Councils should publish annual parking-charge reports to show where revenue comes from and where it is being used, MPs said today.
The use of parking charges and fines specifically to raise revenue was "neither acceptable nor legal" said Louise Ellman, chairman of the House of Commons Transport Committee.
Launching a report by her committee into local authority parking enforcement in England, Mrs Ellman said: "There is a deep-rooted public perception that parking enforcement is used as a cash cow, so it's essential that local authorities apply stringent transparency."
The committee said local authorities in England had a collective parking surplus in the hundreds of millions of pounds, but that the exact amount was subject to debate.
It said the Local Government Association had reported a surplus from on and off-street parking of £411 million in 2011/12 while the RAC Foundation reported a surplus of £565 million in 2011/12.
It added that the Department of Communities and Local Government had said "net income on parking services (off-street and on-street parking) is expected to rise from £601 million in 2012/13 to £635 million in 2013/14, an increase of 5.6%" including income from both parking charges (e.g. pay and display tickets) and penalty charges (i.e. fines).
Mrs Ellman said: "Annual parking accounts would allow the public to see how much local revenue is derived from the enforcement of fines, and what proportion of this come from on or off-street parking charges.
"It's right that parking charges be determined locally, but hard to justify fines that substantially exceed penalties for more serious offences like speeding.
"Central government should freeze the maximum penalty charge and develop differential fines for less serious parking violations. "
She continued: "Common sense also suggests the Department for Transport's statutory guidance should stipulate that local authorities implement a 'grace period' of five minutes after the expiry of paid-for time on any paid parking before enforcement officers issue a Penalty Charge Notice (PCN).
"A 25% penalty charge discount should also be introduced for motorists who pay within seven days of losing any appeal to a parking tribunal.
"Local authorities currently offer a 50% discount if motorists pay their penalty charge within 14 days, but remove this benefit entirely from motorists who appeal to a tribunal."
Mrs Ellman said that motorists should also not have to appeal against PCNs where tribunal adjudicators have repeatedly identified a problem such as poor signage.
She said councils must resolve these sorts of problems and the Government must impose a statutory requirement on them to refund monies received from invalid PCNs of this kind.
Mrs Ellman went on: "Adjudicators should also be given powers to allow appeals where local authorities fail to follow statutory guidance concerning the use of cameras (their use should not be routine) or issue PCNs in settings where exemptions (such as resident permits or Blue Badges) are not visible to such camera equipment.
"It is also unacceptable that enforcement regimes effectively force some companies to incur PCNs costing hundreds of thousands of pounds a year for carrying out their business.
"While businesses cannot be completely exempt from parking restrictions, local authorities must ensure that the need to restrict parking and manage congestion does not stifle the ability of businesses to trade and help grow the economy."
The committee said that the workplace parking levy (WPL) scheme in Nottingham must be carefully evaluated before it is rolled out elsewhere.
The committee said penalty charge rates vary. The maximum penalty charge in London is £130 while outside London the same figure is £70. By comparison, the maximum fixed p enalty for speeding is £60 (unless the case is referred to court).
It added that in 2006 a total of 3,568,462 PCNs parking tickets were issued by 160 councils in England (outside London) and Wales. The total number rose in 2010/11 increased by 21% to 4,319,708.
But the committee said it was important to note that the number of councils adopting civil parking enforcement powers increased from 160 to 268 over this period (a 67% increase).
In London, the number of PCNs issued over the same period fell from 5,185,772 in 2006/07 to 4,131,708 in 2011/12 - a 20% decrease.
Councillor Peter Box, chairman of the Local Government Association's economy and transport board, said: "As this report recognises, parking controls are not being used by councils to raise revenue. They are essential for keeping motorists and pedestrians safe, traffic flowing and ensure people can park near their homes and local shops.
"Councils always look to be open and transparent with residents on their parking policies. Many already publish annual reports and adopt a common-sense approach to regulation that includes grace periods for motorists. "
He went on: "Local authorities are working hard to try and boost trade and keep high streets vibrant through parking incentives such as free short-stay, cheaper evenings and free Sundays.
"Any income they make from charges and fines is spent on running parking services, fixing potholes and providing subsidised travel to children and the elderly."
A Government spokeswoman said: "We welcome this report which strengthens the case for changes to be made to parking rules.
"The law is clear. Parking is not a tax or cash cow for local councils. This Government is reining in over-zealous parking enforcement and unfair parking practices.
"The Government has scrapped Whitehall planning policy that encouraged councils to hike parking charges and removed restrictions around the provision of off-street parking spaces. Ministers also recently announced further reforms including stopping CCTV being used for on-street parking enforcement and reviewing unnecessary yellow lines."
Professor Stephen Glaister, director of the RAC Foundation, said: "Forcing all councils to publish annual reports would illuminate what many drivers regard as the murky world of parking policy.
"Any area of public policy which generates more than half a billion pounds of annual profit demands to be scrutinised and explained.
"Parking charges are not inherently wrong but they need to be fair, and where penalties are levied they should be proportionate to the 'crime' committed."