Treasury will need to plug gap in tax as drivers switch to electric cars

About 65% of the pump cost of petrol and diesel goes to fund public spending. As this falls, alternative sources of revenue will be needed

The switch to electric cars poses a big financial problem for the government - because every time a driver switches from a petrol or diesel car to an electric vehicle, the government loses 57.95p per litre in fuel tax at every fill-up.

In total, duties on petrol and diesel add up to almost 28bn a year for the exchequer. Worse for the chancellor of the day, petrol and diesel sales make a contribution to VAT. VAT is charged at 20% of the wholesale price plus the duty, which equates to 16.7% of the final price. That's a form of double taxation and explains why more than 65% of the cost at the pumps goes to the exchequer.