Reeves to announce £1.5bn boost in EV subsidies amid pay-per-mile concerns | Budget 2025

Motorists will be able to benefit from government subsidies to reduce the cost of buying a new electric car by 2030 under plans to be unveiled by Rachel Reeves in next week’s budget.

The Chancellor will announce an extra £1.3 billion for subsidies for new electric vehicles (EVs) and an additional £200 million for charging points. new pay-per-mile tax.

Electric car experts welcomed news of the extra money but warned the Treasury risked stalling potential buyers with separate plans to tax an extra 3p per mile on top of other road taxes.

A government source said: “We are supporting the switch to electrification with a £1.5bn package to reduce upfront costs, accelerate charge point deployment and unlock jobs and opportunities, making it easier for people to go green and boosting growth across the country.”

Ginny Buckley, founder of EV review site electrifying.com, said: “It is good news that the electric car grant has been increased and the Treasury has recognized that it did not allocate enough to it in the first place.

“However, the policy around EVs is really confusing. You can’t push the idea of ​​pay-per-mile chargers and at the same time encourage people to buy electric vehicles. Potential buyers feel like they’ve been given the green light to buy a new car and then immediately face a stop sign in the form of a pay-per-mile tax.”

Under the government’s electric vehicle mandate, carmakers must ensure one in three cars sold next year are zero-emissions; This rate will increase to 80% by 2030.

At the spending review earlier this year, the chancellor announced a £400 million electric car grant scheme to reduce the upfront price of new electric vehicles by up to £3,750.

The program has so far helped 35,000 drivers buy a new electric vehicle and has proven so popular it will sell out within two years.

The Chancellor will use next week’s budget to add an extra £1.3bn to this fund and extend eligibility until 2029-2030. It will shell out another £200 million for extra charging points, with many potential owners citing range anxiety as the main reason for not buying.

But with the same budget, Reeves is expected to announce a consultation on a new pay-per-kilometre scheme that is likely to increase the average cost of owning an electric vehicle by £276 a year. Such a tax would mean an increase of around £375 million each year for the Treasury, based on the number of electric vehicles currently on the road.

The plan is designed to plug the budget gap caused by a collapse in fuel duty as drivers move away from petrol and diesel vehicles, but experts say it could cause the EV market to stall.

Reeves will also announce a review into the costs of street charging, amid calls for the government to reduce the 20% VAT rate that only applies to roadside charging.

By contrast, home charging is taxed at just 5%, prompting warnings that poorer EV owners without driveways are being penalized. Reeves’ review of street charging won’t be reported until next fall.

Reeves is also under pressure from some domestic and foreign governments to raise the level of fuel tax, partly as a way to make buying electric vehicles more attractive.

Rishi Altar reduce fuel duty by 5p In 2022, while he is chancellor in what was supposed to be a temporary measure to deal with high oil prices caused by Russia’s invasion of Ukraine.

Since then, the price of crude oil has fallen by nearly 40%, but the fuel tax rate has remained the same.