Contradictory Budget encourages drivers to stick with old ICE cars

All industry eyes on chancellor Rachel Reeves’ first Budget were peeled for an announcement about the desired introduction of incentives to help boost flagging private electric car sales, not that many held out much hope of their introduction.

When so many taxes are going up, offering handouts for expensive goods was never going to be a likely outcome – even if the same government has also legislated an ambitious EV sales target that doesn’t take into account consumer demand.

Sensing no help was forthcoming, car makers have instead spent around £2 billion themselves so far this year in trying to tempt buyers into electric cars.

The Budget’s sole mention of electric cars came from the favourable company car tax rates that will now continue. These have helped encourage EV uptake in the fleet sector, which provides the only substantial sales volume that EVs enjoy. 

Yet there was one back-door way of the government hoping to stimulate private EV demand: huge hikes in first-year vehicle excise duty (VED) for cars that emit more than 76g/km of CO2. Buyers face bills running into the thousands for the more polluting models.

If you’re not going to incentivise people into the new technology, highlight the desired direction of travel by adding burdens to the existing technology. This is the option the government has chosen.

But it comes with greater risk and its application by the government is contradictory. By deciding to freeze fuel duty at the same time, the government is simply encouraging more people to stay in their existing cars. This delays the ultimate ‘north star’ legislative goal of reducing CO2 emissions. 

There is not enough incentive or demand for new electric cars – and now there is less reason to switch to a new car of any description. ‘Stick with what you’ve got’ seems to be the government’s message to car buyers with this Budget, which is bad news for the car industry and ultimately bad news for the government itself. 

Private car sales of all fuel types are already in reverse and the Budget risks cementing this trend.