Loss of petrol and diesel fuel duty is 'cause for alarm' as experts demand pay-per-mile
Declining fuel duty revenue is set to cause havoc with a major black hole in public finances predicted in the coming years.
Labour has been urged to act fast and replace petrol and diesel fuel duty charges with a pay-per-mile car tax fee as a major hole in public finances is set to emerge.
Grant Klein, PwC transport leader warned there were roughly 40 million licence vehicles in the UK which is a “huge supporting contributor to the public purse”.
He warned that “shrinking fuel duty tax” would be a “cause for alarm” and long-term changes were needed immediately.
Fuel duty is paid by petrol and diesel owners at the pump every time motorists top-up their cars.
However, total revenues are always falling as more drivers switch from combustion models to electric vehicles.
It's been predicted that the UK is facing a staggering £9 billion hole as fuel duty slowly evaporates.
But this would grow to an eye-watering £27 billion by 2040 and £36 billion by 2050 if action isn’t taken.
Speaking to The Telegraph, Grant said: “It is difficult to imagine the Treasury giving up its substantial current fuel duty revenue without a replacement in mind.
“It is now more important than ever for policymakers to think about long-term sustainability of tax revenues, and how increasingly dated taxation mechanisms can be replaced.”
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PwC have suggested the introduction of a pay-per-mile charge which would see road users pay based on total distance covered.
This could be monitored through geolocation trackers or drivers will be told to self-report their mileage to estimate costs.
Experts at the Resolution Foundation have previously suggested a 7p pay-per-mile charge for electric vehicle owners.
They claim petrol drivers currently pay around 19p per mile on average meaning this would still be cheaper and offer an incentive to switch.
However, there are concerns that a pay-per-mile charge will prove unpopular with previous polls showing an apathy for the scheme.
A recent study for The Green Insurer found 55 percent of 1,072 motorists did not support any pay-per-mile pricing model on any UK roads.
Grant added: "Success would depend on effective planning and engagement with the public. Getting public acceptance is not trivial given the history of the road pricing narrative in the UK.
"The narrative gets more complex when you introduce additional objectives such as congestion, carbon and air quality."
