Public EV charging UK: Chancellor urged to slash VAT to help cut cost of charging electric cars

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Chargepoint operators warn huge gap between domestic and public costs could stall rollout of more chargers

More than 20 EV chargepoint operators have urged Chancellor Kwasi Kwarteng to cut VAT on public charging.

Bosses from 23 firms, including leading operators such as Instavolt, Ionity and Osprey, have written to Mr Kwarteng asking him to make the  “simple, relatively low-cost intervention” and warned that failing to do so could harm the Government’s net zero ambition.

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Currently, VAT on public chargepoints is set at 20% while it is 5% on domestic electricity. Chargepoint operators and campaigners warn that this huge disparity risks putting off drivers who cannot charge at home and have to rely on public infrastructure.

In a letter coordinated by EV campaign group Fair Charge, the firms say that the industry faces unprecedented uncertainty in the face of high and volatile energy costs and warn that this poses a “severe” threat to the Government’s efforts to persuade drivers to adopt EVs.

Public chargepoints attract VAT at 20% rather than the domestic rate of 5% (Photo: Osprey)Public chargepoints attract VAT at 20% rather than the domestic rate of 5% (Photo: Osprey)
Public chargepoints attract VAT at 20% rather than the domestic rate of 5% (Photo: Osprey) | Osprey

The letter says: “We write to highlight the severe threat that high and volatile electricity costs are having on the Government’s stated ambitions to decarbonise transport with the switch to electric vehicles and your ambitious plans for the development of a comprehensive public charge point network.

“As a sector we are facing unprecedented uncertainty. This uncertainty threatens to undermine our investment plans for the network, and the current high price of electricity threatens consumers’ willingness to be part of the transport decarbonisation revolution by switching to EVs.

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“One quick solution, that is totally within your control, is to heed the Fair Charge campaign’s call for an immediate cut in VAT on the electricity delivered by our networks. Such a cut would immediately feed through to a reduction in prices. Further, it would show the strength of the Government’s continued commitment to transport decarbonisation.”

Slowing EV sales

Latest figures from the Society of Motor Manufacturers and Traders show the rapid increase in sales of new pure electric cars has slowed in recent months.

The number of registrations during the first three months of the year was 102% more than during the same period in 2021. At the end of August, the year-to-date increase had fallen to 49%.

Quentin Willson, founder of FairCharge, said the Treasury “needs to act now on EV charging costs”. He continued: “This is a critical moment in the transition to electric cars, and the Government must not be allowed to unintentionally sabotage this transition.

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“It’s also huge opportunity for this new Government to prove its green credentials and show it is serious about net zero.”

RAC spokesman Simon Williams said that chargepoint operators had “had no choice” but to increase prices and warned that the situation could worsen in coming months. He added: “Cutting the 20% VAT rate on public chargers to match the 5% charged on domestic electricity would cost the Government little in the grand scheme of things and is absolutely the right thing to do.

“What’s more, it would be those drivers who depend on the public charging network who would benefit the most, helping to end the current inequity between those with driveways and those without.”

In recent months EV charging firms have increased their prices significantly in the face of rising energy costs. Earlier this month Osprey became the first to charge £1 per kWh and Tesla also recently announced price rises for its customers.

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Osprey’s CEO Ian Johnston blamed the soaring wholesale cost and uncertainty around government relief plans for his firm’s sharp increase in prices. Following the announcement of the Energy Bill Relief Scheme for businesses, he said he hoped to cut prices again.

The scheme will see a cap placed on businesses’ energy costs for six months which should reduce maximum costs from around £600 per megawatt hour (MWh) to £211.

Mr Johnston said: “We welcome the government’s announcement of the Energy Bill Relief Scheme for businesses.

“We will clarify the support with our energy supplier. While the wholesale energy prices has been capped, we need to also establish the final price that we will be charged. This includes transmission and distribution, and other supplier costs. As soon as we know our total cost we will revise our prices, and expect this to be downwards.”

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