The Government has said it’s not looking to cut the VAT rate for public charging nor introduce targeted purchase grants for EV drivers despite calls from the House of Lords.

The Government said again that the Treasury has no plans to change VAT on public charging

The recent ‘EV strategy: rapid recharge needed’ paper from the Lords Environment and Climate Change Committee warned that the Government needed to “put its foot on the accelerator” to support the EV transition to meet net zero targets – and called for a range of actions to support this.

Recommendations included equalising VAT for charging by reducing the 20% VAT rate applied to public charging to 5% in line with domestic electricity. The move has repeatedly been called for by the RAC and FairCharge and would bring a fairer approach for the c.40% of drivers who don’t have access to a driveway to install a home charger.

In its newly published response, the Government has reiterated its previous stance that the Treasury has no plans to change VAT on public charging and said such a move would “impose additional pressure on the public finances to which VAT makes a significant contribution”.

However, the official response added: “Although there are no current plans to change the VAT treatment of electricity supplied at public EV charge points, the Government keeps all taxes under review.”

It’s also rejected the Lords committee recommendation of targeted grants to help make EVs more affordable after the Plug-in Car Grant was axed in June 2022.

While the Government said the Plug-in Car Grant had been vital in building the early market for electric vehicles, it later “had less of an effect on demand than other existing price incentives, such as company car tax” and that it targets incentives “where they have the most impact and deliver the greatest value for money”.

It also said that EV prices continue to fall and some external forecasts predict that some EVs could achieve price parity with ICE cars by the end of the 2020s.

Other areas of the report that the Government disagreed with included a call for the On-Street Residential Chargepoint Scheme (ORCS) to be continued alongside the LEVI fund; a ‘right to charge’ for tenants and leaseholds in multi-occupancy buildings; and mandatory ‘totem signs’ at the approach to motorways service stations with EV charging facilities.

Some support for action on workplace charging

The Government said further evidence would be needed on the impact that of a workplace charging mandate

The House of Lords report also set out various calls for action on workplace charging – with a mixed response from the Government.

With the Workplace Charging scheme due to end in April 2025, the Lords committee had urged for an assessment of how the market-led rollout of workplace charging is progressing – and the Government has said that over the next year, it will assess the impact that the grants have had on the market and consider if future incentives are proportionate.

The Government also said it partially agreed with a call to consult on mandating workplaces that have designated car parking spaces and more than a certain number of employees to install charge points using the workplace charging grant.

However, it noted that a review last year had shown that this approach could incur complex leasehold impacts in certain ownership and land use arrangements – and said further evidence on the impact that minimum requirement powers would have on lease agreements was therefore required.

Government responds to calls for battery health standard

The Government also said it partially agreed with the Lords report’s call for it to accelerate its collaboration with industry to develop a ‘battery health standard’ that is objective and reliable.

The response says: “Through the United Nations Economic Commission for Europe (UNECE), the Government has worked with industry and other governments to develop a Global Technical Regulation on EV batteries (GTR 22) that would set minimum durability and lifespan standards. It would also make reliable and comparable battery health information accessible to a vehicle’s owner.

“On 3 January 2024, the Zero Emission Vehicle Mandate regulations came into force, which obligate manufacturers to provide minimum warranties for EV batteries, in line with the GTR 22 durability standards. The Government is currently analysing options for the implementation of the GTR 22 battery regulations in the UK.”

The Government also noted the report recommendation that it should explore the schemes that other countries, including Scotland and the Netherlands, have implemented to incentivise the purchase of second-hand EVs.

“Industry intelligence suggests that some EVs on the used market are now similar in price to their petrol and diesel equivalents. The number of used EVs continues to rapidly increase. Data from the SMMT shows that, in 2023, used EV sales increased by 90.9%, increasing the pool of available vehicles.

“The Government chairs a working group with several stakeholders to ascertain potential barriers to the uptake of used electric vehicles. The Government will consider all policy options, to address potential failures in the market.”

Areas where the Government agreed with the report included the need for a strategic EV approach and public messaging – the Government said it’s taking proactive action to counter inaccurate information presented by the media on the subject of EVs, when this arises.

It also said it agrees with the recommendation to monitor prices of EVs in the leasing market and assess whether the leasing market continues to work well for consumers.

Inaction on grants and VAT cuts ‘disappointing, says Lords inquiry

The Environment and Climate Change Committee greeted some of the Government’s comments while expressing concern over others.

Baroness Parminter, chair of the 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, equalising 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.”

And Denis Watling, managing director at ChargeGuru UK, said: “Reducing the 20% VAT rate is a vital step in democratising the charging experience. Not everyone has access to home charging at the 5% rate, and it’s these individuals that desperately need the support of the Government to make the switch.

“Transitioning towards EVs in the next decade is a landmark environmental policy of the UK Government, and will be made all the more challenging without a proper reduction in VAT.

“The EV industry must jointly lobby – regardless of whether they offer home or public charging – for affordable and accessible charging in order to ensure the number one priority is met – to help people choose greener transport.”

Finally, Damien Dally, Fiat UK managing director, was not backwards in coming forwards with his criticism.

“Fiat has previously said the Government is sleepwalking into an electric vehicle crisis. With confirmation that no electric car grant is going to be reintroduced, we would say the Government is now well and truly on the cusp of that crisis.

“Half a million electric and plug-in hybrid (PHEV) vehicles were registered during 2023, which is fantastic news. But the EV market for private buyers is in real jeopardy, accounting for fewer than one in five (18.2%) new electric cars registered in 2024.

“The Government says it is targeting its incentives where they have the most impact and deliver the greatest value for money. Whilst we welcome that there is an incentive in place for electric van buyers, we know the biggest barrier to entry for a retail electric car buyer is price. Surely, then, the greatest impact would be to address this by helping to reduce the upfront cost of the car, via the reintroduction of a government grant. Fiat is playing its part in that with the continuation of its £3,000 E-Grant.

“Helping people make the switch to electric also supports the Government’s net zero targets – targets we fully support.”