In future years motorists could be facing a 50 per cent rise in fuel duty to cover a £13billion hole in public finances.
A report from the RAC by the Institute for Fiscal Studies found that the amount of money that has been lost is due to the use of environmentally friendly cars. More people are choosing to use fuel efficient and electric cars causing a major gap in public finances. If this continues it could result in fuel duty increasing causing problems for motorists who may be faced with the prospect of paying higher tax.
As it currently stands fuel duty collected by Exchequer stands at 1.7 per cent of gross domestic product (GDP) but by 2029 this will fall to 1.1 per cent. Vehicle excise duty (VED) is also expected to drop over this period from 0.4 per cent to 0.1 per cent which will ultimately lead to the £13billion loss.
Motorists will unwelcome the news of higher fuel duty since over the last year the Government have been encouraging people to become green drivers and purchase cars which are beneficial to the environment.
RAC Foundation director Professor Stephen Glaister commented: “If the Chancellor was faced with a £13 billion shortfall in motoring tax revenue today, he would need to push the rate of fuel duty up from 58p per litre to 87p per litre to fill the financial black hole. 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.”
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By Amanda Bainbridge