Excise Duty (VED).

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The most popular form of road pricing is generally pay-per-mile taxes, which would see motorists charged every time they use the road.

While this would naturally impact certain motorists more than others, it would require all drivers, regardless of the vehicle they drive, to pay.

The Green Alliance, one of the largest environmental groups in the UK, has set out several recommendations for the Department for Transport ahead of today's spending review.

It argues that revitalising the UK's transport network is essential if the Government wants to meet climate and net zero targets in the coming decades.

It highlighted that the DfT was reduced by 2.5 per cent in the Autumn Budget and the first phase of the spending review, meaning it received the largest reduction, proportionately, of any Government department between 2023 and 2026.

To combat this, the Green Alliance suggested that Chancellor Rachel Reeves could introduce new measures to help the Government raise taxes.

A recent report from the group stated: "Driving has been effectively subsidised through taxes, contributing to a long-term trend where the cost of public transport has risen faster than the cost of driving a petrol or diesel car.

"The brunt of the impact has fallen on poorer households who are less likely to own a car or own one car for several people."

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One of the key suggestions was to introduce a pay-per-mile levy for HGVs, which would bring the UK in line with European charging models for heavy goods vehicles.

Forecasts suggest that this would raise £1.5billion by the end of the decade. It would also help more HGV owners switch to cleaner models, in addition to rebalancing rail and road freight costs.

Despite this, speaking previously to GB News, a spokesperson for HM Treasury said: "We have no plans to introduce road pricing.

"We are committed to supporting our automotive sector as we transition to electric vehicles in order to meet our legally binding climate targets."

While the Government has ruled out a road pricing system, it could re-evaluate the future of Vehicle Excise Duty in the future as more drivers transition to zero emission vehicles.

The latest data from the Society of Motor Manufacturers and Traders (SMMT) shows that sales of new electric cars represented 21.8 per cent of the market share, making it the second most popular vehicle type behind petrol.

As the prices of new electric vehicles continue to fall and the UK's charging network expands, more drivers will have the confidence to switch to an EV, potentially leading to a renewed look at road pricing and pay-per-mile car taxes.

Chancellor Rachel Reeves will announce the Government's spending review later today. Although it is unlikely that the Labour MP for Leeds West and Pudsey will unveil any new tax rules, she could lay the groundwork for future changes.