Andy Burnham's first major policy decision as Prime Minister — slashing VAT rates on electricity from October 1 — could be rendered completely pointless within months, as energy firm EON predicts the price cap will rise by more than £300 in January 2027.
The current 5% VAT fee is set to be ditched in two weeks. The Government promised the news would take around £45 off the yearly Ofgem price cap in October.
Savings expected from October VAT cut
Electric car experts praised the news, with Andersen EV suggesting that drivers plugging in on their driveway could save as much as £40 per year off charging costs. Carwow predicted it could be even higher, with costs down by as much as £65 per annum.
Officials stressed the new policy had been funded for this financial year, supposedly up until April 2027.
January price cap rise predicted
However, energy firm EON has predicted that the energy price cap could rise in January 2027. Specialists tip the price cap to rise by more than £300, hitting £2,027 at the start of next year.
An average £300 bill increase should add around 4.5p to 5.5p per kWh to standard electricity rates. EV charging costs look likely to fall in October for three months before these predicted rises in January.
Impact on EV adoption
Those on an EV specific smart tariff may be slightly protected from price hikes due to lower off-peak charging rates, but early adopters won't have all of that set-up.
It's a critical juncture for EV adoption just years before the 2030 petrol and diesel car ban. Charging costs are still one of the biggest barriers holding back EV demand. Previous YouGov polling shows making public charging cheaper than petrol could boost demand for EVs by nearly 50%.
Even with the energy price hikes, domestic charging will still be cheaper than petrol, but it shows the power that offering low costs can have on road users. If Labour wants the EV transition to work, they first need to make sure it is affordable for the masses.
