New report reveals public support for pay-as-you-drive scheme as fuel duty and VED replacement

Half (49 per cent) of people support replacing fuel duty and vehicle excise duty with a pay-as-you-drive scheme and less than a fifth (18 per cent) oppose the idea, according to a new report from Campaign for Better Transport.

Pay-as-you-drive: the British public’s views on vehicle taxation reform examined over 3,000 UK adults’ views on road pricing. It found that three out of five people (60 per cent) believe vehicle taxation needs reforming, with half (49 per cent) supporting the idea of a pay-as-you-drive scheme compared to fewer than one in five (18 per cent) opposing it. What is more, support for reform grew among those surveyed by eight percentage points (from 41 per cent to 49 per cent) once they were presented with options for how such a scheme could be delivered, showing that some initial concerns around road pricing can be overcome.

Paul Tuohy, Chief Executive of Campaign for Better Transport, said: “The need to reform vehicle taxation is becoming increasingly clear as we rightly move away from petrol and diesel vehicles in order to tackle climate change. What this research shows is that road pricing, far from being an unacceptable concept to the public, is in fact one that the majority of people believe can be implemented fairly and could in fact save most drivers money.”

Campaign for Better Transport’s report found that people thought a well-designed pay-as-you-drive system would be a fairer and more transparent way to tax motoring because it would include EV drivers and could ensure people who drive less, pay less. Those polled thought that a scheme which included measures such as a tax-free mileage allowance would enable targeted tax cuts to specific groups, like those who have to drive for work, and would mean people who live in places where there are no public transport alternatives wouldn’t be unfairly penalised, either through a higher tax-free allowance or being charged a lower rate. A pay-as-you-drive scheme would have the added benefit of bringing an immediate tax cut to drivers with the removal of VAT on fuel duty.

The report also found that a number of measures would further increase public support for a pay-as-you-drive scheme including:

• A commitment to raise no more than fuel duty and vehicle excise duty do
• Ensuring tax intake keeps pace with the increased take-up of zero-emission vehicles as the main reason for reform
• A government campaign to introduce the scheme which focuses on the ‘drive less – pay less’ benefits to help with the cost-of-living crisis
• A proportion of the revenue to be set aside for road maintenance and public transport improvements
• An arm’s length body to set and review emission standards and charging rates annually.

Pay-as-you-drive: the British public’s views on vehicle taxation reform represents the most in-depth analysis of public views on road pricing in recent years and is based on four focus groups and a detailed 60-question survey of over 3,000 adults from across the UK.

Silviya Barrett, Head of Research at Campaign for Better Transport who wrote the report, said: “Our research found that many of the common concerns around road pricing, things like protecting people’s privacy and not penalising people who need to drive, can be overcome with a well-designed pay-as-you-drive scheme. In fact, support for road pricing increased among the survey group over the course of the research once the scheme was fully explained, proving that public concerns about road pricing can be overcome.”

Steve Gooding CB, Director of the RAC Foundation, said: “The question of what does or doesn’t make a policy like road user charging publicly acceptable is one of endless fascination and extensive speculation. This report genuinely shines some light on the issue and reveals the way that people’s opinions can be informed and influenced by giving them the opportunity to develop a better understanding of the issues.”

Kate Jennings, Director of Policy, Logistics UK, said: “We welcome this report on what is an important subject. Change is coming and it is imperative that any road charging policy must be developed in close consultation with the logistics sector to ensure fairness and transparency between government and business. Logistics businesses already operate on extremely narrow margins, so any system must be applied to all vehicles and phased in carefully for the avoidance of double taxation. Logistics UK stands ready to work with government to develop a system which is simple, effective and transparent for all parties.”  

Edmund King OBE, AA president, said: “The Treasury will want to reform motoring taxation as the transition to electric vehicles will cost them billions in the longer term. A balance must be struck between encouraging the uptake of zero emission vehicles against a background of increased EV running costs, and ensuring fairness for all drivers. This comprehensive report opens up some of the options, including a mileage allowance system similar to our ‘Road Miles’ concept."

Campaign for Better Transport’s report concludes that a pay-as-you-drive system could progress in stages from a pilot for electric vehicles, to replacing fuel duty and vehicle excise duty with a fully ‘smart’ scheme with a varied pricing structure, which would replace any pre-existing local road charging schemes and provide the ability for people to opt out and pay a higher set annual charge instead.

Campaign for Better Transport is now calling on the Government to establish a cross-party commission before the next general election to help secure agreement on the case for reform with a view to having a pay-as-you-drive scheme ready for implementation by 2025.

ENDS

Read the headline findings. Read the full report.

For further information or to request an interview, please contact the press office on 07984 773 468 (calls only no texts) or communications@bettertransport.org.uk.

Notes to Editors

1. Pay-as-you-drive: the British public’s views on vehicle taxation reform, has been written by Campaign for Better Transport with funding from the European Climate Foundation (ECF), the Foundation for Integrated Travel, Transport and Environment and Uber. The report is based on the results of four focus groups and a detailed 60-question survey of over 3,000 adults from across the UK and explores the best ways to frame the case for reform and to implement a new system with fairness at its heart.

2. It found:

• 60% of people who took part in the research agree there is a need to reform the current system of vehicle taxation
• 49% of respondents support the idea of pay-as-you-drive, after arguments for and against were discussed, while only 18% opposed it
• 8% points increase in support for pay-as-you-drive over the course of the survey, showing that initial concerns can be overcome.

3. National pay-as-you-drive could progress through three options (although some could be skipped or combined):

• A simple per-mile charge for electric vehicles only. For non-electric vehicles, fuel duty and VED could stay as they are
• A simple per-mile charge for all vehicles, replacing fuel duty and VED. The per-mile charge should be higher for more polluting vehicles
• A smart scheme, which varies the charge according to when and where the journey takes place, so that journeys for which there is no public transport alternative can be charged less.

4. The main form of vehicle taxation in the UK is fuel duty – a tax “hidden” within the price of fuel paid at the pump. For the last 11 years it has been set at 57.95p per litre for both petrol and diesel and it was reduced by 5p in March 2022. It raises approximately £28 billion per year which is used to pay for public services as part of general taxation. Drivers of electric vehicles do not use conventional fuel and therefore do not pay fuel duty. VAT on fuel sales (including fuel duty) is levied at 20 per cent, whereas domestic electricity incurs only five per cent VAT (although electricity through on-street chargers also currently incurs 20 per cent VAT). Vehicle Excise Duty (VED, also widely referred to as “car tax”) is the second form of vehicle taxation and raises approximately £7 billion per year. Like fuel duty, the proceeds are added to general taxation.

5. The Office for Budget Responsibility forecasts fuel duty revenues peaking in 2024-25 at around £30 billion. The RAC Foundation estimates that total fuel duty from all cars in the UK would fall by £5 billion by some point between 2028 and 2033.

6. The Government has admitted vehicle taxation reform is needed. The 2021 Net Zero Strategy states: “We need to ensure that the taxation of motoring keeps pace with the change to electric vehicles to ensure that we can continue to fund the first-class public services and infrastructure that people and families across the UK expect”.

7. Campaign for Better Transport operates in England and Wales. Campaign for Better Transport's vision is for all communities to have access to high quality, sustainable transport that meets their needs, improves quality of life and protects the environment. Campaign for Better Transport Charitable Trust is a registered charity (1101929).