Spring Statement: What does the fuel duty cut mean for the EV transition?

Many charities, individuals and organisations are watching intently on the spring statement, even more so than usual. The cost of living has risen by 6.2% in the last 12 months since February, the fastest since the 90s. The energy crisis we were experiencing has only been exacerbated by the war in Ukraine, with people’s bills rising and prices at the pump becoming extortionate. Add to that the rising cost of food and people are facing a daunting year ahead.

The Spring Statement was dominated by these acute issues, and on the energy crisis specifically Rishi Sunak announced three main support levers for households. For motorists, 5 pence per litre will be taken off of fuel duty tax, only the second time in 20 years a cut has occurred. It’s expected to save motorists a combined total of £5 billion and last until March 2023.

This means that the levy will be reduced from 57.95p to 52.95p and will come into effect from 6pm tonight. This should mean motorists will see a 6 pence drop in forecourt prices as there will be a penny fall in the VAT paid per litre of fuel. However, the government is relying on the goodwill of the fuel retailers to pass this saving on to motorists rather than absorbing the savings themselves. With no safeguards in place it seems unlikely that prices will fall by 6 pence at 6.30pm tonight.

If the savings are indeed passed on to motorists, a family with a 55-litre petrol car will see savings of around £3.30 for a full tank. We welcome any step to ease the burden being felt by families, however the cost of fuel is so high this is a lot like putting a plaster on a gaping wound when the solution is staring the government in the face. 

New AutoMotive research shows that an average motorist, driving 7,400 miles per annum would expect to pay £660 in petrol before the levy cut. Now they can expect to spend £636. The same motorist driving a diesel vehicle could have expected to pay around £598 per annum for fuel but will now pay £576 [1]. For households already under pressure, this is just tinkering around the edges.

However, the same motorist driving an EV for the same amount of miles can expect to spend £275 on the energy to ‘fuel’ their car. This assumes the driver charges their car 25% during the day and 75% at night, which represents typical EV driver charging patterns. Ten years ago, a cut in fuel duty may have been the only thing a government could have done in the face of such an acute energy crisis - now there is a viable strategy out of this crisis.

Rather than tinkering yet again, motorists can personally make a quick change to a fuel cut of over 75p per litre equivalent reduction by moving to electricity to power their cars. This makes great personal economic sense of course, but also helps the UK motorist and the country reduce reliance on imports. The electrons in our electricity are mostly home made already.

Motorists that are facing record breaking fuel prices, even with this levy cut, can benefit from a passenger vehicle industry that is rapidly moving away from conventional vehicles and towards electrification. Those who could benefit the most from switching to EVs are those high mileage drivers, most likely to be diesel powered and driving more than 12,000 miles per annum.

By targeting these consumers not only will we see a much quicker reduction in carbon emissions and motorists saving money, we will also see a reduction in our dependency on diesel.

Sunak spoke about the power of sanctions on Russia, however, direct Russian diesel imports account for 18% of the UK’s total diesel consumption. The government has committed to phasing this out by the end of the year, however we still continue to send money to Russia while this is being phased out.

The best way to cut costs for households and reduce our reliance on Russian diesel is to ramp up support for the EV transition.

[1]  Fuel consumption is based on New AutoMotive analysis of manufacturer fuel efficiency ratings and may underestimate real world fuel usage.

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