The Resolution Foundation, an economic think tank, has recommended that the UK government consider increasing taxes on petrol and diesel vehicles to encourage more people to switch to electric vehicles (EVs).
In a recent report, the Foundation expressed concern over stagnating EV sales and urged the government to intervene if the situation doesn’t improve. The report suggested eliminating “arbitrary” tax breaks that disproportionately benefit wealthier individuals, especially company car drivers who take advantage of benefit-in-kind perks. The study emphasized that current salary sacrifice schemes are skewed toward higher earners, creating a disparity in EV adoption.
To drive demand for electric vehicles, the Resolution Foundation proposed that the government pre-announce the phasing out of current tax incentives, motivating consumers to purchase EVs before the benefits expire. If sales remain sluggish, the report recommended increasing taxes on new petrol and diesel vehicles to close the price gap between traditional cars and EVs, rather than further subsidizing electric vehicles.
The report also highlighted the cost difference between home and public EV charging. Public charging can be up to £425 more expensive annually compared to home charging for average mileage, a disparity the Foundation urged the government to address by lowering VAT on public charging from 20% to 5%, aligning it with the domestic rate. The Foundation also suggested improving public charging infrastructure to promote competition and resolve supply challenges.
Economist Jonathan Marshall underscored the urgency of decarbonizing transport, noting that the sector accounts for a third of the UK’s carbon emissions. He emphasized that reaching the country’s 2050 net-zero target requires swift action to decarbonize transport. According to Marshall, transitioning to electric vehicles could save the UK over £20 billion annually by the mid-2030s, but only if managed effectively. He warned that without fair policy adjustments, wealthier households could disproportionately benefit from the financial gains. The report advocated for affordable charging options, targeted public transport discounts, and fair carbon pricing to ensure a just transition.
Steve Gooding, director of the RAC Foundation, echoed these concerns, stating that tax incentives aimed at higher-income households may hinder broader EV adoption. He highlighted the need to expand the public charging network to ease consumer concerns about electric vehicles.
Fiona Howarth, CEO of Octopus Electric Vehicles, pointed out that while there is strong consumer interest in EVs, financial hurdles remain a major barrier. She stressed the need for more affordable pricing to ensure the benefits of EV adoption are accessible to all drivers.
Overall, the Resolution Foundation’s report calls for a comprehensive strategy to accelerate EV adoption, focusing on equitable policy changes, improved charging infrastructure, and a strong commitment to decarbonizing transport.
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