but then where does the government recoup the loss of revenue from VED fuel tax etc from?
What makes you think they aren't going to start taxing electric cars? They'll either do that, or as DBG says, they'll mandate separate feeds/smart meters for charging cars and will tax that, instead. Either way, they'll get their pound of flesh, don't worry!
They already do tax any electric vehicle with an original price tag of over £40K and have done for a while. Certainly Tesla fall in to this bracket for the first five years of ownership, with VED coming in at over £300 annually. By the time that five years is up, they would have thought of something else to fill the loss of VED. Possibly pence per mile, who knows.
There are plenty of Euro 6 diesels out there that currently cost £30 VED, but buy a new one now costing over £40K and the same vehicle will be around £465 annually for the first five years. It will then drop back to the original £30 VED, or will it.
Remember, even buying one second hand, it's the original purchase price to the first owner that counts for the first five years. As you say, the money has to come from somewhere.