The key automotive policies new PM Andy Burnham must decide on
Andy Burnham has stepped into the fray as the UK’s new prime minister – and one of his first moves in government will have ramifications for UK motorists.
He has ordered the removal of VAT on domestic electricity bills. This was previously charged at 5% but reducing it to zero will save the average home around £45 per year, according to the government. Although the potential savings are small, the move has been welcomed in some quarters as a signal of Burnham’s commitment to reducing the cost of living – and motoring with it.
David Martell, CEO of home wallbox provider Andersen, said the saving for high-mileage EV drivers could be around £40. “That may not sound transformational on its own,” said Martell, “but it’s the direction of travel that matters.”
Gurjeet Grewal, chief of Octopus Electric Vehicles, said the change means “the financial case for going electric has never been stronger”.
Speaking on BBC Radio 4’s Today programme, transport secretary Heidi Alexander said the decision to cut VAT as well as introduce a national cap on bus fares were a “signal of intent for the Burnham government”.
Although the VAT change was broadly welcomed by the motor industry, some called for greater support for those unable to charge their EVs at home.
Drivers reliant on public chargers will continue to pay VAT at 20%. Specialised ‘EV tariffs’ for home charging were already significantly cheaper than public points, but the gap has now widened further. And, according to industry group ChargeUK, public charging prices have risen by 38% since 2020.
Victoria Edmonds, CEO of campaign group EVA England, said the transition to EVs “cannot be fair while people pay substantially more simply because they cannot charge at home”.
Edmonds highlighted “significant taxes, levies and electricity costs faced by charge point operators” as key barriers to cutting public charging costs.
Professor David Bailey of the Birmingham Business School has called VAT on public charging a “tax on circumstance”. He added that it is time to “end the EV charging tax divide once and for all”.
Cutting VAT on public charging has already proven contentious. In March, a tax tribunal ruled that firm Charge My Street (CMS) should have been levied at 5%, rather than 20%, as it fell under the domestic provision threshold. HMRC has appealed the decision.
The VAT issue amounts to a stick in an artillery barrage of automotive questions that the Burnham administration must answer. He has yet to directly comment on the state of motoring in the UK, but he and his ministers have hinted at continuity of Starmer-era policy while making tweaks to improve the general quality of life in the nation. Here are the key sticking points to watch for.
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