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

via NOT A LOT OF PEOPLE KNOW THAT
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By Paul Homewood

h/t Green Sand

The Telegraph has finally woken up to a problem I was warning about four years ago!

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 UK’s infrastructure to help increase the number of autonomous and electric vehicles on British roads. But a new report from right-leaning think tank Policy Exchange has warned that the Treasury could find a gap in its expected tax revenue unless the shift to cleaner vehicles is part of an overarching Government strategy.

“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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It is significant that they highlight the discrepancy between the OBR and CCC assumptions.

In my view, the CCC are living in cloud cuckoo land if they really think that millions of drivers are going to be driving electric cars in ten years time. There is simply nothing that electric cars can currently offer that will attract more than a handful of eco loons, and it is hard to see that changing in such a short space of time.

And although the government talks the talk, as far as CO2 emissions go, they are hardly likely to walk the walk when they stand to lose tens of billions in tax revenue.

But just assuming the CCC are right, where will the government make good the lost tax revenue?

Taxing electric cars? If they do, nobody will buy them.

Taxing electricity? A non starter.

Raising other taxes? A guaranteed vote loser.

Road tolls? Again, this would be massively unpopular.

I expect the government will still be kicking the can down the road ten years from now.