By Paul Homewood
h/t Ian Magness
The recently announced energy subsidies have had the inadvertent, knock on effect of increasing subsidies to EV drivers, as there is no obvious way of having a two-tier charging mechanism.
Given that the energy bailout will be cripplingly expensive, the government clearly needs to make as many offsetting savings as possible. It would be logical to begin by suspending all new spending on Net Zero, and start with cancelling all EV subsidies.
Although the plug-in car grant scheme for purchase of new cars has now been closed, EVs are still heavily subsidised in other ways, above all the avoidance of fuel duty and Vehicle Excise Duty (VED).
Assuming an average of 10,000 miles pa at 40 mpg, an average driver would pay about £680 in fuel duty (incl VAT at 5% *). In addition, petrol is taxed at 20% VAT, compared to 5% for electricity. A 5% rate for petrol would save the driver a further £255.
On top of that, VED is not raised on zero-emissions cars, whilst an average petrol car would be taxed at around £200 a year.
All in all, therefore, EVs are subsidised to the tune of £1135 a year. There are approximately 534,000 EVs on the road, meaning a total subsidy of £607 million.
These calculations do not include plug-in hybrids, PHEVs, which add another 410,000.
There are also other EV subsidies. For instance, company car drivers pay no Benefit-in-Kind tax on EVs, while the government continues to subsidise the installation of public charging points.
This however is the tip of the iceberg. The government is targeting for EV sales to rise rapidly long before 2030, with 22% of all sales in 2024, rising to 52%v in 2028.
With annual car sales of over 2 million, the EV fleet could be over 5 million by 2028, 16% of all cars. If tax arrangements are not changed, the current subsidy of £607 million could increase ten-fold.
It seems almost certain that eventually some form of road charging will be introduced, in order to catch EVs within the tax net. But this still seems a long way off.
In the meantime, a gaping hole in the public finances will appear and grow bigger.
There is a solution, one which is simple to operate and one which can be introduced immediately. This is to begin charging VED on all EVs, and at a rate of £1135 a year.
This, by the way, does not address the issue of subsidised electricity bills.
Naturally this would go down like a cup of cold sick with EV drivers who have long been overindulged. But the longer the decision is delayed, the harder it will become.
* I have costed the fuel duty at 5% VAT, to be consistent with the VAT calculation that follows.
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September 14, 2022 at 05:07AM