The Chancellor has been urged to reform vehicle taxation to avoid a fiscal black hole as consumers increasingly switch to electric vehicles (EVs) over petrol and diesel.

EV owners are currently exempt from fuel duty – because they don’t need it to operate their vehicles – and road tax, also known as vehicle excise duty (VED). While EVs will finally become subject to VED from April next year, the Campaign for Better Transport (CBT) has calculated that the UK faces a £5bn decline in fuel duty annually by 2033 based on growing EV adoption trends.

Duties levied on petrol, diesel and other fuels currently generate around £25bn a year in revenue for the Treasury.

“The new Chancellor faces a looming black hole. She can avoid it, in a way which is fair, and which garners broad public support. But she should start now, as this issue will only get more pressing,” said the CBT’s Silviya Barrett.

In a letter to the Chancellor, the CBT said that EVs should be taxed on a per-mile basis, but that existing...