Andy Burnham’s new VAT rule on domestic electricity is set to leave many electric car owners frustrated, as the policy widens the gap between those with driveways and those without. The change, which took effect on October 1, cuts VAT on domestic electricity from 5% to 0%, but public charging stations remain subject to the full 20% rate.
Savings for some, not for all
Drivers with access to a home driveway or off-street parking are expected to benefit significantly from the reduction. Experts have suggested that the VAT cut could save high-mileage drivers as much as £40, a welcome boost for those able to charge at home.
However, electric car owners in urban areas such as London, Manchester and Birmingham face a very different situation. Many do not have access to their own driveway or charging plug and increasingly depend on public bays to top up their vehicles.
Growing divide in charging costs
Public charging has always been charged at 20% VAT, and the new cut does not affect this rate. These owners are regularly paying close to 50p per kWh of charge, compared to just 7p for those plugging in at home. Data from New Automotive has suggested that as many as 205,000 vehicles are totally reliant on public charging stations.
EVA England has suggested that 25% of EV drivers in urban areas do not own a home charger, compared to just 8% in suburban areas and 5% in rural communities. The issue is turning people away from EVs completely, with 60% of petrol and diesel drivers without off-street parking insisting they would never consider a battery car.
Industry calls for action
Industry has been demanding action around the so-called “driveway divide” for ages, calling out the unfairness of the two separate charges. The Government took action, but the unfairness has actually just gotten bigger, with a 15% divide between home charging and public plugs now extended to a 20% difference.
This is once again a tale of the ‘have’s and the have not’s’ and it could come back to bite Andy Burnham if frustrated road users don’t let him off the hook at the ballot box. Price cuts will be welcomed by many, but the question remains whether the Prime Minister has just made a massive mistake.
