First-year allowance: expenditure on electric vehicle charge points

Finance (No. 3) Bill – in a Public Bill Committee at 9:45 am on 4th December 2018.

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Question proposed, That the clause stand part of the Bill.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

After that excellent start, I will continue. Clause 33 extends the life of the first-year allowances for electric vehicle charge points until April 2023. In the UK, the continued use of high-emission vehicles creates pollution and increases health issues. This measure was first introduced on 23 November 2016 to support the transition in the UK to cleaner vehicles with zero or ultra-low emissions. The measure allows businesses that invest in charge points to reduce their taxable profits by 100% of the cost of their investment in the year it is made. That provides accelerated tax relief compared with normal capital allowances, and so encourages greater investment in these assets. The allowance is currently due to expire in April 2019. The clause enables the first-year allowance to continue as part of the Government’s ambition for all new cars and vans to be zero emission by 2040.

Photo of Bim Afolami Bim Afolami Conservative, Hitchin and Harpenden

Yesterday evening, for some light relief, I was going through emails from constituents. One constituent runs a business that installs electric charging points. Will the Minister illustrate for the Committee how he thinks that business will flourish as a result of these measures?

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

The Government have taken two measures, the first of which was in the last Budget. That created an electric charge point investment fund— £200 million of public investment—which is designed to spur an extra £200 million of private investment. A business such as the one my hon. Friend describes could be part of that. The measure could enable the business to partner with the public sector and gain the capital that it needs to develop, and will be able to take advantage of the allowance and invest early. There are now two opportunities for such a business to take advantage of tax reliefs and public investment in order to grow rapidly and enter the market.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury

I do not deny the Minister’s point per se. Is there any implication that businesses that have chargers could be subject to a rating revaluation, which would put the cost of their business rate up? Perhaps the Minister could clarify that important point.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

The hon. Gentleman makes a valid point and I will reply—the powers that be will return to me in a moment.

The changes made by clause 33 will extend the current 100% first-year allowance for expenditure incurred on electric charge point equipment for a further four-year period until April 2023. That will encourage the increased use of electric vehicles by supporting the vital development and installation of charging infrastructure for such vehicles, to which drivers will look when deciding whether to buy them.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

Perhaps I could reply to the hon. Member for Bootle before taking a further intervention.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

Or not, as the case may be. We will have to write to the hon. Gentleman, I am afraid. He has outfoxed our officials.

Photo of Robert Syms Robert Syms Conservative, Poole

Is the funding available to businesses also available to local authorities, because many of them put in charging points, or does that not apply to councils?

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

I understand that this would apply only to private businesses. Other interventions help the public sector, such as the charging infrastructure investment fund, which local authorities can become involved in if they wish to develop infrastructure in their area. There were a number of wider measures in the Government’s Road to Zero strategy, including consulting on changes to the planning system to ensure that new business and residential properties, as well as public sector projects such as new council offices, hospitals and so on, are built with the infrastructure in place to support these vehicles.

The allowance will expire on 31 March 2023 for corporation tax purposes and on 5 April 2023 for income tax purposes. This extension is expected to have a negligible impact on the Exchequer. There are no anticipated costs to Her Majesty’s Revenue and Customs and neither will there be any significant economic impact nor any additional ongoing costs for businesses beyond the investment that will be generated.

In conclusion, this extension will incentivise the use of cleaner vehicles by encouraging companies to invest in electric vehicle charge points, giving confidence to drivers to shift away from current combustion propelled options in the knowledge that the further roll-out of charge points will continue and accelerate in the years ahead, and reduce all the damage to the environment and public health that follows. I commend this clause to the Committee.

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury)

Having just passed clause 32, which ended first-year allowances on the basis they were little known about and ineffective, I cannot help but comment how clause 33 extends the first-year allowance for another technology for four years on the basis it will provide the incentives and drive Government policy in that direction. Forgive me for pointing out that there are mixed messages from Ministers on these clauses.

It is disheartening that this is one of the relatively few mentions of environmental issues in the Finance Bill. We were all at Mansion House in June when the Chancellor gave a speech about how we would lead the way on green finance, yet there have been no legislative measures to follow up on that promise. We still lag behind our European counterparts on things such as mandatory climate disclosure laws or sovereign green bonds, but we should welcome any measures we like the look of when we see them.

Transport is a major source of emissions and we agree that we rapidly need to shift away from fossil fuels towards electricity and renewable sources and, to a certain extent, hydrogen for heavier vehicles. Thankfully, electric vehicles are coming through the system quickly and are expected to move rapidly through their cost curves, getting cheaper and cheaper. I have been hugely impressed by the electric vehicles I have experienced. Some estimates have cost parity for purchasing an electric vehicle as soon as 2022, after which buying an electric vehicle will become cheaper than buying a fossil fuel powered car.

The transition to a decarbonised, clean and smart economy will offer the UK many advantages, particularly considering how tech-savvy and early adopting much of the UK population is. The Nissan LEAF is the most-sold electric vehicle in the world. I say with some local pride, as someone born in Sunderland, that Sunderland has been the sole producer in Europe of the Nissan LEAF, creating over 50,000 vehicles. Of course, electric vehicle and hybrid production in the UK has provided a £3 billion trade surplus.

With a growing list of countries setting a date to ban combustion vehicles and modelling showing strong uptake curves, the global move to electric vehicles will be rapid. The first mover advantage to capture supply chains and jobs in this coming market will be considerable.

Photo of Alex Sobel Alex Sobel Labour/Co-operative, Leeds North West

Norway is planning to ban combustion vehicles by 2025—the incentives and the infrastructure in Norway are sufficient for that. We are not planning that until 2040. Does my hon. Friend agree that there is a policy failure not just on this measure but more generally in terms of building our electric vehicle infrastructure?

Photo of Jonathan Reynolds Jonathan Reynolds Shadow Economic Secretary (Treasury) 10:00 am, 4th December 2018

I agree with my hon. Friend, who has taken a major interest in these issues both before and during his parliamentary career. The availability of charge points is the greatest concern when it comes to achieving this shift. My hon. Friend the Member for Manchester, Withington and I were just talking about the local charge points in Greater Manchester, which we have both experienced.

A recent World Wildlife Fund report on accelerating the electric vehicle transition made some predictions about how it might evolve. It said:

“Private charging infrastructure will be in most homes and many workplaces. The opportunity to charge at home rather than relying on public charging infrastructure is an attractive feature of electric vehicles, and we assume that owners who are able to charge at home will do so when convenient (for example overnight). Workplace chargers are also likely to be required; evidence suggests that around 20% of electric vehicles currently make use of workplace charging…In the 2040 scenario, 11 million home chargers and around 2.2 million workplace chargers are needed by 2030.”

That last point is key in relation to the clause.

Electric vehicle charging will be facilitated by a combination of home and workplace charging, running to millions of stations. That is why it is essential to grasp every chance to promote the installation of infrastructure in companies. We support this capital allowance to help achieve that. However, although it is a positive move, it is a drop in the ocean of what needs to be done to encourage the use of cleaner vehicles. More than half of new car registrations last year came from businesses, so ensuring that there is an attractive package to encourage companies that are reliant on cars to use electric vehicles is clearly fundamental to tackling emissions.

Will the Minister elaborate further on how this measure will work for smaller companies? Our concern is that smaller companies, which have vast competing spending priorities, may find it difficult to source the cash they need to build charge points. We would also like to know the Government’s long-term plans for the charging infrastructure investment fund, which has recently changed its grant system for the installation of plug points. Will the Minister elaborate on what the take-up of the programme has been among small businesses? How is the scheme being promoted to ensure the maximum possible take-up?

My hon. Friend the Member for Bootle raised a key issue about business rates. We must aim high to ensure workplace charging infrastructure is as widespread as possible. We should compare how this might evolve with the uptake of solar panels. A change in valuation methodology meant that some institutions had a 400% increase in their business rates after they deployed solar technology. That runs counter to everything we all want to incentivise. Why would we penalise those who lead the charge? In such a generous package of capital allowance for businesses, it is difficult to see why any Government would build a tax disadvantage into the system for users of renewable or climate change-solving technologies. That is not simply our view. That point has been heavily put across by trade associations, including the Solar Trade Association, which launched a fairly scathing attack on Budget 2018.

In conclusion, the extension of the first-year allowance on workplace charging infrastructure is a step in the right direction, but these things cannot operate in isolation. The Government must take serious further action urgently to promote the transition to a greener economy. Although this is a start, I hope the Minister can reassure us of the Government’s ambition to go even further.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

I hope I can reassure the hon. Gentleman on those points. The first point was about why we would choose to extend this measure at the same time as bringing another to an end. We chose to bring the other one to an end because the evidence was not there to support its continuation. Having given the matter careful analysis, we believed that there was a better way forward.

We are still at a very early stage in the process. It is too early to assess the precise impact of this measure. We know that the total number of electric charge point connections has increased from more than 13,000 in November 2017 to more than 18,000 in October 2018—a 38% increase. Clearly, we would like that to accelerate even further, because that is still a small number across the whole of the country. We believe, anecdotally, that the measure is working and that it has been welcomed by the industry, but it is too early to assess that precisely. We are placing an extension in the Bill to ensure it can continue and to give certainty to the market. We will review this measure in time, as we have done with other measures, to determine its effectiveness. If it is not working correctly, we will take action accordingly.

The hon. Gentleman asked why the Budget did not do more for the environment. Of course, I contest that. The Budget did set out a wide range of measures to help the environment, from the new plastics tax, which will be consulted on and legislated on in the next Finance Bill—we hope it will be one of the world’s first plastic packaging taxes—to the measures already set out in the Finance Bill, such as this one and the vehicle excise duty measure on taxis, which we brought into effect a year early, and which has ensured that cities such as London and Manchester are seeing a great increase in low emission taxis.

We have already spoken about the industrial energy transformation fund, which we hope will put heavy users of energy on a more sustainable path. These things build on recent announcements, whether it is the industrial strategy and its commitment to the environment and to clean growth, or the Road to Zero strategy with respect to electric vehicles. Across Government, we are taking a wide range of measures to support the environment and to help businesses and individuals to cut their energy bills and lower carbon emissions.

The hon. Gentleman asked about the electric vehicle charging infrastructure fund. This was announced at the Budget last year, and we have now progressed the fund. We are in the final stages of selecting a fund manager, and once they are appointed we expect the fund to be formally launched and to start investing in early 2019. I hope to be able to give the hon. Gentleman and others more information on that very shortly so that businesses that wish to participate in it can start to access that £200 million and we can increase public and private investment in charging infrastructure very rapidly.

Small businesses, which the hon. Gentleman raised, will be able to claim under the annual investment allowances, which we have debated on a number of occasions. As I have said before, 99% of businesses will be able to claim under the annual investment allowances, which is a considerable increase as a result of the Budget and will help businesses that want to invest in this area.

On solar, the feed-in tariff scheme has supported over 800,000 small-scale installations, generating enough electricity to power 2 million homes. The scheme has helped to drive down the cost of renewable electricity, including small-scale solar photovoltaic. We therefore think it is right to protect consumers and to review the incentives as costs begin to fall. The Government—and indeed the Government before us—have made significant interventions in this area. With those reassurances, I hope the hon. Gentleman will support the clause.

Question put and agreed to.

Clause 33 ordered to stand part of the Bill.

Clause 34