UK must face up to falling road emissionsto avoid 23bn tax gap

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The UK Government risks sleepwalking into a 23bn tax black hole by failing to face up to the fiscal impact of tackling road transport emissions.

The new parliament plans to put legislation in place to upgrade the UKs infrastructure to help increase the number of autonomous and electric vehicles on British roads. But a newreport from right-leaning think tank Policy Exchange has warned that the Treasury could find a gap in itsexpected tax revenue unless the shift to cleaner vehicles is part of an overarching Government strategy.

electric vehicleCredit:Getty

The Government needs to recognise the fiscal implications of cleaning up road transport. Our analysis suggests that if carbon targets are met, fuel duty receipts could be 9bn-23bn lower in 2030 than the Government is currently assuming, said Richard Howard, an author on the Policy Exchange report.

The Office for Budgetary Responsibility (OBR) has estimated that fuel duty receipts could increase from 28bn a year to around 40bn by 2030.

But Policy Exchange said fuel duty tax receipts would be as low as 17bn-31bn by the end of the next decade or 9bn-23bn lower than the OBR is banking on if the legislated carbon targets are met. Mr Howard said the OBR and Department for Transport are working off completely different projections for emissions than the Committee on Climate Change.

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