Motorists should be charged for every mile they drive as a way of cutting petrol prices and reducing traffic jams, an influential think tank says in a report today.
The Institute for Fiscal Studies (IFS) argues there is a compelling case for making a switch from motoring taxes to a system of national road pricing. Such a shift would be highly controversial, but it could be used to encourage drivers to avoid the busiest times and routes by varying the amount they are charged for making journeys.
The IFS also warns that the amount collected from fuel duties and road tax is likely to decline, from £38bn a year now to the equivalent of £25bn in 2029-30, partly as the result of cars becoming more fuel-efficient.
It says the £13bn shortfall would be equivalent to a 3.5p increase in the basic rate of tax, an increase in VAT to nearly 23 per cent or a 50 per cent rise in fuel duties – none of which would be "particularly palatable".
By contrast, the think tank says, road use would be a more sustainable way of raising tax as the total distance driven in Britain annually is forecast to increase from 321 billion miles in 2010 to 396 billion miles by 2030.
"Such a move would generate substantial economic efficiency gains from reduced congestion, reduce the tax levied on the majority of miles driven, leave many [particularly rural] motorists better off, and provide a stable long-term footing for motoring taxes without necessarily raising net additional revenue from drivers," it says.