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Drivers confront the possibility of being billed for every mile they travel under transformative proposals to address Britain’s deficit in public finances.
The Resolution Foundation — a think tank closely associated with Labour — has urged Chancellor Rachel Reeves to reform vehicle taxes, cautioning that fuel duty income is dwindling as motorists transition to electric vehicles.
Its suggestion would impose an annual fee on drivers alongside a charge per mile varying from 3p to 9p, with larger vehicles incurring higher costs to represent the burden on Britain’s infrastructure. This system could potentially generate up to £20bn annually, according to the report, thereby covering two-thirds of the Chancellor’s projected £30bn financial deficit.
Adam Corlett, the report’s writer, stated: “Vehicle taxes are a vital component of the tax framework, but they also represent a clear and considerable fiscal threat.” He proposed that mileage could be recorded through MOT inspections, self-reporting, or telematics, while also advocating for a reduction in VAT on public charging stations and lifting the longstanding freeze on fuel duty.
Currently, fuel duty contributes approximately £28bn each year, but the Office for Budget Responsibility foresees this will drop to £22.6bn by 2030. Corlett indicated that raising the levy by 3% annually and gradually reversing the 5p temporary reduction could see the tax increase to nearly 70p per litre by the end of the decade.
Motoring organizations promptly opposed the idea, cautioning that road pricing would disproportionately affect drivers while raising issues of privacy and surveillance. Ian Taylor, from the Alliance of British Drivers, remarked: “It would almost certainly drive prices upward, and likely the only way to implement it is to monitor everyone, which raises concerns about freedom and privacy.”
The report emerges as Reeves encounters mounting pressure before her November Budget, with conjecture that she may need to introduce up to £30bn in new taxes to adhere to her fiscal guidelines.
A Treasury spokesperson refrained from commenting on the suggestions, stating simply: “The Chancellor makes tax policy decisions at fiscal events.”
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