Fears Tax Shortfall May Lead To Road Tolls
Drivers could face toll charges or a 50% rise in fuel duty in future years to cover a £13bn hole in Treasury coffers, according to a new report.
Revenue from vehicle excise and fuel duty is expected to plunge over the next 15 years as more drivers turn to eco-friendly cars.
Fuel duty collected by the Exchequer currently stands at 1.7% of gross domestic product (GDP) but this is due to fall to 1.1% of GDP by 2029.
Vehicle excise duty (VED) will also drop over this period, from 0.4% of GDP to 0.1%, creating a combined fall that leads to the £13bn shortfall.
The Treasury would need to raise fuel duty from 58p per litre to 87p to fill the black hole, according to the report by the Institute of Fiscal Studies and the RAC Foundation.
Foundation director Professor Stephen Glaister said: "Clearly there is no guarantee that future rises in duty rates will be limited to inflation, as is current policy.
"As drivers endure record prices at the pumps they might be surprised to learn that future governments face a drought in motoring tax income.
"The irony is that while ministers encourage us to buy greener, leaner cars, they are being forced to look at ways of clawing back the money motorists think they will be saving.
"This isn't scaremongering. The Treasury has already announced a review of VED bands to ensure drivers make a fair contribution to the public finances even as cars become more fuel-efficient."
The report called for a "radical overhaul" of road taxation and suggested there was a "compelling" case for road charging in the UK.
It proposed a system where drivers are charged by the mile and face higher charges if they are travelling through busy areas at peak times.
"Such a move would generate substantial economic efficiency gains from reduced congestion, reduce the tax levied on the majority of miles driven, leave many (particularly rural) motorists better off, and provide a stable long-term footing for motoring taxes without necessarily raising net additional revenue from drivers," the report said.
IFS director Paul Johnson said motoring taxation did not reflect the costs drivers impose on others and that revenue from petrol was set to fall.
He added: "A national system of charging related to mileage and congestion, largely replacing the current system of fuel taxation, would help solve both those problems."