Advocacy group Campaign for Better Transport is urging the Government to reform vehicle taxation as it warns of a massive revenue gap from the switch to EVs.

Two-thirds of the public believe it’s fair for EV drivers to be taxed but at a lower rate than for ICE

With the UK transitioning away from petrol and diesel vehicles towards zero emission vehicles, revenue from fuel duty will decline by an estimated £5bn a year by 2033, and Campaign for Better Transport has written to Chancellor Rachel Reeves calling on her to take action.

The easiest immediate solution, the letter says, would be a simple charge levied on zero-emission vehicles (ZEVs) on a per-mile basis. Having an adequate transition period would enable industry to prepare. And exempting existing ZEV drivers would incentivise uptake before the implementation date.

Silviya Barrett, director of policy and research, said: “It should be cheaper to drive a zero-emission vehicle than a more polluting vehicle, but it’s only fair that these drivers should pay a share, and a pay-as-you-drive model can achieve this.”

Research by Campaign for Better Transport showed that 65% of the public believe it is fair for ZEV drivers to be taxed but at a lower rate than petrol and diesel drivers, versus only 19% who disagree.

Campaign for Better Transport leads a Pay-as-you-drive Forum, which comprises 37 organisations including transport industry and sector bodies, NGOs and think-tanks. While different members of the forum have slightly different perspectives, all would support a Treasury move on vehicle taxation, believing it is important that ZEV drivers should fairly contribute.

ADEPT president Ann Carruthers said: “As we transition to a decarbonised transport system, it’s crucial that we address the funding gap created by declining fuel duty revenues.

“A well designed, pay-as-you-drive system would provide both a sustainable funding source for our vital road infrastructure and also encourage the shift towards greener travel choices that are crucial for our net zero ambitions.”

RAC head of policy Simon Williams commented: “With fuel duty revenue set to fall further as more electric vehicles come on to the road, a replacement form of taxation needs to be introduced to avoid losing billions.

“Our research suggests drivers broadly support the principle of ‘the more you drive, the more tax you should pay’. Whatever any new taxation system looks like, the most important thing is that it’s simple and fair to drivers of both conventional and electric vehicles. A pay-per-mile system could be set up according to vehicles’ emissions with EV drivers paying the least to further encourage take-up and ‘gas guzzlers’ paying the most. We’re not in favour of charging different amounts per mile based on the type of road driven on.

“We believe the Treasury needs to get moving on creating this new system sooner rather than later.”

The Council for Net Zero Transport has also urged the Government to tackle the thorny issue of road pricing as it warns that the decarbonisation of transport is an urgent priority.

Chair of the Council for Net Zero Transport Lord Deben commented: “Climate change will get worse every year and this means that it is crucial for the Government and industry to work together to focus on delivering the UK’s legally binding target of net zero by 2050.”

“The UK can and must deliver on the many opportunities offered by the fast-growing green economy. As we move into delivery, we must also face the difficult questions that we know must be addressed. That’s why now is the time to have an honest conversation about what will replace fuel duty. Road pricing cannot be dismissed.”