The annual MoT for vehicles may soon come with additional costs for car owners. Alongside standard repairs such as new tyres and shock absorbers, drivers could face a new per-mile tax implemented by the government, calculated based on the mileage recorded during the MoT check.

If a vehicle has been driven 7,000 miles since its last check, the owner could see a charge of £70 based on the proposed new levy of 1p per mile. This initiative emerges from the Tony Blair Institute, a centrist think tank, and while not yet government policy, it reflects a potential future direction.

Newer vehicles would incur charges too, as owners would be required to self-report their mileage, including providing a photo of their odometer when settling their vehicle excise duty. Commercial drivers of vans and trucks might pay a higher rate, ranging from 2.5p to 4p per mile. Authorities would also implement stricter penalties for odometer fraud.

The introduction of this tax could take place as soon as April next year, counterbalancing anticipated increases in fuel duty. Chancellor Rachel Reeves could opt to forgo a predicted 5p per litre fuel duty rise, with the new per-mile tax expected to raise approximately £3.3 billion.

Over the years, the tax could increase significantly to address diminishing fuel duty revenues as more drivers transition to electric vehicles (EVs). The think tank asserts that the system would be straightforward to comprehend and implement.

However, the notion of launching a new tax can be politically sensitive, especially considering the history surrounding fuel duty, which has remained unchanged for 12 years due to apprehension about public backlash and protests from drivers.

Nevertheless, experts advocate that some form of road pricing is a necessary solution to mitigate falling fuel tax revenues and tackle escalating traffic congestion, which adversely affects the economy.

Fuel duty contributed an estimated £24.7 billion last year, accounting for a significant portion of government tax revenue—approximately 2.2% or about £850 per household. When combined with VAT, which applies to the total including duty, the overall figure rises closer to £30 billion.

With forecasts predicting that EVs will comprise 50% of all vehicles on the road by 2032 and 90% by 2040, the government faces an urgent challenge regarding dwindling tax revenues. The Institute for Fiscal Studies highlights this concern as a pressing issue in the medium term.

Traffic congestion remains a growing problem. In 2023, delays on English motorways and A roads averaged 10.5 seconds per vehicle mile, up from 9.3 seconds the previous year, according to the Department for Transport. The societal impact of traffic congestion is estimated to cost up to £120 billion by 2025, potentially rising to £300 billion by 2050.

Addressing these issues is crucial for a government intent on promoting economic growth. Enhancing the flow of goods and people across the country should be a priority to improve productivity.

Implementing road pricing could encourage more public transport usage and motivate flexible travelers to avoid peak congestion times or choose alternative routes.

More complex road pricing strategies, beyond the simple penny-a-mile model suggested by the think tank, could leverage advanced technology such as tolls at congested points, telematics, or GPS systems.

The conversation around road pricing is intensifying. Sir John Armitt, chairman of the National Infrastructure Commission, remarked that while it poses challenges, it is becoming an unavoidable consideration. Likewise, the transport select committee asserts that there are no viable alternatives. Organizations such as the AA and RAC also support the initiative.

With appropriate communication and gradual implementation, this measure does not have to face public relations challenges. It’s essential for policymakers to convey that it should not result in overall increased costs for motorists; rather, the average driver would pay the same in total motoring taxes, although late adopters of EVs may effectively subsidize early adopters.

Heavy road users would contribute more, reflecting their greater impact on congestion and road wear, while lighter users, driving under the 7,000-mile annual limit, could find their costs reduced if the system is carefully designed.

It is critical for cross-party support for the principle of road pricing to be established, as the initiative requires consistent policy over a 20-year framework, independent from electoral cycles.

This aspect proves challenging, as the Conservative Party has historically opposed such measures. Rishi Sunak, during the Tory manifesto launch, pledged to reject per-mile pricing and vowed to prevent local authorities from implementing similar systems.

However, the party will eventually need to address the issue of funding the projected £30 billion deficit resulting from decreased fuel tax revenues.

In contrast, Labour’s response has been muted, focusing on repairing potholes but lacking a clear stance on road pricing.

International examples from Singapore and Stockholm demonstrate that initial resistance to road pricing often diminishes as residents experience the advantages of reduced travel times.

While discussions about road pricing may not feature prominently in Reeves’s upcoming agenda, there is a crucial need to consider its potential benefits and costs. For those committed to economic growth and fiscal responsibility, avoiding this conversation is no longer an option.

Patrick Hosking is the Financial Editor.