Drivers warned of new car taxes as the Treasury sets out electric vehicle goals

GB News: Expert criticises the costs of net zero

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The Government said that global action to fight climate change was “essential to long-term UK prosperity”. This would, however, come with the shift away from fossil fuels and subsequent loss of revenue from fuel duty and vehicle excise duty (VED).

Both of those streams of income for the Government raised £37billion last year.

Fuel duty is currently levied at a flat rate of 57.95p per litre for both petrol and diesel.

The transition to electric vehicles would create a temporary tax vacuum equivalent to 1.5 percent of the gross domestic product (GDP) by the 2040s.

The Government is still planning on banning the sale of new petrol and diesel cars from 2030, with a further ban on hybrids coming in 2035.

As a result of this, other methods would need to be brought in to compensate for the losses.

The Treasury report said one alternative – using borrowing to pay for the costs – would be unfair to future generations and would not be fiscally sustainable.

The document warned the Government may need to consider changes to existing taxes and new sources of revenue throughout the transition to EVs.

Mats Persson, a partner at EY and a former Downing Street adviser, told the FT: “Who actually pays for net zero will be one of the policy questions that dominates both Government and boardroom discussions over the next decade”.

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Many industry experts believe this will be in the form of road pricing to replace the tax revenue lost, although the report doesn’t mention this.

A pay-per-mile tax model has been suggested, with the Tony Blair Institute for Global Change suggesting that a change to car tax was needed.

The report said the UK should “better internalise the social costs of motoring” throughout the switch to EVs.

It did stress that this needed to be done in a way which is fair and doesn’t slow the pace of uptake of zero-emission cars.

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