Tony Blair's think tank urges Tony Blair to introduce pay-per-mile road pricing across the UK | fuel tax

A pay-per-mile road pricing system should now be introduced, according to the Tony Blair think tank, which is calling on the Prime Minister to overhaul car tax.

Rachel Reeves has confirmed the end of the temporary 5p cut in fuel duty and is likely to announce an inflationary increase in the tax paid on petrol and diesel pumps in her Budget next Wednesday.

But the Tony Blair Institute suggested that instead of restoring fuel duty rates as planned, Reeves should introduce a simple on-road pricing system of 1p per mile for cars and vans and 2.5-4p for trucks and lorries.

A new report from the institute argues that the changes would generate the same revenue from drivers as the Treasury expects to raise after the temporary cut to fuel taxes in 2022, and therefore acting now could be less politically harmful than later.

The Blair government's attempt to introduce widespread road tolls in 2007 sparked a huge public backlash, with record numbers of people signing a parliamentary petition opposing it.

But the expected shift to electric vehicles and the resulting fuel tax cuts, which would generate an estimated $25 billion in annual fiscal revenue, have reinvigorated calls for reform.

The institute said introducing a low-level on-road pricing scheme would be an important step in reforming the UK's car taxation system to bring it into line with the electric car era. [and] It helps prevent increases in road congestion that hinder growth.

The cost of an entry-level charge is expected to be around $70 per year for the average driver, based on mileage readings taken from the car's odometer at its annual MOT check.

Fuel taxes will not be abolished, but frozen, and will eventually become redundant as vehicles become zero-emissions, with the price per mile rising to around 10 to 12 pence per mile by 2050, the report suggests.

Speculation about the reforms has been rife for weeks and intensified after Sir John Armitt, chairman of the National Infrastructure Commission, said road pricing was inevitable. Groups including the Campaign for Better Transport have also called for reform to charge per-mile fees for electric vehicles.

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Reeves warned that the United States faces a $22 billion fiscal black hole. The Tony Blair Institute also urged her to change fiscal rules to allow for investment and overhaul stamp duty, while also raising council tax on more expensive homes.

A government spokesperson said: We have no plans to introduce road pricing. We are committed to supporting the automotive sector as it transitions to electric vehicles to meet legally binding climate goals.

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