It’s fair to assume that the budget and electric vehicles will be closely linked over the next few years as the automotive and political landscape changes. So, what did the Spring budget of 2024 have in store for electric vehicles? Were there any benefits, were there any pitfalls? In this blog post I will have a look at some policies that were brought up by the Chancellor and discuss them.
Fleet Industry Disappointed
Long before the budget was delivered in March 2024, the fleet industry had been campaigning strongly for a reduction in VAT on electricity at public charging points. There has long been a disparity between what is charged from home EV charge points and the charge points you see in public.
At present the VAT rate on home charging is just 5%. However, take your electric vehicle on the road and you will be expected to pay 20% in VAT. This is quite a considerable difference and does have an impact on the transition to electric vehicles. Big names, including Stellantis, Jaguar Land Rover, Greenpeace and the AA added their names to the letter sent by the campaign group FairChange seeking parity. Unfortunately this was not enough to get the Chancellor to make any changes.
Missing VAT Changes – The Budget and Electric Vehicles
It isn’t just VAT on charge points that has come up in various environmental campaigns. Many voices have been heard calling for a cut in VAT on new electric vehicles at the point of purchase. Electric vehicle campaigners have also been calling for lower fees for EVs on Vehicle Excise Duty (road tax) when this becomes payable by electric vehicle owners in 2025.
Unfortunately, yet again, the government has not cut VAT on electric vehicles, nor have they given any statements in regards to Vehicle Excise Duty from 2025 onwards. These are points that we are sure will be raised again in the Autumn statement later in the year.
Lukewarm From the UK – A Reason Why
One of the biggest vehicle takeaways from the budget was that fuel duty will be frozen with the 5p deficit per litre being continued. This is certainly a step back from where we would like things to go.
However, something we need to bear in mind is that 2024 is an election year. Whether the politicians want it or not, the public will be heading to the polls at some point in the next few months (no election date has been announced at the time of writing so far). This means that the government won’t want to rock the boat and make themselves seen as damaging to businesses using conventionally fuelled vehicles.2025 may be the year to really talk about the budget and electric vehicles.
Worrying Sounds From the USA
There is a famous saying that when America catches a cold, Britain sneezes. In other words, things that go on in the US have an effect on us here over the pond. The global financial crash in 2007 is a big case in point. Therefore it is worth keeping an eye on what is going on in their election run up in 2024.
Love him or not, Joe Biden’s first term has promoted many great policies for electric vehicles and for the environment in general. Unfortunately the US also has Donald Trump. A man who could possibly be back in the White House come January 2025.
In recent interviews, Mr Trump has made it clear that he will roll back efforts to switch America to electric vehicles. He also wants to seriously ramp up drilling for oil after the Biden administration had been investing in alternative fuel production.
You never know what lies ahead. We know that the budget and electric vehicles need to keep advancing, yet it is not a given that governments will continue being progressive.
The Budget and Electric Vehicles in Conclusion
All in all, this budget is a bit of a damp squib. Yet this is not really all that surprising considering what is going on in the political arena at present. Depending on when a UK election takes place, we don’t think much will change at the next budget either. However, from Spring 2025 there are things that we would like to see brought in to boost electric vehicle uptake.
Firstly we would like to see a big cut in VAT on public charge points. Even if full parity with home charging cannot be matched, we think the gap can be closed significantly. Secondly we would like some clarity on the benefit in kind rate (BiK) after 2028 where the current increasing scale runs to. Thirdly we would like to see a cut in VAT on new electric vehicles to aid promotion. Fourthly we would like clarification on the Vehicle Excise Duty that electric cars will have to start paying in 2025 and have a commitment that this will be a substantially lower fee than conventionally fuelled vehicles.
Finally, we think the government needs to unfreeze duty on petrol or diesel in the next year or two. Although the freeze made economic sense, it is a step backwards if we are truly looking at a green Net Zero future.
*All information correct as at 8 March 2024
