28 ÓCentre for Economics and Business Research In the 2019 Fiscal Risks Report the OBR went further35. The Government’s 2017 decision to ban the sale of petrol and diesel cars by 2040 would, under a continuation of the current tax system, ultimately reduce receipts to zero. The OBR has not as yet placed a timing on this prediction and of course, if the decision to accelerate the ban to 2030 is implemented, the elimination of fuel duty receipts will also be accelerated. 6.3. Cebr modelling Cebr has also modelled the gradual disappearance of fuel duty revenues. In ‘The Future of Road Transport - How to abolish Traffic Jams’36Cebr modelled the future of fuel duties. Cebr predicted, without taking account of government policy to accelerate the phasing out of fossil fuel based sales that: ‘By 2037 overall tax revenue from roads from the current tax system is forecast to decline to £20.3bn (in current monetary terms) compared with £38.4bn in 2015. The relentless economic and political imperatives to improve fuel efficiency, in conjunction with non-fossil fuel conversion, will drive down revenue from conventional sources.’ More recent Cebr modelling investigating the impact of the potential 2030 ban on ICE engined vehicles37 shows the real value of fuel duty revenues declining by 53% by 2040 and by 86% by 2050 if the proposed 2030-40 bans on new sales of ICE engined vehicles goes ahead. 6.4. Conclusions By 2040, fuel duty receipts will probably be less than a fifth of current levels, updating the projections above to take account of the likely ban on sales of fossil fuel based vehicles. The current fiscal crisis is long term and will need up to 50 years of revenue raising and expenditure constraint. Given that any revenue gains from higher fuel duties will be only temporary and will evaporate over time, it seems unnecessary to take the political and economic damage from raising fuel duty in return for very little long-term revenue. The balance of advantages seems adverse. This means that even the relatively small short term revenue gains from a 12p rise in the rate of fuel duty, estimated at £1,500-2,800 millions from the analysis in the previous section, would dwindle to £200-400 millions only (at 2019 levels of activity and prices) within 30 years. As the fiscal crisis is a long term crisis, this indicates that a rise in fuel duty has only a minor role to play in sorting the nation’s fiscal position. 35 OBR, Fiscal Risks Report, CP 131, July 2019 para 4.30, 4.29 36 https://cebr.com/reports/the-future-of-road-transport-abolishing-traffic-jams/ 37 https://fairfueluk.com/CEBR-2030-BAN/
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