A road pricing system should be developed “without delay” to prevent a £35billion black hole in Treasury coffers, MPs warn today.
As drivers switch to electric cars - with sales of new petrol and diesel vehicles banned from 2030 - the Government is taking less tax from fuel and vehicle excise duty.
While moves to end the use of gas-guzzling motors will help the fight against climate change, they will also starve Whitehall of funds for schools, hospitals and police.
The Commons Transport Select Committee today publishes a 21-page report calling on ministers to face up to the need to tackle the looming deficit.
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“A road pricing system, based on miles travelled and vehicle type, would enable the Government to maintain the existing link between motoring taxation and road usage,” says the committee.
“The ban on the sale of new petrol and diesel vehicles from 2030 will result in a corresponding decline in two significant sources of Treasury revenue.
“As sales of electric vehicles increase, Treasury revenue from motoring taxation will decrease, because neither fuel duty nor vehicle excise duty are currently levied on electric vehicles. “Without reform, policies to deliver net-zero emissions by 2050 will result in zero revenue for the Government from motoring taxation.”
MPs say a new charging mechanism should come into force, with fuel duty and vehicle excise duty completely scrapped.
The new system should be “revenue neutral” so the Government does not exploit to raise more cash, the committee adds.
Chairman Huw Merriman said: “It’s time for an honest conversation on motoring taxes - the Government’s plans to reach net zero by 2050 are ambitious; zero emission vehicles are part of that plan.
“However, the resulting loss of two major sources of motor taxation will leave a £35bn black hole in finances unless the Government acts now - that’s 4% of the entire tax-take.”
Warning that “we need to talk about road pricing”, Mr Merriman added: “Work should begin without delay - the situation is urgent.
“New taxes, which rely on new technology, take years to introduce.”
AA president Edmund King said: “It has been obvious for some time that the transition to zero emission vehicles will mean the Treasury will need to recoup the £35bn currently taken in fuel duty and VED.
“Whilst our polls show many drivers accept the principle of ’pay as you go’, they don’t trust politicians to deliver a fair system.
“Hence we agree with the committee that any new taxation proposals should be put forward by a body at arm’s length to government and any new scheme should be revenue neutral, and we believe the charges should be set independently.
“The committee also says any new system should totally replace fuel duty and VED whereas we believe a transition period would be required to still encourage the take-up of EVs.”
A Government spokesman said: “The Government has committed to ensuring that motoring tax revenues keep pace with the changes brought about by the switch to electric vehicles, whilst keeping the transition affordable for consumers.
“We will respond to the committee’s recommendations in full in due course.”
