EV Strategy: (ECC Committee Report)

Lord Hunt of Kings Heath Excerpts

Wednesday 16th October 2024 Lords Chamber

[Lord Fuller (Con)]

My Lords, this is an important debate at a pivotal moment for the personal mobility that underpins our economy and growth. The report explains in great detail that the choice of an electric vehicle affords much greater driving pleasure, greater acceleration, lower maintenance costs for home chargers, competitive daily charges and, thanks to direct-drive motors, the consignment of the grinding of gears to the history books—but if only this mode shift were that simple.

The market for EVs was already stuttering when the report was published in February. Since then, there have been further dramatic changes, as the growth as a proportion of the whole market has stagnated. We are literally at a fork in the road for electric vehicles. The report highlights a number of things that must be done for us to get back on track.

Before I talk about the rollout of chargers, I thank my noble friend Lord Leicester for his comprehensive list of electric vehicles that are made in this country. He missed out one that is close to home for us both, in Norfolk, because Lotus Cars is shortly to be manufacturing its Type 135 in our great county.

To return to the provision of charging infrastructure, the report makes it clear that it is much easier for the market to provide charging points along the motorways and main roads, while there are few incentives on the B roads and in out-of-the-way places. As a council leader back in 2018, I recognised that it was really important for the council to take a lead in the provision of this public infrastructure. Our approach was grounded in the understanding that not every motorist has a long gravel drive; many live in flats or terraced homes, and simply do not have anywhere to park outside their home—a point that other noble Lords have made. Our council understood that we would never get the wide uptake of EVs unless we democratised the opportunity for anybody to charge a vehicle close by, so we invested in the fat cables in our car parks to serve the first generation of fast chargers, with better app support. We have now extended the number of installations in our leisure centres and other public buildings with a second generation, taking advantage of government funding and adding our own resources to decarbonise.

However, we still needed to drive forward, having done our bit to begin with. Two years ago, we made a big offer to each of the 120 town and parish councils in our district. We would procure, install, maintain and manage an electric charging point in the grounds of their village hall or bowls club car park; all they needed to do was find that space. We would hook it up to the mains, and the app would ensure that any electricity consumed by chargers would be refunded, with a margin for themselves.

A third of our population lives in rural villages, and we wanted all residents and their visitors to be able to charge, especially as we had lost so many rural petrol stations. We would provide a real choice of mobility technologies for everybody in the countryside—and, of course, by putting the capital costs of these chargers on to the local council tax payer, those amortisation costs would then not fall in a surcharge on the pence per kilowatt hour on the public charges, which the noble Baroness, Lady Parminter, and the report have enumerated. We did not want to discriminate against those who could not charge at home.

These parish councils are valued partners and make an enormously positive contribution to our national life, but, two years on, I regret to say that only a single installation has been made under our offer to the villages. Although there are a few in the pipeline, our offer ran flat. Yes, the market will provide on the highway and, yes, urban authorities can upgrade their lamp-posts, but we can and must do more in the countryside.

I want to relay some of the reasons why our parish councils did not take up our offer. Some parishes simply assumed that there was not enough electricity, notwithstanding that we were going to have a survey as part of the offer. The offer was rejected on the basis of hearsay, rather than evidence. Some market towns felt that taking a lead locally and installing charging points was a service—a service that, on principle, they did not seek to provide. Others felt that they were not going to get used, so why bother? A few cited the lack of mobile coverage in the countryside as an issue; unless you have a mobile connection, you cannot connect to the app and download the code, and so the electric charger would not work—but that is of course notwithstanding that most village halls in most parish councils now have wifi.

There were cases where the parish council wanted to learn more but could not persuade the village hall committee to get on board. Some were just simply unrealistic. Sometimes in rural areas there is just not the oomph in the network to provide the sort of rapid charging found at a service station. They were rejected on that basis, and therein lies a real case of the excellent being an enemy of the simply satisfactory. Finally, and notably, most local councillors just did not want people hanging around the village hall. I was disappointed. There was a pocketful of excuses.

I tell these disappointing stories because they are part of my real-life experience, and if there is to be a plan for more electric cars, we will need a national strategy that takes some of these concerns into account. As the SMMT has observed to me, just making the plan is worthless unless the market participants can look beyond defeatism or prejudice. Having a plan is one thing but delivering it is another. Only when we have leadership across the whole of the public sector—that includes some of our 9,000 parish councils, as well as principal authorities—will we get universal, not just urban-based, coverage.

It is important to make progress quickly because, unless we start to address some of these headwinds, we will never get progress. I was pleased that the report makes it clear that home-based charging is nearly always cheaper, but home-based charging is just one of the costs. It has become clear to me, especially since February, when the report was written, that, leaving the simple energy cost per mile to one side, the total cost of EVs is now rising fast, and is making the internal combustion engine even more competitive once again.

Although electric cars are now subsidised by manufacturers, as the noble Lord, Lord Woodley, said, the upfront purchase costs are still more expensive—especially when taking into account the interest payments, which are not the same as when interest rates were 0.5%. There are also insurance costs: a function of providing a like-for-like replacement, plus some astonishingly risk-averse repair quotations for minor prangs in the car park that see write-offs, are now driving premiums to eye-watering levels. Depreciation is ruinous. It has destabilised the motor traders, who have been trying to catch a falling knife on the impaired value of their stock. The private motorist, as we have heard, is at a serious disadvantage to the corporate purchaser, with no tax incentives or opportunities for salary sacrifice and other things. Of course, battery range is not what it was thought to be—my noble friend made that point so clearly.

I will not dwell further on the 20% versus 5% VAT level, but it is discriminating against people who live in flats and do not have the long gravel drive or large diesel 4x4 to fall back on. We know from the SMMT that the fiscal drag is bringing electric cars into the luxury super-charged tax rate, at another £500 per year. Who would buy such a car with their own money? The costs, over and above the mileage costs, are running away.

We hear now that road charges have been mooted. I can understand why the noble Lord, Lord Whitty, mentioned this, because it is a truth that we will have to grip. Not only is the total cost of ownership of electric versus combustion becoming much more significant but, if we then end up with road pricing, it will be the nail in the coffin. It would dramatically increase the cost of running an electric car.

I am not going to dwell further on the increasing proportion of electric vehicles against internal combustion engines in sales, but the policy is destabilising UK motor dealers, and undermining European and domestic manufacturers, by encouraging a flood of Chinese imports of uncertain quality and with concerns over embedded IT. This well-intentioned regulation is undermining our economic stability and electronic security, delegating production and wealth creation to parts of the world with lower environmental standards. Given the importance of cars to the global economy, we cannot ignore this global context. We must approach EVs and our policies as part of economic security, which in turn is part of our national security.

[The Minister of State, Department for Energy Security and Net Zero (Lord Hunt of Kings Heath) (Lab)]

My Lords, there has been a bit of chuntering so I should explain that the Clock was wrong; the noble Lord has not taken more than 15 minutes.

[Lord Fuller (Con)]

I thank the noble Lord, Lord Hunt. I noticed that it was showing eight minutes when I started, so I think I have some more time.

I was talking about the role of electric vehicles and our treatment, in trade and tariffs, of our economic and national security. A dilemma is around the corner. After the US elections, will we follow the Canadians with a 100% tariff on Chinese EVs, or will we pursue a more EU-aligned strategy that combines a less aggressive tariff approach with tighter regulation—but at the risk of hobbling UK production? Informed commentators know that the upcoming UK policy choices on such matters as tariffs and trade are being watched closely in Beijing and Washington, as well as by our new friends in Brussels, who are the subject of a renewed charm offensive from London.

Whether it is America, China or Europe, the trade treatment of EVs here in the UK will set the tone for global trade negotiations in a much more complicated trading environment in an unstable world. One thing is for sure, though: if we side with our allies on protectionist tariffs, this will drive up the costs of UK electric vehicles still further, which will increasingly aggravate the move to electric. But if we side with China, this could kill off our industry anyway and leave us reliant on imports for ever. These are big dilemmas.

There is nothing more democratic than the freedom to get about. This report has made an important contribution to this important market at a single point in time, but it is a fast-moving target. I wish the noble Lord, Lord Hunt, well in navigating this complex macroeconomic, security and environmental situation. My view is that the fiscal approach, our environmental regulations and government policy targets need to be urgently tweaked—not done away with—to ensure that customer preference for electric vehicles is maintained, not further undermined with our economy damaged. This is not a market that can afford to go into reverse but, unless there is a change in tone, gears will continue to grind. Let us hope the engine does not seize up completely.

--- Later in debate ---

[Lord Hunt of Kings Heath (Lab)]

My Lords, it is a great pleasure to respond to what has been an excellent debate. I thank the noble Baroness, Lady Parminter, for her opening speech and the many members of the Select Committee, and other noble Lords, who have spoken today. I very much agree with the tributes paid by the noble Baroness, Lady Randerson, and the noble Earl, Lord Effingham, to the noble Baroness, Lady Parminter. Her opening speech without notes was a remarkable effort that set the tone of the debate.

She outlined the main themes in the Select Committee report, which were clearly built on in the debate. She spoke of this being a critical challenge for the Government and the need for the Government to take a lead. Her committee said that the transition to electric vehicles was “essential” if the UK is to meet its net-zero emissions target by 2050. Her report said that EVs could provide “dramatic reductions” in emissions, in addition to improved air quality, but that “concerted Government action” is required.

In the debate, we heard about a number of the key measures. I think that there is a pretty broad consensus among noble Lords about what needs to happen, including the issues around upfront costs, charging infrastructure and affordability, and the grid and planning regulations. VAT and the vehicle excise duty were also raised, which I am afraid I will completely duck and say are a Treasury matter, although I have noted noble Lords’ comments on them.

The committee and the noble Lord, Lord Birt, said that, to ensure the transition to EVs, it was necessary to decarbonise the electricity used for charging. The report—as well as the noble Lords, Lord Lucas and Lord Grantchester, and the noble Earl, Lord Leicester—also said that we need to review urgently progress on EV and battery recycling facilities.

An important matter that a number of noble Lords raised, including the noble Baroness, Lady Randerson, as well as the committee, is that consumer confidence is critical to secure a successful transition and that the Government need to do more to convey a positive vision of EVs and to counter misinformation about the technology. Of course, there are many other things in the Select Committee report as well.

I was very interested in the noble Earl’s comments about what he thought the Government should be doing. He went through a list of actions taken by the last Government, which I readily acknowledge. However, he rather glossed over what the Select Committee had to say when it was particularly critical of the September 2023 speech by the former Prime Minister, Rishi Sunak, in which he pushed back the petrol and diesel phase-out date from 2030 to 2035. The noble Earl had a go at defending that, presenting it as a positive asset in terms of consumer choice. However, I think—and the evidence is here in this debate today— that it had a dampening effect on industry and consumer confidence. That is a reflection of the fact that Mr Sunak told the public that achieving

“net zero is going to be hard”.

He had emphasised the costs of EVs while failing to stress the benefits. So, coming back to the issue of growing confidence, this is clearly a role I believe government has to take, and it is one that we readily accept.

There was a very interesting discussion about costs and subsidy. The noble Lord, Lord Lilley, was articulate as ever in relation to that matter. He has a debate in a week’s time looking at the whole relationship between what we seek to do in terms of energy net zero and the cost of it, and of course his speech during the King’s Speech debate reflected his views on that.

The noble Lord, Lord Lucas, also raised the issue of costs. Of course, costs and subsidies are involved, and the Department for Transport is engaged in discussions with our friends in the Treasury on Budget and spending review decisions. I recognise that noble Lords have asked me to give precise dates about when announcements will be made and how policies will be taken forward. The fact is that I cannot say, because many of these are bound up in the current spending discussions. However, I can say that I have noted the issues that have been raised today, as will the Department for Transport, and they will of course be considered by the department in taking these matters forward.

Costs and subsidies are involved; equally, my noble friend Lady Young made the very important point that the cost of not taking action also has to be taken into account in terms of the impact of climate change. As the noble Baroness, Lady Jones, said, that is not some distant threat but is with us now, and we are seeing the consequences.

I also agreed with the noble Baroness, Lady Jones, on the question of decarbonising our energy network. That is why it is one of the five key missions of the Government. I know that noble Lords have asked me to set out how we will get there, first to clean power 2030 and then to net zero. We have asked NESO, the new body, to provide us with advice on the precise path to 2030.

I accept that the noble Baroness, Lady Jones, also mentioned the need for a coherent approach across government. In a sense, I hope that the fact that I am here at the Dispatch Box responding to this issue is a reflection of that. However, I acknowledge, as my noble friend Lord Whitty said, that the policy lead for electric vehicles rests with the Department for Transport.

I was disappointed that the noble Baroness, Lady Parminter, said that the Government had not made sufficient progress since the election. That has not been for want of lack of energy, emphasis and importance. Of course it is very important but, as I said, so much of this is tied into spending review and budgetary issues, and it is difficult for me to give the kind of responses she seeks. However, I can say that the Government see this as being a very important policy area, and we look forward to making a series of announcements in the next few months when we are clearer about the financial situation and the other issues that we need to take forward.

I turn to the manifesto commitment, which is clear. We said that we would support the transition to electric vehicles by accelerating the rollout of charge points and giving certainty to manufacturers by restoring the phase-out date of 2030 for new cars with internal combustion engines. I say to the noble Earl, Lord Effingham, that we are of course actively engaging with the industry on these matters. We are also supporting buyers of second-hand electric cars by standardising the information supplied on the condition of batteries.

I say to my noble friend Lord Grantchester that it is our firm intention to phase out the sale of new cars powered solely by internal combustion engine by 2030. All new cars and vans will need to be zero-emission by 2035. I say to my noble friends Lady Young and Lord Birt that we do believe that this is doable. We are not being spooked by the adverse comments we occasionally see in the media.

As noble Lords know, the zero-emission vehicle mandate will increase from 22% this year to 80% in 2030, while that for vans will rise from 10% this year to 70% in 2030. As the noble Earl, Lord Effingham, said, following extensive consultation with vehicle manufacturers, a number of flexibilities were built into the ZEV mandate which vehicle manufacturers can use to be compliant with the legislation. These include reducing the CO₂ of non-ZEVs to earn additional ZEV credits, borrowing from future years and trading with other manufacturers. We think the targets are within reach.

We then come to the matter of cost, which a number of noble Lords, including the noble Baroness and the noble Earl, Lord Effingham, raised. I know from looking at the media reporting on electric vehicles in the last few months that there is a sense that production and the whole policy have stalled, but it is worth pointing out that the number of electric vehicles sold in the UK continues to rise. So far, 270,000 battery electric cars have been sold this year, 13% higher than last year. The September figure is particularly encouraging; one hopes—I certainly do— that it is a sign that consumers and the industry now have greater confidence in our making progress on the targets we have set, and that this will be the start of an acceleration in interest in and the purchase of electric vehicles.

On the used car market, there is some evidence that electric cars are now priced similarly to their petrol and diesel equivalents. Obviously, this provides a more affordable route for drivers to purchase an EV; none the less, I accept that cost is a key barrier to EV uptake. We know that, in the end, everyone should benefit from the transition to EVs and the cheaper running costs that can occur, but the Government are going to continue to review demand incentives to make sure that we strike the right balance between value for money for the taxpayer and support for the transition to electric vehicles. So, this is very much a work in progress.

It is the same answer, really, in relation to charging infrastructure and costs. We know that to give the public confidence in making the switch to electric vehicles, they must be confident in their ability to charge those vehicles. The noble Earl illustrated the point very well indeed.

I take on board the comments made by the noble Lord, Lord Fuller, about the democratisation of charging —as he described it—the potential contribution of parish councils, the lack of uptake and the issue of rurality, which I will make sure the department gives full consideration to, as I recognise that this is very important. He talked about parish councils, but we know that the performance of local authorities generally is patchy. In souping-up the policy going forward, we must look at how we can encourage local authorities, including parish councils, to take up the charge rather more enthusiastically.

Obviously, charging at home works for many people. One of the benefits of the election was campaigning, during which we knocked on doors and talked to people who had home chargers. My perception was that people who have them are very happy with them, but clearly it cannot be for everyone. Noble Lords have raised a number of problems for those people who do not have access, as well as the issue of renters. Clearly, we need to reflect on what we can do to improve the situation. Public charging provision has increased by 42% since last year, and the noble Earl referred to that as well. We need to look at what we can do to encourage ever-more increase in the charge point provision.

I take note of the well-made point from the noble Lord, Lord Birt, on service stations and rapid charging points. My understanding is that we now have 960 open access rapid and ultra-rapid charge points at motorway service areas, with many more on or close to our key A roads. The rapid charging fund is piloting and funding a portion of the cost of upgrading the electricity grid at motorway service areas where it is currently not commercially viable. We are looking at applications for the fund pilot at the moment and will be coming forward with further information in due course—to use the phrase beloved of government departments.

The noble Lord, Lord Birt, referred generally to the need for a reliable charging network. The Public Charge Point Regulations were introduced in November last year, meaning, in effect, that charge point operators will be required to offer 24/7 access to a free helpline, share open data, increase the provision of contactless payment options and be 99% reliable across each rapid charging network. We are definitely not complacent on this; we know that more needs to be done. We also recognise the importance of what the right reverend Prelate the Bishop of Oxford said very well in relation to fairness.

The noble Lords, Lord Whitty and Lord Lilley, mentioned road pricing. I must say from the Dispatch Box that there are no current plans to introduce a system of national road pricing. However, we recognise that motoring tax revenues in general need to keep pace with the changes that are being brought about by the switch to EVs, while keeping the transition affordable for consumers.

A number of noble Lords made important points about manufacturing, recycling and the battery supply chain. I have listened to those very carefully indeed. To the noble Lord, Lord Lucas, and the noble Earl, Lord Effingham, I can say that we are going to work closely with investors, via the automotive transformation fund, to build a globally competitive EV and battery supply chain in the UK.

I ought to turn to the issue of communication, because this is such an important area. A number of noble Lords—the noble Lords, Lord Lucas and Lord Whitty, the right reverend Prelate and my noble friend Lady Young—particularly raised the problem of misinformation about electric vehicles. This is something we need to be concerned about and not be complacent. I recognise that we as the Government have a clear duty and responsibility in terms of giving clear information to consumers on the benefits and use of electric vehicles. We need to work closely with industry in terms of correcting this misleading coverage and delivering factual communications to consumers on the many benefits that electric vehicles provide. We are already taking proactive action to counter inaccurate information presented by the media on the subject of EVs when this arises. Today’s debate has reinforced my view of the importance of doing this and I know that my colleagues in the Department for Transport will be listening very carefully to what has been said in relation to the role of government here.

To summarise the Government’s view, we welcome this report. I know that it was published in February and here we are in October, but none the less I can reassure members of the Select Committee that the report has informed, and is informing, the Government’s policy now about the way we need to go forward. I have said already that there are a lot of areas where I cannot give precise answers in terms of what we will do and what the dates are, because it is very much dependent on the spending review and budgetary discussions. Let us be frank: the public finances are particularly challenging and I will not hesitate to remind the party opposite of the public expenditure hole that they left us in. Clearly, that is a factor as well. But this is an important policy area; electric vehicles play a major role in the journey towards net zero and we know that it is important that we come back with some of the answers to the questions noble Lords have raised today.

In conclusion, I again thank the Select Committee and its chair for the extraordinary, valuable piece of work that they have done.