How a ‘stealth tax’ deemed inevitable under Labour could end up costing drivers £800 a year_Nhy
Drivers could end up paying up to £800 a year because of a ‘stealth tax’ deemed inevitable.
Under ambitious plans to reach net-zero, Labour has vowed to press ahead with the controversial ban of sales of new petrol and diesel cars by 2030.
But the push towards electric vehicles is expected to deprive the Treasury of around £30billion a year in missed fuel duty, leaving future Governments grappling another financial blackhole and needing to claw back cash elsewhere.
Sir John Armitt, the country’s infrastructure tsar, has already warned road pricing is ‘inevitable’.
The controversial system could see drivers stung by ‘pay-per-mile’ fees, which have been backed by bodies including the Campaign for Better Transport charity.
Policy advisers are split as to what the toll could be, with the Resolution Foundation mooting a 6p-per-mile rate.
The Tony Blair Institute (TBI), meanwhile, has suggested cars and vans should be hit with a 1p-per-mile charge. Large goods vehicles and lorries should get a 4p-per-mile rate, it said.
These charges could snowball to 12p-per-mile by 2050, once income from fuel duty virtually evaporates.
MailOnline analysis shows that adopting this heavier rate would have raised close to £30billion from cars and motorbikes alone in 2023.
It suggests the levy, unless it discourages drivers from the roads completely, could cancel out the missed fuel duty revenue.
The Department for Transport (DfT) estimates that cars, taxis and motorbikes drove 254.2bn miles in 2023.
The 1p-per-mile scheme would have generated around £2.5bn if it was in place last year.
With the average driver racking up between 6,000 and 8,000 miles a year, the TBI’s proposed initial fee would see them hit with an annual fee in the region of £70.
This could exceed £800 with the TBI’s heavier toll.
Under both scenarios, the Treasury would claim hundreds of millions, if not billions, from vans, buses, coaches and lorries.
Sir Keir Starmer‘s Government has insisted it has no plans to introduce road pricing, described as a ‘stealth tax’ when Tony Blair’s New Labour sparked public outrage by floating the idea.
However, with the ban on new petrol and diesel cars looming, conversations around the controversial scheme will surface again.
It also called for the system to be introduced now, to counteract the decline in fuel duty caused by the push to electric vehicles.
The Centre for Economics and Business Research estimates the levy will bring in less than £4bn by 2050.
Since 2012, Whitehall has made £330bn through fuel duty – roughly the equivalent of 55 new hospitals, according to Department of Health figures.
It comes after London Mayor Sadiq Khan‘s plans to introduce a flagship £2-per-mile toll inside the capital’s congestion zone were outed this week.
Although slated to be introduced in 2026, on top of a new £5 daily tax, Mr Khan has since confirmed that the plans have been binned.
A Transport Select Committee report in 2022 suggested mileage could be tracked through ‘telematics software’, comparable to an airplane’s black box.
Alternative options to charging drivers per mile include introducing extra toll roads and congestion zones.
As well as being hit with a pay-per-mile fee, motorists who make the electric switch will eventually have to pay £165-a-year road tax from 2025. Currently they pay no excise duty.
Owners of models that cost more than £40,000 will be hit with an additional £355 annual ‘Tesla tax’.
The Office for Budget Responsibility, an arm of the Treasury, expects the change to vehicle excise duty will raise another £3bn per year before the 2030 ban.
Labour has faced pressure from all sides of the political and business spectrum to drop the 2030 petrol and diesel car ban, outlined in its manifesto this year.
Armed with warnings of ruinous economic consequences, The Mail has also led a campaign urging ministers to rethink the drastic timescale.
Half of respondents to an exclusive Mail poll said they were not confident in Britain having sufficient infrastructure for the 2030 ban to work. Fifty-three per cent felt it was the wrong policy.
Fraser Brown, founder of automotive consultancy MotorVise, said the industry believes the figure was plucked from thin air. He said: ‘We have no idea where this 2030 target came from and it’s political.
Sir John Armitt (far left) said that government would need some way of recouping the £30billion added annually to the Treasury from taxes on fossil fuels and vehicle excise duty, as electric cars are not liable for either
‘Nobody in the industry anywhere thinks it’s sensible. It would be so destructive and would lead to a government-controlled industry and we might as well be somewhere like Russia or China.’
The Government initially planned to phase out new petrol and diesel cars by 2040 as part of a wider green initiative.
The date was brought forward by five years in February 2019 and by a further five years in November 2020.
Ex-Prime Minister Rishi Sunak announced it would be delayed until 2035, to bring Britain in line with the EU’s target. Yet Labour has pledged to restore the original date.
The ban would ensure that no manufacturer operating in the UK sells new diesel or petrol vehicles, which currently represent nearly two-thirds of the total market.
To reach the zero emission vehicle (ZEV) target by 2035, 22 per cent of all new sales this year must be from battery electric vehicles.
But data from the Society for the Motor Manufacturers and Traders show the figure for 2024 so far sits at around 17 per cent.
Next year, the ZEV target rises to 28 per cent before hitting 33 per cent in 2026 and eventually 80 per cent in 2030.
A Tesla charges up at a electric vehicle charging point in London
This trajectory by itself is highly unlikely, industry experts say, but shifting to a 2030 ban would be totally catastrophic.
Mr Brown, whose company advises UK manufacturers on best practice and strategy, added: ‘If the 2030 target is re-introduced, it would break the motoring industry.
‘Manufacturers will leave the UK and the cost to everyone will be high. It’s absolutely nuts.’
John Rainford, UK manager for JOLT, an EV charging consultancy, told MailOnline that the target moving has ‘little to no effect’ on UK car manufacturers.
He said: ‘I can’t see what material impact it would have, they all should have been planning for 2030 back in 2020.
‘We are not hearing any major noises that manufacturers are having any more concern about the 2030 target.’
Mr Rainford added that the most pressing issue is for the Government to reduce the cost of public charging points, which are more than ten times more expensive to charge cars than at-home points.
According to consumer watchdog Which? costs for at-home charging can run at just 7p/kWh, while public charging points can cost up to 79p/kWh.
For a typical EV with a 60kWh battery, that’s the difference between filling up for £4.20 or £47.40.
Mr Brown said that as a result, dealerships are ‘throwing EVs out the door at a loss’ to artificially inflate the EV market, especially within the corporate ‘fleet’ market where businesses take on bulk orders of cars to offer as company vehicles to their employees.
Department for Transport figures show just under one in ten cars on Britain’s roads as of the end of June were electric or hybrid.
Elon Musk‘s Tesla is the UK’s most well-represented electric car brand on the streets, holding just over 14 per cent of the total UK EV market share.
The German giants are close behind, with BMW in second (11 per cent) followed by Audi and Mercedes (both 7 per cent).
Chinese brands, meanwhile, have moved into position to try and capitalise on the expedited roll-out of EVs in Britain.
Nearly 10.3 per cent of imported cars are now made by Chinese brands – up from one per cent in 2022, Government data suggests.
This is despite fears that Britain could become reliant on a malicious state and senior MPs have raised concerns that electric vehicles shipped in will be ‘weaponised’ to gather intelligence.
Build Your Dreams or ‘BYD’ is one of the brands having the most success, as have Great Wall Motors and MG, formerly a British maker.