Countries should stop subsidising company cars to improve people’s health, claims the Organisation for Economic Cooperation and Development (OECD).

It says advanced economies which “under-tax” company cars and diesel fuel are pushing up carbon emissions and air pollution.

Most OECD governments tax company cars at lower rates than wages, according to the study by the economic group which counts wealthy nations as members.

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The study finds under-taxing company cars tots up to an average yearly subsidy per car of €1,600 (£1,246), ranging from just €57 (£44) in Canada to €2,763 (£2,150) in Belgium.

Estimates peg the knock-on effect to climate change, local air pollution, health ailments, congestion and road accidents at a cost of €116 billion (£90bn).

OECD Environment Director Simon Upton said: “The cost of driving a car today does not properly reflect the impact on the environment and to society. Taxing diesel fuel and company cars correctly would help to fix this.”

The study covered the 27 OECD countries plus South Africa.