The Government's decision to scrap the paper car disc last year has led to a revenue loss of £80m.

Unlicensed vehicles in that period have also doubled.

The Driver and Vehicle Licensing Agency (DVLA) abolished the paper tax disc in favour of a digital system in October 2014, stating that the new system would save the UK taxpayer £10m each year in efficiency savings.

Official figures, however, suggests that the new system has backfired.

0.6% of vehicles were unlicensed two years, ago, when the old system was in force. Figures collected in the summer, however, reveal that 1.4% of vehicles are now unlicensed. The data also shows that approximately 560,000 vehicles are now unlicensed.

A number of motoring organisations predicted that abolishing the paper tax disc would lead to problems.

The new system, which uses digital number plate recognition technology, faced a number of administration problems when it launched and resulted in many innocent motorists having their vehicles clamped. It has been suggested that many people failed to tax their car because they were not sent official notices in the post.

Critics suggest the old system was better because drivers received a visual reminder to re-new their VED. Police could also easily identify an untaxed car.

Data released last week showed that the DVLA towed away or immobilised more than 100,000 vehicles in the last 12 months – a year-on-year rise of 58 per cent.

The DVLA says it recognised the potential for revenues to fall “temporarily”, but that it would recoup much of the £80m in losses by pursuing tax evaders, a process that netted the Treasury £33m last year.

Oliver Morley, the DVLA’s chief executive, said: “Almost 99% of all vehicles on the road are correctly taxed: that’s around £6bn in vehicle tax passed to the Treasury every year. We write to every registered vehicle keeper in the UK to remind them when their tax is due, and we have introduced a range of measures to make vehicle tax easy to pay. At the same time, we are taking action against those who are determined to break the law.”