Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he will make an assessment of the potential merits of developing (a) a bonus-malus or grant scheme, (b) 0 per cent or reduced VAT rate on new electric vehicles and (c) other sustainable long-term solutions to replace the existing Plug in Vehicle Grants to incentivise consumer purchase of those vehicles.

The Government already provides ‘Plug-in Grants’ for zero emission cars and ultra-low emission vans, motorcycles and taxis, which provide a discount on the cost of a new vehicle, reducing the price paid by the consumer. At the Spending Review 2020, the Chancellor confirmed £582m to extend these grants to 2022/2023.

VAT makes a significant contribution towards the public finances, raising about £130 billion in 2019/20, and helps fund the Government's priorities including the NHS, schools, and defence. Any loss in tax revenue would have to be balanced by a reduction in public spending, increased borrowing or increased taxation elsewhere.