3:05 pm, March 6, 2024
The automotive industry was today left deeply disappointed after Jeremy Hunt failed to heed pleas to help UK drivers switch to electric in his Budget.
It was, instead, widely seen as a Budget to woo voters in what seems certain to be a general election year, thanks to his 2p cut in national insurance, which matched the cut in the autumn statement.
VAT on electricity at public chargers will remain at 20%, while people with chargers at home will still only have to pay 5% VAT for the energy.
There had been cross-industry calls to address the imbalance by reducing the VAT on public chargepoints to the same level as domestic ones, thereby encouraging more people to buy EVs.
The continuing freeze on fuel duty announced by Hunt – which will see it remain at 52.95p per litre for petrol and diesel until March 2025 – was welcomed but, again, was reckoned to be more of an attempt to curry favour with the voting public rather than being something of help to car manufacturers and dealers.
Mike Hawes, SMMT chief executive, said: ‘The government has been keen to assure the UK automotive industry’s competitiveness, with support for EV development and manufacturing – including £2.1bn in autumn’s Advanced Manufacturing Plan – but there is little to help consumer demand.
‘Today’s Budget is, therefore, a missed opportunity to deliver fairer tax for a fair transition.
‘Reducing VAT on new EVs, revising vehicle taxation to promote rather than punish going electric, and an end to the VAT “pavement penalty” on public charging would have energised the market.
‘With both government and industry having statutory requirements to deliver net zero, more still needs to be done to help consumers make the switch.’
Ian Plummer, commercial director at Auto Trader, said: ‘Fuel duty has been frozen every year since 2011, so no self-respecting chancellor would ever shoot himself in the foot by raising it in an election year.
‘Drivers may avoid higher pump prices for now, but the freeze does send yet more mixed messages to any motorists tempted to switch to electric vehicles.
‘Equalising VAT across public and private EV charging points would encourage people to make the switch and for a fraction of the £6bn cost of freezing fuel duty, so today is a missed opportunity to support the green transition.’
Philip Nothard, insight director at Cox Automotive, who will be a speaker at tomorrow’s Car Dealer Live conference, said: ‘The Budget will come as a disappointment to both current and would-be EV drivers and automotive generally.
‘We had hoped that the government would address the VAT discrepancy between domestic and public charging. Steps taken in that regard would have been both affordable and logical.
‘Having said that, measures that put money back in the pocket of the average consumer, as the fuel duty freeze and national insurance cut do, clearly help our sector.
‘This was a Budget designed to win votes in an election year, but one with zero incentives to further push zero-emission motoring.’
Jack Cousens, the AA’s head of roads policy, commented: ‘Even with the intense pressure to balance the UK’s books, now is not the time to rev up motoring costs for workers and families who rely on their cars to go about their daily lives – and stoke inflation.
‘The AA therefore welcomes the 12-month freeze in fuel duty, despite the benefit felt being halved from its introduction.’
But he added that the motoring organisation found it ‘disappointing’ that VAT hadn’t been reduced on public chargers by 15 percentage points.
‘Not equalising the VAT on public charging of EVs with domestic charging is a missed opportunity to encourage more car owners to switch to an EV and contribute towards the UK goal of net zero,’ he said.
RAC head of policy Simon Williams said: ‘The chancellor has once again missed a massive opportunity to correct a bizarre tax anomaly and level the playing field when it comes to making running electric vehicles more affordable.
‘As things stand, anyone without a driveway is penalised by having to pay four times the rate of VAT when they charge their cars at a public charger, compared to anyone who is fortunate enough to charge up at home.
‘There is a huge strength of feeling about this issue, with charging networks having committed to passing the savings on in full to drivers – so it’s enormously frustrating that the chancellor has chosen to look the other way on this important issue.
‘As campaign group FairCharge points out, the current tax rules date from 1994 and were written long before there were any electric cars on the road.’
Meanwhile, John Rawlings, consumer editor at Carwow, stated: ‘While it is positive to see that the chancellor has announced the fuel duty freeze will be extended for another 12 months, motorists were really hoping for more investment in the UK’s electric vehicle charging network and incentives to encourage private consumers to buy EVs.
‘Motorists need to trust that the transition to EVs is being supported by policymakers as they decide which car they’ll be choosing next, so today’s decision to focus on fuel duty over EV improvements is a real missed opportunity by the Chancellor.’
Vauxhall managing director James Taylor commented: ‘Today’s spring Budget has not delivered the acceleration needed to stop the UK’s transition to electric vehicles from stalling.
‘If we are to meet the rightly ambitious targets laid out in the government’s Zero Emission Vehicle mandate, with 80% of all cars sold to be electric by 2030, then there needs to be incentives for private car buyers to make the switch to electric as there are in the majority of European nations.
‘Vauxhall will already offer its entire car and van line-up as electric by the end of this year and has a number of highly competitive offers available but we cannot drive demand alone.
‘Whilst there are strong incentives for company car drivers to make the switch to electric – including for those choosing luxury vehicles – the private buyer who wants a more attainable small or family car receives nothing.
‘Furthermore, if you can charge your electric vehicle at home with off-street parking then you will pay 5% VAT on your electricity. If you don’t have a driveway and rely on public chargers then you will pay 20% VAT on your electricity. We support the FairCharge campaign for a fairer taxation on charging.’
He added: ‘We would call on the chancellor to urgently set up purchase incentives to stimulate the electric vehicle market and review the unfair taxation on public charging so that the UK isn’t left behind in the race to more sustainable motoring.’
Damien Dally, managing director of Fiat UK, said: ‘It’s hugely disappointing that the chancellor has failed to reinstate financial incentives for electric vehicle buyers in today’s budget.
‘While the extension of a 5p cut in fuel duty will be welcome news to motorists, it’s estimated the cost to the Treasury will be around £5bn to implement.
‘The government has missed an opportunity to ring-fence some or all the money that would have come from the fuel duty rise and invest it into this country’s seemingly dwindling electric vehicle strategy.
‘The government has set the direction of travel by enforcing the zero emission vehicle mandate and net zero target but is doing nothing to incentivise private customers to drive electric vehicles.
‘The numbers don’t lie; private sales account for fewer than one in five electric car registrations in 2024 – and the overall market share is way below the 22% mandated by the government as part of the ZEV mandate.
‘The demand for electric vehicles is waning and we are sleepwalking into an electric vehicle crisis. The government is also potentially putting its net zero target at risk.’
Lisa Watson, director of sales at Close Brothers Motor Finance, commented: ‘The lack of incentives for drivers in today’s Budget will do little to encourage the transition to EVs.
‘Drivers would’ve been hoping for changes such as a cut to VAT on EV charging in order to improve affordability, as the upfront cost of purchasing an EV remains high.
‘The absence of any impactful changes will also make the government’s own ZEV mandate harder to achieve – and will cause headaches for car manufacturers in the process.’
James Tew, CEO of iVendi, who is also a speaker at tomorrow’s Car Dealer Live, said: ‘With the used car market in reasonably strong health and yesterday’s figures showing that the new car market had its best February for 20 years, it’s probably unlikely that the government was ever going to provide any new forms of support for our sector in this Budget, even if there are various voices asking for more help during the process of electrification.
‘Really, the bigger issue is the general state of the economy, and there was little here to change the view that has developed over recent months.
‘While the reduction in national insurance might make a few people more likely to swap their car, the truth is that we appear to be in the middle of a long period when growth is flatlining, and general consumer and economic confidence is similarly, largely in check.
‘Whether the general election later this year will start to change that situation and bring a degree of optimism is an unknown.’
Startline Motor Finance CEO Paul Burgess said: ‘Overwhelmingly, this was a Budget aimed at voters rather than businesses, with the general election only a matter of months away.
‘We carried out some research a couple of weeks ago that showed what motorists overwhelmingly want from the next government – whoever that turns out to be – is to resolve the pothole crisis and bring down fuel costs.
‘The chancellor has maintained the longstanding fuel duty freeze and recent reduction, so there is an argument that they have at least listened a little, but whether any of this is sufficient to turn the political dial in their direction after a long period when polling has indicated that most voters feel it is time for a change, is very much open to question.’
Pictured at top: Jeremy Hunt leaves 11 Downing Street for Parliament today to deliver his Budget. Image credit: Stefan Rousseau/PA
