Plan to track plug-in hybrid cars to make pay-per-mile tax fairer

Labour’s pay-per-mile tax for plug-in hybrid (PHEV) cars can be fair, if tracking technology is used to record usage – that’s the viewpoint of the Campaign for Better Transport, one of the key advisory bodies for the eVED scheme which is slated to come into effect in 2028. This comes as Chancellor Rachel Reeves lessens the financial blow on petrol and diesel drivers by postponing the ‘unwinding’ of the temporary 5p cut to fuel duty.

Under current proposals, PHEVs will be charged 1.5 pence per mile – half of what EV drivers will pay – on top of the standard annual road tax rate. The logic behind PHEV cars being charged alongside their full-electric counterparts is because, in theory, they use less fuel than a traditional petrol car. With eVED acting as a means to supplement lost state income from fuel duty, HM Treasury believes that this would eradicate any deficit from hybrid drivers.

However, speaking to Auto Express at an industry panel in Parliament, the Campaign for Better Transport’s director of policy and research, Silviya Barrett, said: “The Treasury has assumed plug-in hybrids will drive in EV mode 50 per cent of the time, for simplicity… If you’re only driving in electric mode 20 per cent of the time, you’d be overpaid eVED as you’d already be paying for the fuel duty for the other 80 per cent.”

To overcome this conundrum, the automotive industry has proposed introducing a telematics system that will be able to track and transmit mileage to a central server. This will be able to provide a simpler and more accurate means of charging than the alternative for eVED, which involves estimating and paying for one’s annual mileage, then to have it checked at the end of the year, with the difference either charged or rebated. 

“This is the benefit of using a telematics-based system as it’s more precise,” Barrett explained. “You’d be able to tell what proportion of people are driving in electric mode, versus petrol.” In theory, such a system would be able to transmit data only when the car is in EV mode, meaning PHEV drivers pay a proportionate amount of eVED to how much (or little) electric power they use.

All of this won’t require new technology; in-built SIM cards and GPS have been required by law on all new cars since 2018. It will, however, heavily rely on the verdict from motorists. Studies by EVA England suggest that “the majority of” electric car drivers believe they should pay their fair share of road tax, but only a quarter would be in favour of a telematics-based system, provided it does not transmit location-based data.

There are some circumstances, however, where GPS data will be key to accurately calculate mileage for eVED. Those living near the Irish border or driving their car abroad often will be able to avoid being charged for foreign miles by a telematics system that can ascertain whether or not you’re driving in the UK. The more rudimentary approach of self-submission and MoT mileage checks will not be able to account for these discrepancies.

All of this only highlights how complicated the introduction of such a scheme will be; the odometer reading self-submission process is rife with issues, not only because it lends itself to manipulation and fraud, but also because current proposals for rebates would see drivers being reimbursed for any overpayments in ‘credits’, rather than cash.

Nevertheless, with how tight the public purse strings already are – loss in fuel duty income is expected to generate a £12 billion black hole by 2030 – the industry believes eVED to be a necessary evil. With all of this in mind, EVA believes the scheme should be pushed back by two years from April 2028 in order to iron out any stumbling blocks.

The group’s CEO, Vicky Edmonds, said: “EVA England is calling on the Government to delay the introduction of eVED until at least 2030, redesign the scheme so drivers pay based on actual mileage rather than estimates, and ensure it is introduced alongside meaningful action on charging costs and affordability.”

For the time being, Chancellor Rachel Reeves has decided to postpone the highly-controversial ‘unwinding’ of the temporary 5p cut to fuel duty until the end of the year. The original plan was for it to be phased out in September, gradually reducing to a 4p cut, then 2p in December and finally removed altogether the following March. Fuel duty will still rise in-line with inflation next April, though – in the case of 2027/28, by 2p per litre.

Regardless, speaking following the announcement, Reeves said: “The war in Iran is pushing up fuel prices here at home, but after strong growth at the beginning of the year, I am stepping in to protect people at the pump.”

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