New Energy Vehicles

10 Mar 2023

Chancellor urged to scrap EV 'pavement tax', boost energy efficiency spending

10 Mar 2023  by businessgreen   

Jeremy Hunt faces fresh call to cut VAT on public EV chargers and pull forward £6bn energy efficiency programme

The Treasury is this week facing further calls to use the upcoming Spring Budget to significantly strengthen the government's Net Zero Strategy on multiple fronts, amid growing fears the UK's competitiveness could be badly undermined by a failure to unlock increased investment in green infrastructure.

The Chancellor Jeremy Hunt this week received a letter from over 40 MPs and peers from across the political spectrum urging him to scrap the so-called 'pavement tax' that sees electric vehicle (EV) owners without access to off-street parking pay more to charge their vehicles.

Drivers of EVs who charge using public chargers pay 20 per cent VAT on the power they use. But those who can charge at home are able to take advantage of the five per cent VAT rate on domestic power.

Critics have long argued the discrepancy penalises those without access to off-street parking, often hitting less well-off families that would otherwise like to switch to an EV.

The letter to Hunt, which was co-ordinated by the FairCharge campaign, argues that the 'pavement tax' is "illogical and unfair" and as such VAT rates for charging an EV should be set at five per cent, regardless of where people are charging.

Analysis from FairCharge suggests the average cost of EV charging for those with private parking is now £863 per year, compared to £1,418 for those without. EVs are still typically cheaper to run than petrol and diesel cars, even when charged using public chargers, but the cost advantage is eroded by the 'pavement tax'.

Quentin Willson, founder of FairCharge, said: "The UK won't be taken seriously as an investment destination for EV infrastructure if it has an illogical tax burden on electric charging."

The move comes as The Guardian today reported that a coalition of more than 20 charities have also written to Hunt urging him to significantly increase funding for energy efficiency programmes in support of the government's goal to cut energy use by 15 per cent by 2030.

Hunt announced the new target last year and confirmed plans to provide £6bn of funding from 2025 for energy efficiency programmes.

But the move angered campaigners who argued the government had still not delivered on its pledge to provide £9bn of energy efficiency funding during the current parliamentary term, while officials reportedly told the Chancellor recently that current policies had no chance of delivering on the 15 per cent target.

As such, the new letter to Hunt reportedly calls on him to approve a £6bn a year energy efficiency budget through to the end of the decade to support the roll out of heat pumps and building retrofits.

Areeba Hamid, joint executive director of Greenpeace UK - one of the groups to sign the letter - said: "This country is on its knees. High inflation, a shrinking economy and an energy crisis that has forced a quarter of all households into fuel poverty. Insulation and heat pumps could be the silver bullet the government so desperately needs right now, but only if the chancellor delivers the investment required to get our homes off gas for good."

Separately, the UK100 group of local authorities committed to climate action this week wrote to Levelling Up Secretary Michael Gove to raise "serious concerns" over the government's planned changes to its National Planning Policy Framework (NPPF).

In the letter, Jason Torrance, interim director of UK100, argues further planning reforms are urgently needed to "address the climate and ecological emergency, seize the economic opportunities that the transition to net zero presents and build communities and infrastructure resilient to the worst impacts of climate change".

Specifically, the letter calls on the government to ensure the NPPF gives local planning authorities the power to prioritise the Climate Change Act in planning policy and a bigger role in delivering a clean energy system and net zero infrastructure.

Meanwhile, a coalition of transport and environmental groups today also wrote to Gove warning that the proposed reforms to the NPPF risk missing a huge opportunity to curb transport emissions.

The Transport Planning Society, Chartered Institution of Highways and Transportation, Transport for New Homes, Sustrans, Living Streets, and CPRE have jointly submitted a response to the government's Draft NPPF arguing bolder reforms are needed to better integrate spatial planning with transport, meet net zero targets, and improve health and wellbeing. The group warned that under the current plans developers will be able to continue to secure planning approval for housing developments that entirely car dependent.

Neil Johnstone, President of the Chartered Institution of Highways and Transportation (CIHT), said: "Poor location of new developments to existing transport links creates a barrier for people to using sustainable transport. If we want more people to choose sustainable transport options, sustainable transport provision needs to be included in every stage of planning."

His comments were echoed by Mark Frost, chair of the Transport Planning Society, who said: "As the transport sector is now the largest single contributor to carbon emissions in the UK, considering how planning processes can support reducing those emission is vital. Doing so would ensure more people have a genuine choice in how they move around, helping increase the take up of sustainable transport modes and is essential if the UK is to meet its legal obligations to tackle the climate emergency."

The letters come amid growing concerns the government's reforms will fail to deliver on its promise to lift the de facto ban on new onshore wind farms by retaining guidance that could be interpreted by councils as requiring them to block projects if there is a single complaint.

The various interventions also follow calls yesterday from the Institute of Directors (IoD) for the government to introduce ambitious new policies to accelerate green investment in response to the introduction of generous new green industrial subsidies through the US Inflation Reduction Act.

Responding to the IoD's calls yesterday, the government insisted in a statement that the UK was "committed to reaching net zero, and investing in the green industries of the future - our measures have secured the four biggest wind farms in the world".

"While the US Inflation Reduction Act is an important and welcomed step forward in international action on climate change, the UK government is working closely with our trading allies and partners to make sure we can collectively drive global decarbonisation and growth in supply chains," the statement added.

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