Business department insiders believe that the cuts can be reversed with a relatively small amount of money. The current budgets for the plug-in grant scheme are #124m for 2018-19 and #96m in 2019-20. The dispute comes just days after Theresa May utilized her Tory party conference speech to assert”austerity is over” and that”there are better days ahead”.
“We have supported the purchase of more than 150,000 ultra-low-emission vehicles and supply a range of infrastructure incentives as part of our almost #1.5bn investment to encourage the transition into zero-emission vehicles. We’ll continue the plug-in grant until at least 2020 and keep the rates under constant review.”
The government announced last year that it would prohibit all new gas and diesel cars and vans from 2040 to decrease the increasing levels of carbon dioxide. Consumers receive a discount of up to #4,500 when they buy a green vehicle that qualifies under the”plug supply” scheme for low-emission vehicles. However, ministers have warned the Treasury that the tight budget for the scheme means large cuts will have to be made.
This could have serious implications for Jaguar Land Rover, the UK’s biggest automotive firm. The cap would mean its luxury Jaguar I-Pace would no longer be eligible. Ralf Speth, its chief executive, said last week that it was delaying its decision on whether to build electric cars in Britain, partly as a result of uncertainty around Brexit.
Sales of electric vehicles reached a record high in August and accounted for one in every 12 new cars purchased in the UK. According to figures published by the Society of Motor Manufacturers and Traders last month, hybrid, plug-in hybrid and pure electric cars made up 8 percent of the general market. It represented an increase of 23% on the year before.
Funding is causing concern at the transport and business departments. Some ministers believe that fostering the sale of green cars should be a priority in chancellor Philip Hammond’s budget this month.
Ministers are taking May at her word on ending austerity and are scrambling to secure cash for their pet projects. It is understood that there are also concerns about the budget for universal credit. Tories at all levels of the party are supposed to be worried about the transition into the new benefits system in which some families may lose out by as much as #200 a month. Hammond has a difficult task in his budget, in which he is already under pressure to raise taxes to pay for extra resources for the NHS.
Thousands of pounds will be added to the cost of some electric and hybrid vehicles as one of the government’s main green initiatives falls victim to cuts, the Observer can reveal.
Under current proposals, the maximum grant would fall to #3,500, while the grant of up to #2,500 for hybrid plug-in vehicles would be abolished altogether. A cap is also being considered, which would imply only cars worth around #60,000 would be eligible for the scheme.
The Treasury is being warned that emergency funds will be needed to avoid an impending cut in the subsidies given to individuals buying plug-in cars, which some fear will dent Britain’s green credentials.
A source close to the discussions said:”Creating new technologies and maintaining our car industry are equally tactical priorities, Philip should see this more clearly than anyone. Greg [Clark, the business secretary] is not asking for huge amounts, unlike other departments, but does want to deliver for the consumer.”
A Department for Transport spokesperson stated:”The Road to Zero Strategy lays out a clear path for the country to be a world leader in the clean transportation revolution, including continuing to make sure the tax system incentivises the purchase of the cleanest vehicles.