Britain is on the verge of a major transport policy shift as Chancellor Rachel Reeves prepares to introduce a pay-per-mile charge for electric vehicles in next week's budget.
The Looming Tax Shortfall
The Treasury has all but confirmed that some form of charge targeting electric vehicles will be announced when the Labour chancellor delivers her budget. According to initial reports, EV drivers could from 2028 pay a supplement based on annual mileage, potentially around 3p per mile, on top of their standard vehicle excise duty.
The need for new road taxes is clear. As the transition to electric vehicles accelerates, income from fuel duty - which currently brings in £24.4 billion annually - will dwindle away from 2030 when the ban on new pure petrol and diesel cars takes effect. Department for Transport figures show battery electric cars already clock up about 8,900 miles on average in 2024, meaning a 3p per mile charge would generate approximately £267 per car from the 1.4 million EVs currently on UK roads.
Industry Concerns and International Warnings
Transport Secretary Heidi Alexander was quick to rule out a national road pricing scheme during Commons exchanges on Thursday, though later clarification confirmed that EV-specific pay-per-mile charges remain under consideration.
Manufacturers, businesses and motoring groups including Ford, AutoTrader and the AA have all expressed concern about the timing of new charges. Under Britain's ZEV mandate, carmakers must ensure one in three cars sold next year are zero-emission, rising to 80% by 2030.
A report from the Social Market Foundation highlights New Zealand's experience as a cautionary tale. When EVs were made liable for road-user charges last year, combined with the end of buyer grants and tax exemptions, new EV sales plummeted from a peak of 19% to just 4% of the market.
The Fairness Question and Political Challenges
The debate extends beyond simple revenue raising to questions of fairness and privacy. Steve Gooding, director of the RAC Foundation, acknowledges that while any scheme should be kept simple, modern cars already generate phenomenal amounts of data.
There are also significant concerns about discouraging drivers from switching to electric vehicles, which remains crucial for cutting carbon emissions. Ginny Buckley, chief executive of Electrifying.com, points out that for those reliant on public charging points - usually in poorer areas without driveways - running costs can already exceed those of petrol cars due to 20% VAT on public charging.
Professor Graham Parkhurst of the University of the West of England describes the vast difference between domestic chargers and public charging points as a "political timebomb", further dividing the haves and have-nots.
While the Resolution Foundation recommends a charge based on miles driven and weight for future EV sales only, the government faces the challenge of designing a system that's both fair and doesn't undermine its own environmental goals. As Tanya Sinclair of Electric Vehicles UK notes: "Anything that muddies that message - such as giving a grant with one hand and introducing pay-per-mile with the other - undermines that clarity for the consumer."
