Radical tax reform is unnecessary to support the country’s transition to electric vehicles, according to a new report.

The research warns that pay-per-mile road pricing could stall strong EV take-up

Published as the Government dismisses rumours of an imminent announcement on a road user pricing scheme, the analysis by New Automotive says that pay-per-mile road pricing and tax based on the negative impacts of driving on the environment aren’t needed.

An announcement on road user pricing had been expected in the Autumn Budget but following weeks of rumours, Labour has now said: “We have no plans to introduce road pricing. We are committed to supporting our automotive sector as we transition to electric vehicles in order to meet our legally binding climate targets.”

Chancellor Rachel Reeves had been urged to push ahead with road pricing to plug a multi-billion-pound revenue gap from the switch to EVs.

Campaign for Better Transport had written to Reeves, calling on her to take action and implement a charge levied on zero-emission vehicles (ZEVs) on a per-mile basis to ensure ZEV drivers “pay their way”.

But the Department for Transport has now scotched the rumours, while the New Automotive research says pay-per-mile road pricing and tax isn’t needed for this parliament.

The study from the independent transport research organisation warns that pay-per-mile road pricing could stall strong EV take-up in the UK, based on sales figures from Iceland and New Zealand. Researchers at the independent transport research organisation say that road tax and fuel duty need “light reform” but radical tax changes to support the EV shift are unnecessary.

And the analysis also sets out that imposing road pricing to pay for the negative impacts of driving on society and the environment is needless.

New Automotive analysts reckon that air pollution and greenhouse gases will quickly reduce as a result of the EV transition, whilst the impacts on road wear and congestion from vehicle use are much smaller than commonly assumed.

The report, however, does call for the Government to introduce reform for road tax. This would replace the “perverse” increase in Vehicle Excise Duty for EVs scheduled for April 2025 and instead introduce an efficiency-based VED system which applies to electric, petrol and diesel cars alike, irrespective of age.

Under the current reforms planned for road tax policy, drivers of cleaner cars will end up paying up to 10 times more than owners of some older, more polluting petrol and diesel vehicles. The suggested changes would tackle this by raising VED for certain cars sold pre-2017 while ensuring that drivers of many cleaner cars – not just electric cars or newer cars – would pay less.

The report also calls for light reform to fuel duty to ensure petrol and diesel drivers continue to pay their way.

The analysis suggests that freezing fuel duty has not significantly undermined decarbonisation efforts to date – and that a gradual increase in fuel duty of 2ppl every three years will provide enough revenue to ensure drivers of internal combustion engine vehicles continue to pay their way.

Ben Nelmes, CEO of New Automotive, said: “Electric cars aren’t a sin to be taxed but a boon for the economy. Our recommendations suggest a way forward for the Chancellor that is simple and would avoid the kind of bad outcomes seen in other countries that introduce pay-per-mile charging on electric cars.

“Our recommendations would avoid the creation of an electric car tax penalty that is currently due to come into force in April 2025, and which may prevent more people from accessing the benefits of getting a used electric car. EVs can be good for motorists and the taxman – a win-win for people and the planet.”

New Automotive’s full report on ‘Vehicle Taxation: The Next 25 Years’ can be downloaded here.