'Fuel Duty to rise, but pay-per-mile needed'

The RAC has accepted that the Government has ‘no option’ but to reverse the Tories’ 5p per litre cut in Fuel Duty in the Autumn Budget, but called for the tax to be replaced by a pay-per-mile system ‘as soon as possible’.

The comments follow the claim last month by chancellor Rachel Reeves that she had discovered a projected overspend of £22bn, during the current year in addition to the expected £86bn annual deficit predicted by the Office of Budget Responsibility.

The motoring organisation’s head of policy, Simon Williams, said: ‘We’ve reached the conclusion the chancellor has no option but to put Fuel Duty back up to 58p a litre in October’s Budget.

‘She knows the 5p discount is losing the Treasury £2bn a year. She also knows drivers were overcharged by a staggering £1.6bn last year according to the Competition and Markets Authority’s recent report.’

‘We’d normally be against any increase in duty, but we’ve long been saying drivers haven’t been benefiting from the current discount due to much higher-than-average retailer margins.'

Mr Williams also noted the ongoing loss of revenue to the Government from the take-up of electric vehicles (EVs).

He said: ‘As more and more EVs come onto the roads the Government will need to tax drivers differently.

‘We think replacing Fuel Duty with a pay-per-mile system as soon as possible is the way forward as then the only tax levied on fuel would be VAT. This would give retailers nowhere to hide.’