Public transport sector welcomes the end of the fuel duty cut in due course, a new distance-based electric vehicle charge and a rail fares freeze

 
Rachel Reeves outside Number 11 ahead of the budget

 
Chancellor Rachel Reeves tilted the scales in favour of public transport in her budget this week by freezing rail fares, introducing a new distance-based levy for electric vehicles and a commitment to phase out the 5p fuel duty cut by March 2027.

“This budget is finally starting to rebalance transport costs towards more sustainable modes,” said Ben Plowden, chief executive of Campaign for Better Transport.

“The gradual ending of the 5p fuel duty cut will recoup billions in lost revenue which can be used to benefit hard-pressed households and the country, rather than fuel retailers. A proportionate pay-per-mile charge on electric vehicles will help restore fairness to transport taxation and avoid a looming budget black hole as the transition to electric vehicles gathers pace. It will also help offset the ‘rebound effect’ we are seeing in Norway, where electric vehicle ownership is leading to a 10-20% rise in car trips.”

The government currently generates £28bn annually from fuel duty on petrol and diesel vehicles, accounting for around 4% of all tax receipts, but this is eroding as motorists switch to electric vehicles.

The plan to introduce a new 3p per mile levy on electric vehicles – alongside a lower rate on hybrids – was welcomed by bus operators. Alison Edwards, director of policy and external relations at the Confederation of Passenger Transport commented: “Road user charging which reflects usage can be fairer and can help accelerate the shift towards more sustainable public transport by encouraging people to think twice before making unnecessary car trips.”

This budget is finally starting to rebalance transport costs towards more sustainable modes

Edwards added: “Switching more journeys from car to bus or coach will ultimately mean fewer jams, faster moving traffic and improved productivity …
We look forward to working with government as it manages the inevitable shift from charging motorists at the pump to charging them as they drive.”

The 3p-per-mile charge for EVs will equate to around £250 per year for the average
driver. Petrol and diesel drivers pay roughly £600 a year in fuel duty.
To avoid intrusive surveillance or costly technology, the per-mile charge for EVs will be verified through annual mileage readings.

Responding to the budget, CILT (UK) called for the new per-mile EV charge to be integrated into a single, long-term system, creating a stable and technology-neutral tax model to replace fuel duty and Vehicle Excise Duty.

Max Sugarman, chief executive of ITS UK, also saw an opportunity to evolve the plan. He said: “The EV mileage charge is much needed in order to meet the emerging gap in tax revenue from falling fuel duty receipts, as our vehicle fleet electrifies, and means we can finally move to a fairer, more effective road tax system, that charges based on usage.

“The UK transport technology sector offers the proven capabilities and expertise to deliver this new road pricing scheme in a smarter, more effective way than a simple odometer reading. The industry has the tools to introduce a road pricing system, utilising digital connectivity and roadside infrastructure, that can give policy-makers greater levers to manage their transport networks, and deliver a more effective system for the Treasury too.”

The budget also saw a commitment to fund a number of rail infrastructure projects, including the Docklands Light Railway Thamesmead extension, Midlands Rail Hub, Northern Powerhouse Rail and the Transpennine Route Upgrade.

 
This article appears in the latest issue of Passenger Transport.

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