‘Collapse’ of diesel cars could lead to motoring tax ‘black hole’ from fuel duty losses

Rishi Sunak and host Kay Burley clash over fuel duty

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The study, from the RAC Foundation, warned that Chancellor Rishi Sunak could face losing almost a third of revenue from fuel duty before the end of the decade. The report states that the “collapse in sale of new diesel cars” and growing popularity of electric vehicles will prove to be a blow to public finances.

It is likely, however, that finances will be cushioned by a temporary rise in revenue received from petrol cars.

In 2019, pre-pandemic income from fuel duty was £28billion.

Around £16.4billion or 58.6 percent was derived from the 32.9 million cars on the UK’s roads at the time.

Analysis has shown that under an optimistic scenario for the future take up of EVs, the figure of £16.4billion could be cut to £11.4billion by the middle of 2028.

This would be a 30.5 percent reduction, a shocking £5billion loss.

Annually, around £5billion is spent on operating, maintaining and enhancing the nation’s motorways and major A Roads.

This comes in preparation before the 2030 ban on the sale of new petrol and diesel vehicles, as part of the Government’s push for net zero emissions by 2050.

Steve Gooding, director of the RAC Foundation, warned of the impact that declining fuel duty costs could have.

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He said: “Whilst we will all welcome a shift to greener driving, the sooner it happens the more pressing the dilemma for the Chancellor who faces a looming hole in the public finances.

“Currently, drivers of electric cars benefit from purchase subsidies and cheap running costs as ministers push to get more people to ditch fossil fuels.

“However, ministers must soon decide how and from where they are going to plug the fiscal hole electrification will inevitably cause.

“It could be that they choose to regard a drop in yield from motoring taxation as the price to be paid for saving the planet.

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