A think tank is warning that a per-mile charge for driving electric vehicles is necessary to fill the hole caused by falling fuel duties as fewer people pay tax through the petrol and diesel pump.

The Resolution Foundation’s report “Where The Rubber Meets The Road” says that the transition to EVs comes with significant fiscal implications, the biggest of which is a rapid decline in Fuel Duty receipts, where annual receipts are expected to fall by £10 billion by the early 2030s.

It recommends a national, per-mile Road Duty system should be introduced that leads to EV drivers paying 6p per mile, plus VAT, from 2027, when one–in–six of all car miles are expected to be electric. It says this should be implemented through a GPS system, building on existing technology. Drivers of fossil–fuelled vehicles will continue to pay Fuel Duty.

It also says local areas should be empowered to introduce Congestion Charging, with a focus on the nation’s cities and large towns. It says that, if it is enabled by, and interlinked with, the national GPS system, this will avoid the need for costly infrastructure and allow simple billing.

It also wants reforms to Vehicle Excise Duty to go further than existing Government plans, with at-purchase VED modernised such that it is based on vehicle weight – with a per-kg charge for all vehicles above a certain weight limit. It also says VAT on public chargers should be reduced from 20% to 5%, matching that enjoyed by motorists able to charge at home, with costs recouped from other motoring taxes, with a higher rate on upfront VED “likely to be the most progressive option”.

You can read the full report here.

(Picture – Yay Images)