EV Strategy: (ECC Committee Report)

Lord Lilley Excerpts

Wednesday 16th October 2024 Lords Chamber

[Lord Lilley (Con)]

My Lords, it was a great privilege to serve on the committee under the noble Baroness, Lady Parminter. Like her, I am no longer in it. Her departure is greatly missed; I suspect that mine, since I was the grit in the oyster on that committee, was much welcomed by its other members. It is also a privilege to follow the noble Lord, Lord Woodley. He made some important points, which I hope I will be able to suggest—probably to other people’s surprise—are not quite as much of a worry as he suggested.

One of the problems with most Select Committee reports is that they tend to be all words and no numbers. Committees show an extreme reluctance to discuss the costs of their proposals to the taxpayer or the consumer. I was originally trained as a scientist; drilled into us was Lord Kelvin’s remark:

“When you can measure what you are speaking about, and express it in numbers, you know something about it. When you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind”.


It may be the beginning of knowledge, but you have scarcely in your thoughts advanced to the stage of science. That is even more true in economics. If you cannot even estimate the costs or benefits of a policy, you can scarcely claim to have advanced to the stage where you can make policy recommendations.

Happily, this report is not devoid of numbers, albeit that most of the important ones are well hidden and the obvious conclusions that might be drawn from them have not always been drawn. I will focus on some of the key numbers in this report, but none of them appear in the initial recommendations. The upfront conclusions on page 4 use all sorts of euphemisms and verbal circumlocutions to avoid mentioning that they will cost money.

Perhaps I might translate what the report actually says. The first recommendation is:

“Tackle the disparity in upfront costs between electric and petrol and diesel cars”.


That means subsidising or, as the noble Lord, Lord Woodley, remarked, penalising the sale of petrol and diesel cars. The second recommendation is:

“Turbo-charge the charging infrastructure rollout”.


That means subsidise it. The third is:

“Ensure charging is reasonably priced, convenient, and reliable”.


That means subsidising fuel costs further. The report goes on to say that

“the Government must explore options for equalising the discrepancy between the VAT rates for domestic and public charging”.

Now there is no conceivable likelihood that the Government will put up VAT on domestic electricity, so that is a call for VAT on public charging points to be reduced, further increasing the subsidy on fuel costs for electric vehicles. I will return to the important fifth point later, but the sixth point is:

“Enhance UK manufacturing and battery innovation”.


That means more subsidies. The seventh is “Invest in UK recycling”—a new area for government subsidies. And so it goes on.

The problem is that the existing level of subsidies is very high, before we add to them from any of the proposals in this report. You have to get to page 33 or 34 to find out how much the subsidies are. They reveal that a privately owned EV is already subsidised, relative to petrol cars, to the tune of £5,000 over 10 years—it actually says £5,000 on page 34 and €5,000 on page 33, but I think the former is correct. However, corporately owned vehicles are subsidised to the tune of £10,000 in just four years. Those are big subsidies, particularly the latter. No wonder the vast majority of sales are to company fleets. If we are to subsidise EVs, it baffles me why the bulk of the money should go to those owned by companies—but so it is.

The main subsidy for private vehicles is, of course, the fact that they pay no duty on their fuel, which is electricity. You have to reach page 36 to find the total costs of this as EVs gradually replace fossil-fuel vehicles. The OBR has pointed out that fuel duties raised £23.4 billion last year, equivalent to £867 per household. That means that, if we forge ahead and succeed in phasing out those vehicles by 2030, we will have created what we might call a black hole in the nation’s finances, heading towards £23 billion as older vehicles are retired and used less.

The committee mentions the important issue of road tax in its fifth recommendation. It simply says that we should:

“Begin an urgent review of road taxation”.


It calls for an honest conversation with the public—quite right. Sadly, the committee did not agree to initiate this honest conversation by honestly admitting that the only option to replace this revenue is to introduce road charging. If we in this House, who do not have to get re-elected, do not have the courage to be honest enough to say that we are going to have to introduce road charging to replace fuel duty, how can we expect the people in the other House, who do have to get re-elected, to broach the subject until that black hole in the public finances is upon us?

The penultimate figure from the report is highly relevant to the decision on whether to phase out the sale of non-EVs sooner or later. There was much criticism of the previous Prime Minister’s decision to postpone the date beyond which sales of fossil fuel cars would be banned—delaying it from 2030 to 2035. There is rather less criticism now. The car companies seem rather relieved he did that, since sales are slower than was anticipated. We were told by the Society of Motor Manufacturers and Traders—which is of course largely a society of traders, and largely represents foreign companies exporting cars to this country—that this had a damaging effect on British manufacturers, who would not have the incentive to develop EVs. However, this ignores the strange nature of the British car market.

We export the overwhelming majority, more than 80%, of the cars we manufacture, and more than 80% of the cars we consume are imported. Indeed, on page 22 of the report you will discover that no less than 97% of the electric vehicles sold in the UK in the last quarter were imported. Most of the EVs produced in this country are presumably exported. So these changing rules only really have a major effect on EVs and other vehicles sold in the UK. Given that 80% of our vehicles are exported, the effect of these rules on our production falls on only one-fifth of the production, 20%. They are mainly affected by the rules of the countries to which they export, so I hope the damage that it does to British manufacturing will be less than the noble Lord, Lord Woodley, fears.

I am reasonably sure that electric vehicles will, eventually, displace petrol and diesel cars without subsidy, when their upfront price comes down to equal that of petrol and diesel cars, when the range of batteries is sufficient so that a normal journey would never require recharging, and when recharging is rapid. Actually, recharging is probably less of an issue than we imagine in this report. For the 60% of people who can keep cars off-road, the normal thing they will do after they use their car and come home is plug it in. The next morning it will be charged. They will not have to stop at the gas station as they would in a petrol car because they will have a fully charged car—so it is actually better. But for the 40% who do not have off-road parking, there is a problem we did not really find a solution to.

When will the price of electric vehicles come down to that of petrol and diesel? In the report, we quote people as saying that

“Other predictions for when average EV prices will meet those of petrol and diesel vehicles range from 2025–27”,


so, apparently, it will be quite imminent. So why are we subsidising people to buy expensive vehicles when they could have them at more or less the same price as the alternatives in a couple of years’ time? It is forecast that, by 2025, the price would be down to about £21,000 for an EV in Europe. Actually, you can get one for £22,000 now in the UK, so they are coming down to a similar price.

We should remember Dieter Helm, the great energy expert, who was asked by the Government to analyse their energy policy. He concluded that the big failure was that we had invested in immature technologies. He said that investing in technologies—which were going to become mature and cheap—when they were still immature and expensive had probably cost us the best part of £100 billion. So why are we encouraging people to do that in the EV market?

I suggest that we should look at this report and the figures, and draw conclusions from them. We might be a little more optimistic than some of the pessimists and a little more realistic than some of the super-optimists.