Motorists face having to pay increased road tax as the Treasury considers plans to claw back hundreds of millions of pounds in revenue that will be lost as drivers opt for greener cars.
The Daily Telegraph has learnt that government officials have begun private discussions with the motoring industry and drivers’ groups about an overhaul of the Vehicle Excise Duty (VED) rules.
The talks come as ministers try to prevent a fall in tax revenues as more motorists choose smaller, cleaner cars that incur a lower rate of duty. Labour has accused the Coalition of planning a “stealth tax” on drivers, effectively punishing them for going green.
Ministers say that while they have not finalised their plans, changes may be necessary to ensure the “sustainability of the public finances”.
One option being considered would replace the annual tax on cars with a one-off up-front charge on new vehicles when they are sold.