The ULEZ scheme was owed more money than it made last year, figures have revealed.
And a Conservative MP has claimed this is because drivers have been "revolting" against the scheme.
In 2022, the ULEZ scheme was left with a debt of £255 million, according to a Freedom of Information request reported by The Telegraph.
This exceeded the scheme’s revenues of almost £225 million, with £73.3 million coming from penalty notices.
Under the current scheme, drivers within the north and south circular roads must pay £12.50 a day if their vehicles do not meet the required emissions standards.
The Mayor of London, Sadiq Khan, announced in November 2022 that he planned to extend the ULEZ to cover all London boroughs – with expansion due to come into force on August 29.
The outer-London boroughs of Bexley, Bromley, Harrow and Hillingdon along with Surrey County Council launched legal action in February over the proposed extension.
The councils' barrister Craig Howell Williams KC criticised the consultation period and said the consultation documents provided to the public were “not sufficiently clear’”
He had reportedly argued that “unintelligibility of consultation materials as to how compliance rates were calculated rendered the consultation process unfair and unlawful”.
Conservative MP Karl McCartney, who represents Lincoln, said the number of unpaid fines shows “the sheer numbers of drivers who must have made a conscious decision to no longer be ripped off by Sadiq Khan”.
He said: “It makes any rational person realise that these numbers show a large number of drivers revolting on the ULEZ scheme and refusing to pay.”
David Jaffey KC, defending Mr Khan, said there was more than "sufficient information" to enable an intelligent response on how it had forecast the compliance rates.
The mayor is running a £110 million scrappage scheme to help qualifying businesses and individuals in London exchange their non-compliant vehicles.
The councils also claimed that the mayor was unaware of the key details of the scrappage scheme, including the eligibility criteria.
The hearing was adjourned with a judgement not expected until later this month.
Christina Calderato, TfL’s Director of Strategy and Policy, said: “London has made significant progress over the last six years in improving air quality, but it sadly remains the case that thousands of Londoners die prematurely each year as a result of toxic pollution.
“We know that air pollution contributes to life-changing illnesses, such as cancer, lung disease, dementia and asthma.
“The expansion of the ULEZ London-wide is vital in tackling the triple challenges of air pollution, the climate emergency and congestion, and will help millions more people breathe cleaner air.
“The ULEZ has already made a significant difference. Since its launch in 2019, the ULEZ has helped cut the number of older, polluting vehicles on the road and helped to reduce harmful nitrogen oxides by 46 per cent in central London and by more than a fifth in inner London.
“Particulate matter levels have also continued to reduce across London, with a 41 per cent reduction in central and inner London since 2017.
“TfL pursues payments for all penalties we issue both in the UK and overseas but we would rather no one needed to pay the charge. Any net revenues raised by the ULEZ are reinvested into running and improving London’s transport network, such as expanding bus routes in outer London.
"A successful larger ULEZ is one that leads to cleaner air and generates ever smaller net revenues or surpluses, as has been the case with the previous expansion to inner London where people switched to greener vehicles and more public and sustainable forms of transport, such as walking and cycling.”
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