If they put the current Vehicle Excise Duty on fuel then it should stop most people evading it, plus we pay for what we use. As long as it's worked out
fairly and
doesn't increase the financial burden for people that already pay the correct amount of current vehicle excise duty and fuel tax, then surely that would be a better system? They might even be able to drop the amount we pay if everyone is chipping in and there's no tax evasion shortfall to pay for?
It would be a better system. It would mean some quite big charges for people who do big mileage though.
In 2016-17, fuel duty raised about £27.6 bn, and therefore the VAT on fuel duty raised £5.5 bn, so the total tax take from fuel was £33.1 bn. Meanwhile vehicle excise duty raised £5.5bn [1]. Fuel duty is 58p per litre, and fuel duty + VAT is 70p per litre. So if you folded VED into it you'd have to increase the fuel duty by about 10p, or 12p including VAT. Or maybe a little more, because business users would be able to reclaim the VAT on the extra fuel duty whereas they can't reclaim VED. Say 13p per litre including VAT, to allow for that.
I can't be bothered to look up actual average figures, but if you drive a "typical" amount of 10,000 miles per year at 40 mpg, folding VED into fuel duty at 13p per litre will cost you about £150, which seems like a reasonably fair replacement for VED. I can't see too many people complaining about that. But if you do 50,000 miles per year at 40 mpg, it's £750 instead of £150. That would hurt. Of course most of us would say it's only fair, those that drive the most pay the most, but it would still hurt.
However ... despite it being a better system, it won't happen. Here's why.
When you start arguing that the people who drive the most should pay the most, you get awkward people like economists asking why? What is the actual point of motoring taxes? It isn't to build and maintain roads. Motoring taxes aren't hypothecated, at least not since the 1930s, and hopefully never will be in future. Hypothecation is a terrible idea. The only logical purpose for collecting taxes from road users as opposed to via any other method is to compensate society for the negative externalities which road usage creates - obvious ones such as delays, noise, pollution, and casualties, plus less obvious (and less easily quantified) ones such as physical inactivity and community severance.
But there are two problems with that. One is that, while some of these negative externalities are related fairly simply to the volume of car usage - and could therefore be internalised via fuel duty - some (such as congestion and casualties) obviously aren't. The second is that, whenever people try to measure these externalities, they always conclude that they're far bigger than the current level of road user taxation. So the only logical solution is (1) a road pricing system in tandem with fuel duty; and (2) *much* higher taxation of road users.
The current system of VED isn't logically justifiable, but it has the huge advantage that it is the system we have. Obviously no government would want to switch to a new system which is not logically justifiable. But any system which is logically justifiable Is politically unpalatable. So it won't happen.
[1] "A survey of the UK tax system", Institute for Fiscal Studies, November 2016 -
https://www.ifs.org.uk/bns/bn09.pdf 
if the DVLA cannot be arsed to do it themselves
