We’ve always known that the switch to electric cars would cause a deficit in fuel duty. And we’ve always known that the government would ultimately need to find a way to offset that loss. With that in mind, let’s recap what decisions the government has made relating to EVs this year.
The first big change related to VED or 'road tax', specifically the news that any EV registered after April 2017 would now fall into the standard rate of £195 per year, rather than being free, as had previously been the case.
Next, the government swung wildly in the direction of incentivising EVs via the introduction of the new Electric Car Grant (ECG), which offers two levels of grant - £1,500 or £3,750 – to buyers of electric vehicles, provided the vehicle costs less than £37,000. The level of grant offered depends largely on how ‘local’ the car’s production and parts sourcing is, and how environmentally friendly the vehicle’s production is. Putting aside how complicated the eligibility process might be, let's mark it down as a good incentive, not least because it’s also forced any manufacturers that haven’t received the grant to drop their prices anyway to compete. The result? A win for anyone buying a new EV right now.
For the next whiplash in this story, we find out that the government is considering if it might apply a 3p-per-mile tax on EVs from 2028. Details of how the mileage will be tracked is still to be revealed.
So, in the space of six months, the government has offered a meanginful incentive to buy an EV, and yet it has also implemented or announced multiple tax hikes for existing or new EV owners. Confused?
To me, the timings of these decisions is confusing. We know that the government wants car buyers to switch to EVs, yet while it gives to the EV cause with one hand, it then takes away with the other. For any new car buyer considering an EV and feeling confused about what to do, I don’t blame them. Never mind the fact that the government has consistently ignored the used electric car market in all of this.
So here's my idea: Offer the grant in the form of zero-interest loans that can be used for the purchase of any new- or used electric car. Then, instead of a standard flat rate VED tax for all vehicles (excepting the premium car tax and first year emission-based tax already applied), apply annual road tax based on CO2 emissions for hybrid, petrol and diesel cars, and based on miles/kWh for electric cars.
