Reeves pledges £1.5bn EV support despite mileage tax concerns

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Rachel Reeves, the Chancellor of the Exchequer, announced her intention to allocate £1.3 billion for subsidies on new electric vehicles (EVs) and to issue an additional £200 million for the installation of charging stations.

Reeves’ decision aims to ensure the market for clean vehicles remains stable amid escalating concerns about a new pay-per-mile tax. Following the Chancellor’s plans, set to be outlined in next week’s budget, reports from sources claim that drivers in the country can obtain government subsidies to reduce the cost of buying a new electric automobile until 2030.

Reeves makes clear her intentions to back the EV sector with increased subsidies

When Reeves’ decision was announced, experts in the EV sector expressed their excitement about the news of extra funding. However, they warned that the Treasury might discourage potential buyers with its plan to impose an additional 3p tax for every mile driven on top of the current road taxes.

Following these concerns, the government issued a statement highlighting its intention to support the emerging electric vehicle sector in the country with a £1.5 billion package aimed at reducing upfront costs, accelerating the rollout of charging points, and creating jobs and opportunities for individuals. Therefore, according to the government, individuals will find it easier to choose green options and contribute to national growth.

Ginny Buckley, founder of the EV review site electrifying.com, weighed in on the topic of discussion. Buckley acknowledged that the government’s efforts to increase subsidies for EVs are great news. She argued that this move was adopted after the authority realized that the initial funds allocated were insufficient.

“The rules about electric vehicles (EVs) are really confusing. You can’t encourage people to buy EVs while also suggesting pay-per-mile charging. Potential buyers feel like they get the green light to purchase a new car, only to face a roadblock in the form of a pay-per-mile tax,” Buckley added.

On the other hand, reports from sources revealed that the government’s plan for EVs required car makers to ensure that one out of every three vehicles sold in 2026 produces zero emissions. Notably, this requirement is predicted to increase to 80% in 2030.

Meanwhile, during the spending review held earlier this year, Reeves launched a £400 million grant initiative for electric automobiles. This program was introduced to help reduce the initial cost of new EVs by up to £3,750. 

To illustrate its effectiveness, sources noted that this initiative has already enabled 35,000 drivers to purchase a new electric vehicle. Additionally, it is becoming increasingly popular, and it is expected to run out in two years.

Reeves’s next week’s budget set to spark optimism in the EV ecosystem

Reeves demonstrates her commitment to supporting the emerging EV sector. Sources mentioned that the chancellor is expected to propose adding an extra £1.3 billion to this fund and extending its availability until 2029-2030 next week. 

She will also set aside an additional £200 million for more charging stations since many potential owners cite range anxiety as a major reason for not purchasing an EV. 

At the same budget, Reeves is also likely to reveal a plan for a new pay-per-mile system, which may raise the average yearly cost of owning an electric vehicle by £276. This tax could generate around £375 million for the Treasury each year, based on the current number of EVs on the road. 

The purpose of this scheme is to fill the budget gap that has emerged due to a drop in fuel duty as more drivers switch from petrol and diesel cars. However, experts warn that it might slow down the growth of the EV market. 

Reeves will also announce a review looking into the costs of charging vehicles on the street. This comes as there are demands for the government to lower the 20% VAT rate that only applies to roadside charging. 

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