Joint Letter: Fuel duty cut vs cheaper EVs for low-income households: ministers face £2.2bn choice

Cutting fuel duty in response to the US-Iran conflict would not support the majority of UK households.

Civil society and industry are united in advising the Government to urgently rethink the proposed reversal of the 5p fuel-duty hike.

Instead, the government should provide targeted support to lower-income households to access affordable electric vehicles through an affordable social leasing scheme and take concrete action to bring down the price that drivers pay for public charging - a barrier to EV uptake. These policies would cut bills while securing the UK’s energy independence.

Delaying the reversal of the 5p fuel duty cut would represent a regressive and costly policy, disproportionately benefiting higher-income drivers who tend to own larger and more expensive cars. Research shows large cars consume around 20% more fuel than medium-sized family cars, and that wealthier households tend to drive further distances, meaning they gain the most from fuel duty cuts.

An alternative is possible. Instead of cutting fuel duty, the government could implement a social leasing scheme to bring battery electric lease costs down to as low as £77 a month. The scheme would do this by subsidising leases for small BEVs by £100 a month for households earning below the median income. For the same cost as keeping the 5p fuel duty cut, the scheme could fund cheap EV leases for 230,000 households per year, lowering bills and allowing households to directly benefit from the climate transition.

The policy would also support the British automotive industry as it transitions to an electric future. By targeting eligibility for the scheme to British and European BEVs, the policy could support UK manufacturing of affordable BEVs such as the Ford Puma and Nissan Leaf - supporting the UK automotive industry to meet the ZEV mandate’s 2030 targets and 2035 phase-out. Further, it would deliver significant environmental benefits: if funded until 2034 it could deliver a CO₂ reduction equivalent to 9% of current domestic transport emissions - crucial for fighting the climate crisis and tackling toxic air pollution.

It would also have a significant impact on working people, particularly those who have to make frequent car journeys for work, such as social care workers, or those who live in poorly connected rural communities. Looking at the example of Gina, a care worker who relies on a car to visit clients, a social lease could save her £1,056 over an 8-year vehicle term. Beyond this, she would benefit from cheaper day-to-day running costs by charging at home instead of relying on price-volatile petrol. The latest research has shown that driving an EV saves on average £870 on fuel a year, and this has jumped to over £1000 in the current crisis.

We hope that the government will rethink the reversal of the 5p cut, and instead choose to provide targeted support for lower-income households while tackling the climate crisis and reducing the UK’s oil dependency. 

Download the full research and policy briefing on social leasing.