The rapid growth in greener, more fuel efficient vehicles will leave the Treasury with a £13bn shortfall in motoring taxes by the end of next decade, despite an anticipated 44 per cent jump in traffic.
The predictions from the Institute for Fiscal Studies, an independent think tank, are based on an analysis of the government’s own long-term forecasts, which show that by 2029 fuel duty will contribute 1.1 per cent of GDP, down from 1.7 per cent today. Vehicle excise duty will drop to 0.1 per cent from 0.3 per cent.
Receipts from the taxes total £38bn a year, equivalent to 7 per cent of all Treasury income.
The lost revenue is equivalent to increasing the basic rate of income tax from 20p to 23.4p, VAT from 20 per cent to 22.7 per cent or raising fuel duty by more than 50 per cent, according to the IFS report, published today.