The tracking system was proposed, it was called Road Pricing, and the idea was to scrap current road tax and reduce fuel tax and replace it with a pay-per-mile system.
On more congested and busy roads at 8-9am in the morning you'd be charged £1 a mile, but if you live in the countryside on barely used roads it would be 2-3p per mile.
It seems fair because if you're an old lady who lives in the country and you only pop to the shops once a week a few miles away you barely pay any tax, and if you're a heavy commuter you pay more tax because you use the roads more, you pollute more etc.
Needless to say the idea was deeply unpopular, 1.5 million signed the official petition against it, and it died a death. One reason people felt they were being shafted with more tax and the fear that if they knew where you were they also know how fast you were going and you'd be automatically fined for speeding.
Current road tax is based on CO2 emissions, the less CO2 g/km your car puts out the less tax you pay, and if your car produces less than 100g/km you pay no road tax.
I paid £150 for a years tax on my car, it puts out around 150g/km, some people with big polluting cars can pay £400 a year.
Though this system only applies to cars produced after the year 2001, before that it's based on engine size.
UK Road Tax prices if you're interested.
Diesel is expensive because the government can get away with it, 70-80% of the cost per liter is pure tax. I also remember being told that diesel takes more energy to produce when distilling so oil companies charge more for it's production.