Chancellor Rachel Reeves will unveil an extra £1.3 billion in subsidies for new electric vehicles (EVs) and £200 million for charging points at next week’s budget, as the government attempts to boost the clean car market while separately consulting on a pay-per-mile tax.
The new funding extends the existing £400 million EV grant scheme, which has helped 35,000 drivers buy new electric cars, through to 2029-2030. Industry experts welcomed the additional incentives but warned that plans for a mileage tax could send mixed signals to potential buyers.
Ginny Buckley, founder of electrifying.com, said: "It is good news the electric car grant is getting topped up... but the policy around EVs is really confused. You can’t incentivise people to get EVs while also floating the idea of pay-per-mile chargers."
The Treasury is expected to launch a consultation on a pay-per-mile scheme that would add an average of £276 a year to EV ownership, raising about £375 million annually to offset falling fuel duty revenue. The move has raised concerns it could stall the EV market, which must see 80% of new cars zero-emission by 2030 under government mandates.
Reeves will also review VAT on on-street charging, currently at 20% compared to 5% for home charging, which critics say penalises EV owners without driveways. The review is not due to report until autumn 2025. Meanwhile, pressure is mounting to increase fuel duty, cut by 5p in 2022 by then-Chancellor Rishi Sunak, as crude oil prices have since fallen by about 40%.
