UK must modernise how it funds transport

BUDGET 2025: CILT (UK)’s Daniel Parker-Klein warns EV road tax falls short without a real long-term strategy

CILT (UK) has welcomed the government’s recognition that the UK must modernise how it funds its transport system, but warns that the proposed 3p-per-mile road tax for electric vehicles (EVs) must form part of a coherent, long-term national strategy – not a standalone measure.

A pay-per-mile charge for EVs is a logical step as fuel duty revenues decrease, but it is not a strategy on its own The UK needs a clear, integrated plan for how we fund roads, rail, and wider mobility – one that is fair, future-proof and aligned with decarbonisation goals.

CILT (UK) emphasises that the UK must urgently address how it pays for its transport network as fuel duty declines, EV uptake grows and the regressive nature of Vehicle Excise Duty becomes more apparent. Long-term certainty is essential for logistics, public transport operators and motorists alike.

The government currently generates £28bn annually (2023/24) from fuel duty on petrol and diesel vehicles – some of which is used to repair and improve our roads. The shift is intended to plug the widening fiscal gap as more drivers switch away from petrol and diesel vehicles.

The chancellor announced a 3p-per-mile charge for EVs – around £250 per year for the average driver – alongside a lower rate for hybrids, framing the move as a matter of fairness given petrol and diesel drivers pay roughly £600 a year in fuel duty, with the scheme to be implemented after consultation and expected to begin in 2028.

CILT (UK) emphasises that electric vehicle per-mile charging must be integrated into a single, long-term system, creating a stable and technology-neutral tax model to replace fuel duty and Vehicle Excise Duty over time.

CILT (UK) also stresses that logistics operators need clarity and predictability, as the freight sector – still predominantly diesel-powered – requires clear signals to guide investment in vehicles, infrastructure and decarbonisation. Ensuring fairness for rural communities is essential. These areas often involve longer travel distances and limited modal choice, so any charging framework must avoid disproportionate impacts on rural households and businesses.

The institute notes that early action is preferable to delay, enabling a smoother transition while EV uptake remains moderate. We need to move beyond short-term fixes. This Budget should mark the start of an honest, national conversation about how we pay for the transport networks the economy and society rely on.

Daniel Parker-Klein is director of policy and communications for CILT (UK)