Ministers were warned yesterday that the push for electric cars will create a £9 billion deficit in the public purse by 2030. Experts explained that fuel duty receipts will decrease by this amount due to the government’s ban on new petrol and diesel vehicle sales by 2030. Additionally, electric cars are currently exempt from road tax, which is estimated to cost the public finances hundreds of millions of pounds more. Ministers were cautioned that towns and cities could experience severe congestion without implementing new taxes such as pay-per-mile road pricing.
The warning was issued during a hearing of the Lords’ environment and climate change committee. The committee is conducting an investigation into electric vehicles (EVs) and the feasibility of the government’s 2030 ban. Jonathan Marshall, a senior economist at the Resolution Foundation, emphasized that the longer the government delays addressing the £9 billion shortfall, the more burdensome it will be for lower-income motorists.
According to Marshall, fuel duty revenues are estimated to have a £9 billion annual shortfall by the end of the decade, which accounts for approximately one-third of the total revenue generated by this tax. Furthermore, without changes to the vehicle excise duty (road tax) system, there will be a loss of income. Marshall stressed that the lack of vehicle taxation presents a significant fiscal challenge that must be addressed. He pointed out that congestion in the UK will worsen unless the cost of driving is effectively accounted for and distributed.
Marshall also highlighted the fairness issues surrounding the tax burden. Lower-income individuals who are unable to afford electric cars will end up paying more in fuel duty compared to those who choose electric vehicles and avoid the tax. He insisted that this issue needs to be resolved promptly.
The affordability of EVs was also discussed. EVs can be as much as £10,000 more expensive than their petrol or diesel counterparts, making them unaffordable for lower-income drivers. Currently, fuel duty and road tax generate approximately £34-35 billion annually for the Treasury. Fuel duty is charged at 52.95 pence per litre, making up a significant portion of the cost of filling up a family car’s tank. Road tax, or vehicle excise duty (VED), is currently set at £140 per year for vehicles registered after April 1, 2017. EVs are currently exempt from road tax due to their zero carbon emissions, but they will begin paying VED starting April 2025.
Peers at the hearing also expressed concerns that the 2030 ban could lead to counterproductive effects in reducing carbon emissions. Drivers may rush to purchase fossil fuel vehicles before the ban comes into effect and then hold onto them for a longer period, thereby delaying the transition to electric transportation.
Despite these challenges, Dr Russell Fowler from the National Grid expressed confidence in the ability of the nation’s grid to handle the transition to electric vehicles. Previously, there were concerns that grid upgrades were not happening quickly enough to meet the expected surge in electricity demand.
Pressure has been mounting on Prime Minister Rishi Sunak to reconsider the 2030 target, with concerns about its impact on motorists and the slow rollout of charging infrastructure. The Daily Mail has launched a campaign urging the government to review the target. The Treasury has been contacted for comment.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
