The chancellor, Rishi Sunak, is reportedly looking at a ‘pay-by-the-mile’ tax scheme for motorists to plug the gap in fuel duty as the electric car initiatives would put a stop to £40bn of annual tax revenue.

According to The Times, Sunak is “very interested” in a road pricing scheme and it comes after reports this weekend suggested the government is looking to bring forward the new petrol and diesel car ban to 2030.

A ‘pay as you drive’ scheme was last explored by the Labour government in 2007 but was scrapped due to opposition from motorists.

‘Cost of running a car already a burden for some’

Dan Hutson, head of motor insurance at comparethemarket.com, said: “A per-mile road tax will be a daunting prospect for many motorists in the UK. Cars are critical for so many people who rely on them to get to work, and post-lockdown to see their family and friends. The cost of running a car is already a significant burden for some and simply becoming unaffordable for others, particularly given the financial constraints people face as a result of the pandemic.

“It is essential the government think carefully about how this rumoured road pricing scheme is implemented to protect these under-pressure groups as they struggle to cover the existing costs, let alone a further tax.”

RAC head of roads policy, Nicholas Lyes, said: “As more electric vehicles come on to our roads, revenue from fuel duty will decline so it’s inevitable a new system will have to be developed. While not paying car tax is clearly an incentive to go fully electric at the moment, we will very soon need a system that can levy tax on both conventionally fuelled and battery electric vehicles fairly. If this isn’t addressed, we risk finding ourselves in a situation where petrol and diesel drivers continue to pay all the tax for using the roads which is unsustainable.

“But drivers are firm in their views that any new system must not be used as a way to increase the tax burden on them. Despite this, RAC research shows around four-in-10 drivers believe that some form of ‘pay-per mile’ system would be fairer than the current system of fuel duty, while half agree that the more someone drives the more they should pay in tax. Drivers are also clear that tax revenues from any replacement for fuel duty should be solely reinvested back into the road network.”