More than one million motorists in the UK could be hit with a new 'alternative' tax system as soon as this month, according to speculation ahead of the Autumn Budget.
Chancellor Rachel Reeves is set to deliver her financial statement to the House of Commons on November 26, with fuel duty reforms high on the agenda.
The Fuel Duty Shortfall
Officials have identified a "widening gap" in the nation's accounts, driven by a sustained drop in fuel duty receipts. Economists suggest this provides the Chancellor with a "timely opportunity" to act.
Sheena McGuinness, Co-Head of Energy and Natural Resources at RSM UK, explained the trend. "Fuel duty receipts continued their downward trajectory in September, reflecting the ongoing transition from petrol and diesel vehicles to electric vehicles," she said.
McGuinness highlighted a significant financial pressure, noting that without intervention, the Treasury would need to find an additional £2.7 billion from other sources. "It therefore seems highly likely we will see a change to fuel duties in the forthcoming Autumn Budget," she added.
The Push for an EV Alternative
The core of the issue lies in the growing number of electric vehicles (EVs) on UK roads, which do not contribute to traditional fuel duty. McGuinness stated that "the only sustainable solution is to develop an alternative duty for the increasing number of EVs."
This could lead to a major policy shift. "We could therefore see the introduction of a price-per-mile scheme in the budget," she confirmed, a measure previously ruled out by the government.
This view is supported by economic commentators. Larry Elliott of The Guardian argued, "The chancellor also needs to come up with a plan for what to do once the era of all-electric vehicles finally arrives, and here there is an obvious solution: road pricing."
Challenges and Political Hesitation
While conceptually straightforward, comparing road pricing to variable costs for trains or hotels, the government faces significant hurdles.
Ministers are reportedly reluctant to act for several key reasons:
- Fuel duty, while regressive, is simple for the public to understand.
- Road pricing raises serious concerns about privacy and surveillance.
- Governments are sensitive to accusations of "waging war on motorists."
With electric vehicles currently representing only 5% of the UK's fleet, the transition may be slower than anticipated, making inaction an attractive short-term option for policymakers.
