How can the government plug a £13 billion black hole?

Accountants and other drivers could soon find their motoring activities taxed in a different way if the government listens to proposals from the RAC.

The RAC commissioned a report from the Institute for Fiscal Studies and discovered that the amount of income the government gets from Vehicle Excise Duty and fuel duty is set to decline even though the amount of traffic on our roads is set to increase.

By 2029, there will be a £13 billion black hole as cars become more fuel-efficient and people switch to vehicles than run solely on electricity. To fill that £13 billion hole the government would need to increase the basic income tax rate by 3.5p, raise VAT to nearly 23% or increase fuel duties by 50%. None of those options would go down well with the general public.

The government wants us to buy greener cars but by doing so we are depriving the Exchequer of much needed taxes. Vehicle Excise Duty bands are already being reviewed to make sure drivers are contributing their fair share.

Under the RAC proposals, we would move towards a system of road pricing and the money raised could go towards reducing other motoring taxes. The report says that by levying a tax on the number of miles driven it would reduce congestion and leave motorists in rural areas better off. Motoring taxes would be on a stable footing without the need for the majority of drivers to contribute additional revenue.

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