What's happened
The UK government is planning to introduce a 3p per mile tax for electric vehicle drivers, starting in 2028, to offset declining fuel duty revenue. The scheme, expected to affect up to six million EV owners, aims to generate additional income but faces opposition from industry groups and regional stakeholders.
What's behind the headline?
The proposed 3p per mile EV tax reflects a strategic shift in UK transportation policy, aiming to balance revenue loss from declining fuel duty with the need to fund roads and infrastructure. This move signals a recognition that the era of oil-powered vehicles is ending, and traditional revenue streams are shrinking. However, the plan risks slowing EV adoption, especially among drivers who cannot charge at home and already face higher costs on public chargers. Industry voices warn that such taxes could undermine the government’s climate goals, particularly the mandate to phase out petrol and diesel sales by 2035. The scheme’s success hinges on careful design, transparent consultation, and regional considerations, such as rural exemptions. If implemented without safeguards, it could provoke public backlash and hinder the transition to cleaner vehicles. Conversely, if balanced properly, it could establish a sustainable funding model for future transportation needs, aligning fiscal policy with environmental objectives.
What the papers say
The Scotsman reports that the scheme could start in 2028, affecting six million EV drivers with an average additional cost of £250 annually. The Independent highlights that the plan involves drivers estimating their annual mileage and paying accordingly, with some examples of journey costs provided. Both articles emphasize the political sensitivity of road pricing, recalling past opposition to similar schemes like the poll tax. Industry experts, including the AA and lobby groups, express concern that increased costs could slow EV adoption and undermine government climate targets. They call for careful reform, regional exemptions, and unfreezing fuel duty to avoid penalizing drivers and to support the transition to electric vehicles. The government’s rationale is to create a fairer system that replaces fuel duty, which has been frozen for over a decade, and to address a fiscal shortfall while maintaining infrastructure funding.
How we got here
As more drivers switch from petrol and diesel cars to electric vehicles, the UK Treasury faces a significant drop in fuel duty revenue, which has been frozen at nearly 53p per litre for over 14 years. Previous attempts at road pricing have been politically sensitive, with past schemes like the poll tax causing protests. The government is now exploring a pay-per-mile system to create a fairer tax structure and fill a fiscal gap estimated at £20-30 billion by the end of the current parliament.
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Rachel Jane Reeves is a British Labour Party politician serving as Shadow Chancellor of the Duchy of Lancaster and Shadow Minister for the Cabinet Office since 2020. She has been the Member of Parliament for Leeds West since 2010.
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His Majesty's Treasury (HM Treasury or the Treasury) is the United Kingdom's economic and finance ministry. It maintains control over public spending, sets economic policy, and works to deliver economic growth. It is led by the Chancellor of the Exchequer