EVs could 'create £30bn tax hole'

The increasing popularity of electric vehicles (EVs) could cause a £30 billion shortfall in tax revenues by drying up money collected from fuel duties unless an alternative is found, new research suggests.

The report by the Tony Blair Institute for Global Change suggested the Government should introduce a new road pricing system to maintain tax receipts.

Without road pricing, tax revenue equivalent to 6p rise in income tax by 2040 would have to be found elsewhere, the Institute argued.

Under road pricing, road users would pay for the use of roads at a rate determined by how far they travelled, and where and when they travelled.

With EVs offering to reduce the costs of driving, researchers also predict the time each driver wastes in traffic will rise by a third to 32 hours a year, costing the economy £121.5bn annually, up from the current £59.5bn.

By 2025, researchers expect there to be three million EVs on the road, 10m by 2030 and 25m by 2035.

The Institute said a road pricing system could counter the growing costs of congestion as well, as evidence suggests drivers respond to changes in the cost of motoring.

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