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Proposals for incentivising EV adoption, including bringing back electric car purchase grants and equalising VAT between public and home charging, have been rejected by the UK Government.
Ministers have responded to a report on EVs from the House of Lords Environment and Climate Change Committee, recommendations from which include that targeted grants to incentivise the purchase of EVs should be introduced, and that VAT on public charging should be reduced from 20% to 5%, in line with home charging.
Although it has rejected these recommendations, the government has said it agrees with the committee's recommendation that low company car tax BIK rates be maintained.
On EV purchase grants, the government's response states: "The Plug-in Car Grant was closed to new orders on 14 June 2022, having injected £1.5 billion in taxpayer funding to support the growth of the early electric car market. In June 2022, the government published a public evaluation report, which highlighted that the Plug-in Car Grant was vital inbuilding the early market for electric vehicles. It then had less of an effect on demand than other existing price incentives, such as company car tax.
"According to industry data, the purchase price premium of an EV - relative to an equivalent internal combustion engine (ICE) vehicle - has dropped from around 50% in 2020 to around 40% in 2023. With battery costs reducing and continued innovation, some external forecasts predict that some EVs could be around the same price to purchase as a petrol or diesel car by the end of the 2020s.
The government is targeting its incentives where they have the most impact and deliver the greatest value for money. Plug-in grants will continue until at least financial year 2024/25 for motorcycles, vans, taxis, trucks and wheelchair accessible vehicles."
On the proposal to reduce public charging VAT, the government states that exceptions to the standard 20% VAT rate have always been limited by legal and fiscal considerations.
It states: "In recognition of the fact that families should not have to bear all the VAT costs they incur to meet their needs, the supply of energy for domestic use, including electricity, attracts the reduced rate of VAT (5%).
"Whilst this relief was not designed or introduced for charging EVs at home, this relief applies for all uses of domestic energy.
"Expanding the VAT relief already available would impose additional pressure on the public finances to which VAT makes a significant contribution."
On the maintaining of low company car BIK rates, the government states: "The 2022 Autumn Statement extended favourable BIK tax rates for electric vehicles out to April 2028. This will continue supporting the uptake of electric vehicles.
"From 2025 company car taxes for electric vehicles will increase 1% year on year to a total of 5% for battery electric vehicles by April 2028.
"By contrast the company car tax rate for petrol and diesel cars will increase by 1% in financial year 25/26 and then be maintained, with the most polluting cars subject to 37% rates by 2028."
Other recommendations in the report rejected by the government include the introduction of a tenants' 'right to charge' policy.
Commenting on the government's response to the report, Baroness Parminter, who chaired the Lords committee's EV inquiry, said: "Whilst we welcome the government's acceptance of some of the recommendations in our report, it is particularly disappointing that it is not committing to incentivising the purchase of more EVs, equalizing the VAT differential between public and domestic charging, or addressing our concerns about barriers to charging in multi-occupancy buildings.
"If implemented, these recommendations would help people to adopt EVs and ensure a smoother journey towards net zero. Peers will keep urging the government to do more, as otherwise the EV revolution is a non-starter."
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