The UK government has cut grants for electric car buyers, to the horror of the automotive industry as it tries to rapidly shift away from fossil fuels.
The maximum grant for electric cars was reduced from £3,000 to £2,500 with immediate effect on Thursday. The government also lowered the price cap for cars eligible for the subsidy from £50,000 to £35,000.
The cut is likely to be controversial, only a fortnight after the chancellor, Rishi Sunak, extended a generous implicit subsidy for drivers of petrol and diesels by freezing fuel duty.
Electric cars cost more than those with internal combustion engines, but they are seen as a crucial part of meeting the UK’s decarbonisation targets. Other European countries such as Norway, Germany and France subsidise electric cars.
The UK government’s announcement means it has unilaterally increased the cost of an electric car, which produces no carbon dioxide exhaust emissions while keeping the costs of burning petrol and diesel down – in the same year the country is hosting the UN’s Cop26 climate conference.
The government said it wanted to target help at people less able to afford electric cars, rather than wealthier buyers of premium vehicles. It also said cutting the grant would mean funding would last longer and be used by more people.
Environmental campaigners tend to be ambivalent about grants. Some argue the money would be better spent elsewhere. Greg Archer, the UK director of the campaign group Transport & Environment, said the changes to the grants were “inevitable and reasonable given the rapid growth in sales that is under way”, but that the vehicle taxation system also needed to be overhauled.
“The Department for Transport cannot continue to chip away at grants without the Treasury simultaneously reforming car taxation to ensure it remains attractive for car buyers to make the shift to battery electric cars,” he said.
The transport minister Rachel Maclean said the government wanted as many people as possible to be able to switch to electric vehicles, but flagged rising costs. She said taxpayers’ money would “make more of a difference” at the cheaper end of the market.
Kerry McCarthy, the shadow minister for green transport, said the grant cut sent out “all the wrong signals” so soon after the government moved to ban petrol and diesel sales completely by 2035.
The car industry, which has lobbied for increased government support, criticised the move, which means the government has cut the support for electric cars by £1,000 in little more than a year. Sunak cut the grant from £3,500 to £3,000 and introduced the £50,000 eligibility cap in the March 2020 budget. When the support was introduced in 2011, it was worth up to £5,000 a car.
Mike Hawes, the chief executive of the Society of Motors Manufacturers and Traders, said: “The decision to slash the plug-in car grant and van and truck grant is the wrong move at the wrong time.
“This sends the wrong message to the consumer, especially private customers, and to an industry challenged to meet the government’s ambition to be a world leader in the transition to zero-emission mobility.”
The Confederation of British Industry said it was “the wrong time to stunt a green recovery” by cutting the grants.
