Chancellor Rachel Reeves is preparing to introduce a new pay-per-mile car tax that will see drivers of electric vehicles (EVs) face an average annual charge of £267. The update from the Labour government's Department for Transport confirms plans to ensure all road users contribute to infrastructure upkeep.
Road Funding Gap Drives New EV Levy
The proposed tax aims to address a significant shortfall in Treasury revenue created by the shift away from petrol and diesel vehicles. Traditional fuel duty and road tax have historically funded road maintenance, but the rapid adoption of electric cars, which are currently exempt from vehicle excise duty, has created a growing financial gap. Secretary of State for Transport Heidi Alexander emphasised the need for fairness in a recent interview on BBC Breakfast.
"We think that everyone who uses our roads needs to contribute to the maintenance of our roads," Alexander stated. "We have ageing motorways, we need to make sure that we’re repairing them." She highlighted the government's record investment in highways maintenance, aimed at fixing potholes and doubling spending on local roads maintenance by the end of the current parliament in approximately four years.
Industry Reaction and Criticism
The announcement has drawn commentary from motoring and insurance experts, who suggest the transition could have been managed more smoothly. Simon England, founder of ALA Insurance and a GAP insurance expert, argued that a more gradual approach would have been preferable.
"A gradual levy introduced earlier in the EV transition may have been easier for motorists to accept," England said. "Even a small tax on public EV charging could have helped balance revenue without penalising early adopters." He further suggested that the government should have focused on stronger incentives and trade-in support to accelerate adoption before introducing new taxes.
Balancing Fairness with Infrastructure Needs
The core argument from the government centres on creating a sustainable and equitable system for funding the nation's transport network. Alexander stressed the principle of fairness, noting that the new system aims to ensure EV drivers "contribute in the same way as people who are driving petrol and diesel vehicles."
The proposed pay-per-mile scheme, with its estimated average annual cost of £267 based on current national mileage averages, marks a significant policy shift. It represents the Labour government's move to modernise the tax system in line with technological change while securing vital funds for road repairs and upgrades. The policy is expected to be implemented within the current parliamentary term.
