Szu Ping Chan
Sat, 21 October 2023
Labour wants buying an electric car to be an ‘easy and cheap choice’, according to a party source - Darren Staples/Bloomberg
Labour will hand drivers cash to buy electric vehicles under plans being considered to help the party stick to a 2030 ban on the sale of new petrol and diesel cars.
Officials are examining ways to tie subsidies and interest-free loans to British jobs and manufacturing amid fears that cheap Chinese models will start flooding the market in order to help Britain meet its net zero target.
It is understood that Labour prepared a package of financial incentives designed to help motorists switch to electric vehicles to be unveiled at its party conference in Liverpool which took place earlier this month.
One proposal at an advanced stage included a universal cash subsidy worth around £1,500 to help people who want to buy an electric car to fund a deposit.
Three-year interest-free loans were also proposed for those taking out personal contract purchase agreements, which allows people to rent cars over a multi-year period, with the option of buying it at the end.
Loan guarantees for people using car finance deals were also considered, as well as extra help for people on low and middle incomes.
However, a split within the party over both the costs and approach of the scheme is understood to have delayed an official announcement.
The shadow Treasury team led by Rachel Reeves is understood to have been the most resistant to subsidies and officials are now exploring ways to link any subsidies to cars made in Britain.
Others have raised concerns that mass government subsidies or guarantees could end up boosting Chinese manufacturers.
Electric vehicles cost significantly more than equivalent petrol or diesel models. Former Labour leader Jeremy Corbyn pledged in 2019 to provide up to £60bn over five years to fund interest-free loans on electric cars.
But soaring debt and high inflation means any subsidy scheme is likely to be on a much smaller scale as Labour focuses on planning reforms to make it easier to build battery gigafactories, as well as infrastructure to support the switch to electric and more support for buyers of second-hand EVs.
Labour has already been forced to scale back plans to borrow £28bn a year to invest in green jobs and industry in an attempt to prove its fiscal credibility.
“We need value for money,” said one Labour source. “We don’t want to end up in a situation where we’re spending taxpayers’ money to subsidise Chinese companies, so we need to make sure that the models that are available are built in Britain.”
Others have warned that Labour’s commitment to no new petrol and diesel cars by 2030 could threaten the survival of the UK car industry.
Just one in 10 of all cars purchased in the UK are currently made in Britain, according to the Society of Motor Manufacturers & Traders (SMMT).
More than 30pc of EVs sold in the first quarter of 2023 were manufactured in China. Only the Nissan Leaf and Mini electric are currently made in Britain.
But soaring debt and high inflation means any subsidy scheme is likely to be on a much smaller scale as Labour focuses on planning reforms to make it easier to build battery gigafactories, as well as infrastructure to support the switch to electric and more support for buyers of second-hand EVs.
Labour has already been forced to scale back plans to borrow £28bn a year to invest in green jobs and industry in an attempt to prove its fiscal credibility.
“We need value for money,” said one Labour source. “We don’t want to end up in a situation where we’re spending taxpayers’ money to subsidise Chinese companies, so we need to make sure that the models that are available are built in Britain.”
Others have warned that Labour’s commitment to no new petrol and diesel cars by 2030 could threaten the survival of the UK car industry.
Just one in 10 of all cars purchased in the UK are currently made in Britain, according to the Society of Motor Manufacturers & Traders (SMMT).
More than 30pc of EVs sold in the first quarter of 2023 were manufactured in China. Only the Nissan Leaf and Mini electric are currently made in Britain.
“The only non-subsidy way to meet the target is we have a bunch of cheap Chinese EVs dumped on our shores,” said another Labour source.
The party has also been studying how other countries are encouraging the switch to electric vehicles. Joe Biden’s Inflation Reduction Act provides a tax credit of up to $7,500 for EVs made in the US.
Officials have also looked at French incentives of up to €7,000 that were recently changed to exclude many EVs made in China.
There are also concerns that state subsidies could fall foul of international trade rules.
President Biden faced a backlash from countries including South Korea and Japan after their car exports were excluded from the generous consumer tax credits.
The UK exports 80pc of the cars it makes, mainly to Europe.
It is understood that Labour has sought legal advice to ensure that subsidies do not fall foul of World Trade Organisation rules.
Last month, Rishi Sunak announced Britain will push back a ban on new petrol and diesel cars and vans to 2035 from 2030,to protect “hard-pressed British families” from “unacceptable costs”.
Labour is understood to be waiting for any more green announcements from Jeremy Hunt in the Autumn Statement and is also watching for progress between the UK and EU on post-Brexit tariff arrangements on electric vehicles that threaten to raise prices by £3,400 next year.
“Ultimately we want to make sure that going electric is the easy and cheap choice whether you’re looking to buy a new or second-hand car ahead of the 2030 switchover,” said one figure familiar with Labour’s plans.
A Labour spokesman did not respond to a request for comment.
The party has also been studying how other countries are encouraging the switch to electric vehicles. Joe Biden’s Inflation Reduction Act provides a tax credit of up to $7,500 for EVs made in the US.
Officials have also looked at French incentives of up to €7,000 that were recently changed to exclude many EVs made in China.
There are also concerns that state subsidies could fall foul of international trade rules.
President Biden faced a backlash from countries including South Korea and Japan after their car exports were excluded from the generous consumer tax credits.
The UK exports 80pc of the cars it makes, mainly to Europe.
It is understood that Labour has sought legal advice to ensure that subsidies do not fall foul of World Trade Organisation rules.
Last month, Rishi Sunak announced Britain will push back a ban on new petrol and diesel cars and vans to 2035 from 2030,to protect “hard-pressed British families” from “unacceptable costs”.
Labour is understood to be waiting for any more green announcements from Jeremy Hunt in the Autumn Statement and is also watching for progress between the UK and EU on post-Brexit tariff arrangements on electric vehicles that threaten to raise prices by £3,400 next year.
“Ultimately we want to make sure that going electric is the easy and cheap choice whether you’re looking to buy a new or second-hand car ahead of the 2030 switchover,” said one figure familiar with Labour’s plans.
A Labour spokesman did not respond to a request for comment.
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