Road pricing could be the remedy for falling Government revenues from fuel duty as demand for electric vehicles ramps up.

Leading economic think-tank, the Institute for Fiscal Studies (IFS), argues in a new report that fuel duties, which in 2019/20 are expected to raise £28 billion plus an additional £5.7 billion from the VAT payable on the duties, will “completely disappear” over the next three decades as the UK moves to zero net emissions by 2050 leaving ministers with “a huge long-run fiscal challenge”.

Arguing that a system of road pricing with charges varying by time and location was the long-term solution – and the best way to incorporate the costs of congestion into prices paid by drivers – the IFS says as “a stepping stone” the Government could introduce a flat-rate tax per mile driven. That, it says, would “at least continue to raise revenue and discourage driving once alternatively fuelled vehicles replace petrol and diesel ones”.

Meanwhile, the House of Commons Transport Committee says it wants to “to start a national debate about road pricing” in advance of an inquiry to be formally announced in early 2020, when MPs will invite views from across the country from drivers and non-drivers alike about the future of road-based transport and investigate whether national road pricing should play a part.

Issues to be considered by the Committee will include: pros and cons of road pricing including the economic, environmental, and social impacts. It will also look at the lessons that can be learned from existing schemes at the national level, local level, and overseas. However, it said that road pricing did not only mean tolls, but included congestion charges, an HGV levy, workplace parking levy, low emission and clean air zones.

The IFS also says that emissions-based company car benefit-in-kind tax should be replaced by a regime that taxes the value of a car to an employee. It concludes: “Income tax and National Insurance should be levied, at the taxpayer’s marginal rate, on the value to the employee of having the use of the car for a year”.